State & Local Tax Impacts of COVID-19 for Massachusetts – 2020

Thoughtware Alert Published: Dec 11, 2020 | Updated: May 05, 2021
SALT GOV COVID TW - 1

Information current as of December 31, 2020.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to Massachusetts

  • The DOR will provide an extension until June 20 for payments of sales, meals, and room occupancy taxes for businesses that paid less than $150,000 in those taxes in 2018.
    • Massachusetts Emergency Regulation Section 62C.16.2.7, effective March 19, 2020.
  • The DOR will waive penalties for meals and room occupancy returns and payments due during the period of March 20 through May 31 for vendors whose cumulative sales and use tax liability in the 12 months ending February 29 was at least $150,000.
    • Massachusetts DOR Technical Information Release TIR 20-2, March 19, 2020.
  • Massachusetts is extending the individual income tax return filing and payment deadline from April 15, 2020, to July 15, 2020.
  • Massachusetts is extending property tax bill and exemption application due dates from April 1 or May 1 to a date not later than June 1. Interest and other penalties for late payment for payments with due dates on or after March 10 are waived when payment is made before June 30.
    • Governor Charlie Baker announcement, March 27, 2020, and H.B. 4598, effective April 3, 2020.
  • Massachusetts extended sales and use tax return filing and tax payment due dates as follows: 1) suspending returns and payments with due dates falling during the period beginning March 20 and ending on May 31 for vendors with a cumulative sales tax liability less than $150,000 for the 12-month period ending February 29; 2) rescheduling these due dates to June 20; and 3) specifying that the suspension doesn’t apply to marijuana retailers, marketplace facilitators, or motor vehicle vendors.
    • Massachusetts DOR Emergency Reg. § 62C.16.2, effective March 19 and generally expires June 19, 2020.
  • As the Commissioner’s authority to delay due dates doesn’t extend to corporate excise filings and payments, the DOR will waive late-file and late-pay penalties for corporate excise (including financial institution and insurance premiums excise) returns and payments due on April 15, 2020, when those returns and payments are filed and made by July 15, 2020. By law, interest will still accrue on any amounts not paid by April 15, 2020.
    • Massachusetts DOR Technical Information Release TIR 20-4, April 3, 2020.
  • Massachusetts announced additional tax deadline extensions. Personal, fiduciary, and trust income tax and partnership composite return filing and tax payment due date is extended from April 15 through July 15. The first and second installments of estimated income and fiduciary tax payment deadlines are extended through July 15. Corporate excise taxpayers must pay the amount required on the April 15 due date for an automatic six or seven-month extension. Sales tax filing and payment deadlines, including meals taxes, are extended through June 20. Room occupancy excise tax filing and payment deadlines are extended through June 20, and the associated penalties are waived subject to certain conditions.
    • Massachusetts DOR Notice, April 9, 2020.
  • Legislative authorization for the local chief executive officer or committee of a city, town, or district to waive interest and other penalty for late payment of any excise, tax, betterment assessment, or apportionment thereof, water rate or annual sewer use, or other charge added to a tax for any payments with a due date on or after March 10, 2020, where payment is made after its respective due date but before June 30, 2020.
    • H.B. 4616, effective April 10, 2020.
  • Massachusetts adopted a sourcing rule for personal income tax withholding from employees who telecommute during the pandemic. Employers must source compensation to Massachusetts, and withhold income tax, for personal services performed by a nonresident who, immediately before the emergency, was an employee engaged in performing those services in the state and who during the emergency is performing those services from a location outside the state. A resident working in Massachusetts during the emergency can claim a credit for income taxes paid to another state due to that state’s sourcing rules. Massachusetts also will not require withholding from the employer if it must withhold income tax for the employee in the other state.
    • Massachusetts 830 CMR 62.5A.3, effective April 21, 2020.
