Accelerated sales tax collection isn't a dead issue on Beacon Hill, after all.
Governor Charlie Baker’s administration has tried in the past without much success to speed things up. After all, retailers wait three weeks after a month ends to remit taxes to the state. But an unlikely champion for the cause is emerging: Cronin Group, a prominent restaurant owner in Boston.
Cronin has backed a joint venture called STAC Media, led by Cliff Rotenberg, which holds patents for a sales-tax payment methodology. Reps for the Cronin/STAC effort are making the rounds, meeting with lawmakers and major business groups. The goal: to revive the thwarted efforts to accelerate sales tax collections.
No state has yet adopted daily sales tax remittances, and businesses in Massachusetts have been reluctant to be pioneers.
Rotenberg is telling them they have no reason to fear. He says the technology is in place to pull this off. (The STAC patents cover a business process, not hardware or software.) The taxes could be collected by card processors and sent to the state daily, he says, after retailers settle up with the card companies. Cash remittances would still be delayed.
We know what the STAC venture gets out of it: potentially lucrative licensing agreements with card processors.
But what about the state? Rotenberg promises an appealing prize. He says daily transmissions could increase total sales tax collections by hundreds of millions a year, by curbing delinquencies and fraud and scooping up taxes from soon-to-fail retailers before they close. Day-to-day collections would also provide a real-time source of economic data for state budget writers — and maybe an early warning sign for a recession. He also says big chains earn interest in the current system because they hold onto taxpayer funds for several weeks.
In the past, real-time technology was billed as a way to vacuum up a 13th month of sales tax collections each fiscal year, by getting a one-time jump. Yes, it looks like Budget Gimmickry 101; Rotenberg is not emphasizing this in his pitch. Instead, his focus is on the potential gain over the long haul by gathering sales taxes that might otherwise fall through the cracks.
Cronin made a minority investment in STAC two years ago, Rotenberg says, after conducting a successful test run in one of its restaurants. The majority partner is the New York team that invented the patent, led by celebrity chef Pino Luongo.
In 2017, lawmakers agreed to go along with Baker’s suggestion to accelerate sales taxes — if the Department of Revenue determined a new system could be feasibly adopted by June 2018. The agency subsequently found financial benefits and described it as an achievable goal with current technology. But the scale and complexity made it tough to promise by the deadline without big costs and risks. A 2017 estimate pegged one-time costs at $1.2 billion.
Baker tried a different approach in January, proposing that larger retailers remit collections from the first three weeks of each month in the final week of that same month, with the final week getting remitted in the following month, as it is now. Baker estimates this would affect only the largest 10 percent of retailers. However, the Legislature left the issue alone.
Rotenberg says his group has met with more than 20 Boston-area business associations in recent weeks to seek support for reviving the concept. He says the idea is gaining traction.
But some business groups — Associated Industries of Massachusetts and the Retailers Association of Massachusetts, among them — remain skeptical. The latter, in particular, worries about upheaval on what vice president Bill Rennie calls “a theory or a whim.”
But the lure of quicker revenue might eventually seem too good for lawmakers to ignore.
Jon Chesto can be reached at firstname.lastname@example.org.