As Massachusetts seeks to close the gap in the state’s budget, a variety of revenue streams are up for consideration. The most recent change took place on Saturday, August 1st and affected the sales tax, meals tax, and room occupancy tax. To help you remain informed, we’ve include highlights on these tax changes.
Sales Tax – Effective August 1, 2009
• The tax rate on sales and use of tangible personal property and telecommunications services has changed from 5% to 6.25%. This reflects a 25% increase. • Exemption from sales and use tax for alcoholic beverages, including beer, wine, and liquor, sold at retail has been repealed. Alcoholic beverages will also be effected at restaurants as patrons will • Also, the so-called “bracket system” now in use for the computation of sales tax will be replaced with a rounding method. • Transition rules have been established for periodic bills for utilities; certain unconditional contracts; certain contracts for construction of buildings; leases of tangible personal property with periodic payments; rentals of tangible personal property; and quarterly and annual filers.
Meals Tax – Effective August 1, 2009
• The tax rate on sales of meals, prepared food and all beverages will change from 5% to 6.25%. • Again, the so-called “bracket system” now in use for the computation of sales tax will be replaced with a rounding method. • A city or town may impose a local sales tax on the sale of restaurant meals originating within the city or town by a vendor at the rate of .75 percent of the gross receipts of the vendor from the sale of restaurant meals. • This local excise, which is imposed in addition to the 6.25% state sales tax on meals, takes effect on the first day of the calendar quarter following thirty days after acceptance by the city or town or on the first day of a later calendar quarter that the city or town may designate. A city or town must vote to adopt this increase not later than August 31, 2009 in order to impose the additional excise starting on October 1, 2009.
Room Occupancy Tax – A city or town must vote to adopt this increase not later than August 31, 2009 in order to impose the additional excise starting on October 1, 2009.
• The maximum rate of the local option room occupancy excise has been increased from 4% to up to 6% (from 4.5% to up to 6.5% in the City of Boston) provided that each city or town votes to accept the increased rate in accordance with the provisions ( G.L. c. 64G, sec. 3A.) A
Additionally, there are no signs of a Tax Free holiday in Massachusetts in 2009.
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