  • As to the matter of nexus, the Massachusetts DOR asserted that for the duration of the Massachusetts COVID-19 state of emergency, the department won’t consider the presence of one or more employees who previously worked in another state but who are working remotely from Massachusetts solely due to the COVID-19 pandemic to be sufficient in and of itself to establish either corporate nexus or nexus for sales and use tax collection purposes. Further, for the duration of the COVID-19 state of emergency, services performed by such an employee in Massachusetts won’t be considered to increase the numerator of the employer’s payroll factor for corporate apportionment purposes.
    • Technical Information Release 20-5, April 21, 2020.
  • The DOR will provide an extension until September 20 for payments of sales, meals, and room occupancy taxes for fiscal businesses that paid less than $150,000 in those taxes for the year ending February 29.
    • Gov. Charlie Baker announcement and Massachusetts 830 CMR 62C.16.2, June 18, 2020.
  • Massachusetts issued guidance on income tax treatment for selected provisions of the CARES Act. The guidance provides that 1) 2020 recovery rebates to individuals aren’t subject to the taxes; 2) coronavirus-related distributions from certain retirement plans are includable in the individual’s state gross income and there isn’t any additional exemption of 10 percent provided; 3) qualified education loan payments made by an employer aren’t excluded from an employee’s gross income; 4) state gross income excludes any amount forgiven for a corporate borrower under the loan forgiveness to small businesses provision of the CARES Act; and 5) there’s a temporary easing of the charitable contribution limitation for corporate excise purposes.
    • Massachusetts DOR Technical Information Release 20-9, July 13, 2020.
  • Massachusetts residents are generally required to pay Massachusetts taxes on their personal income, no matter the source of that income. A resident engaged in performing services from a location outside of Massachusetts, and who began performing such services in Massachusetts due to a pandemic-related circumstance, will be eligible for a credit for income taxes paid to the state where the employee was previously providing services. Nonresidents are taxed on their gross income earned within the state, regardless of whether they’re employees of a Massachusetts business or obtain income from their own business or trade. All compensation received for services performed by a nonresident who, immediately prior to the Massachusetts COVID-19 state of emergency, was an employee engaged in performing such services in Massachusetts, and who is performing services from a location outside Massachusetts due to a pandemic-related circumstance will continue to be treated as Massachusetts source income subject to personal income tax.
    • Massachusetts 830 CMR 62.5A.3; the emergency rule is effective July 21, 2020, and will sunset on December 31 or 90 days after the governor lifts the state of emergency.
  • Massachusetts clarified the personal income and withholding tax obligations of and related to employees working from home during the pandemic. The guidance states that one or more employees working from home won’t subject a business to a sales tax collection obligation or to the corporate excise tax and that businesses claiming a nexus exemption must maintain written records sufficient to substantiate the existence of a pandemic-related circumstance.
    • Massachusetts DOR Technical Information Release 20-10, effective July 21, 2020, and until the earlier of December 31 or 90 days after the state of emergency is lifted.
    • Supersedes TIR 20-5.
  • Massachusetts issued a COVID-19 update on scheduled tax court hearings. If the DOR scheduled a taxpayer’s case for a court hearing, it will be rescheduled and the taxpayer will receive notice of the date, time, and place of the hearing. The DOR is currently scheduling cases for virtual hearings only. 
    • Massachusetts DOR Notice, July 31, 2020.
  • Massachusetts extended sales/use and excise tax relief measures for local businesses affected by the ongoing COVID-19 outbreak. The deferral of regular sales, meals, and room occupancy taxes for small businesses due from March 20, 2020, through April 30, 2021, is further extended to May 20, 2021. Businesses that collected less than $150,000 in regular sales plus meal taxes or room occupancy taxes in the year ending February 29 will be eligible for relief, and no penalties or interest will accrue during the extension period for small businesses. 
    • Governor’s Announcement, September 15, 2020.
    • Massachusetts DOR Technical Information Release 20-12, September 16, 2020, and superseding Technical Information Release No. 20-7.
    • Massachusetts 830 CMR 62C.16.2 and 830 CMR 64G.1.1(11)(g), the emergency rules are effective September 16, 2020. 
  • Massachusetts updated information regarding the COVID-19 pandemic for estate, individual income, corporate income, trust income, excise, and sales and use tax purposes. The filing and payment due dates have been extended to May 20, 2021, from September 30, 2020, for vendors collecting room occupancy excise and sales and use taxes or meals tax and that have cumulative tax of $150,000 or less. Vendors above the $150,000 threshold have penalties waived through the same period, but interest will accrue. 
    • Massachusetts DOR Release, October 14, 2020.
  • Massachusetts amended a regulation on the sourcing of income of nonresident and certain resident employees telecommuting due to the COVID-19 pandemic. The rule includes measures continuing to source to Massachusetts the income of nonresident employees of Massachusetts employers temporarily telecommuting due to the pandemic and allowing a credit for resident employees working in Massachusetts due to the pandemic for income tax liability in another state due to that state’s sourcing rule. The regulation applies to the sourcing of wage income attributable to employee services performed commencing March 10 through the earlier of December 31, 2020, or 90 days after the governor lifts the Massachusetts COVID-19 state of emergency. 
    • Massachusetts 830 CMR 62.5A.3, implemented October 16, 2020. This supersedes the prior temporary regulation.
    • New Hampshire has filed a challenge to the Massachusetts rule that would require New Hampshire residents to pay Massachusetts income tax. New Hampshire argues that Massachusetts’ imposition of an income tax on its residents, who now work from home in New Hampshire, is an attack on New Hampshire’s sovereignty. Further, Massachusetts’ imposition of tax on nonresidents is in violation of both the Commerce Clause and the Due Process Clause subjecting New Hampshire residents to unconstitutional confiscation. New Hampshire acknowledges the Massachusetts rule has a set expiration date; however, New Hampshire argues there is reason to believe the underlying shift in policy will outlast the current pandemic. 
      • State of New Hampshire v. Commonwealth of Massachusetts, U.S. Supreme Court, motion for leave to file bill of complaint, filed October 19, 2020.
    • Also see New Jersey S.B. 3064 (pending) that directs the state treasurer to examine legal efforts to thwart New York from taxing New Jersey residents working from home. It will analyze the revenue the state could bring in if it were to collect those taxes itself.
  • Massachusetts extended and revised the previously announced Massachusetts tax relief in situations in which employees work remotely due solely to the COVID-19 pandemic. While the relief rules remain in effect, the presence of one or more employees working remotely in Massachusetts due to (1) a government order issued in response to the COVID-19 pandemic; (2) a remote work policy adopted by an employer in good faith compliance with federal or state government guidance or public health recommendations relating to COVID-19; or (3) the worker’s compliance with quarantine, isolation directions relating to a COVID-19 diagnosis or suspected diagnosis, or advice of a physician relating to COVID-19 exposure will not, by itself, create a withholding obligation with respect to such employees. Also, while the rules remain in effect, one or more employees working remotely in Massachusetts solely due to a pandemic-related circumstance, including the presence of business property reasonably needed for such persons’ use while working remotely, will not subject a business to a sales and use tax collection obligation or to the corporate excise (or corporate apportionment adjustments) by reason of that fact. A business claiming a nexus exemption must maintain written records sufficient to substantiate the existence of a pandemic-related circumstance with respect to the employee(s) triggering the application of these rules.
    • Massachusetts DOR Technical Information Release No. 20-15, December 8, 2020, and effective until 90 days after the state of emergency in Massachusetts is lifted and supersedes TIR 20-10.
  • Massachusetts extended an emergency regulation on sourcing income of nonresidents telecommuting due to COVID-19. The emergency regulation includes measures 1) providing that all compensation received for services performed by nonresident employees engaged in Massachusetts immediately prior to the pandemic and now performing such services from outside the state will continue to be treated as Massachusetts source income subject to individual income tax and withholding; 2) allowing a credit for resident employees working in Massachusetts due to the pandemic for income tax liability in another state due to that state’s sourcing rule; and 3) clarifying that employers of such resident employees aren’t obligated to withhold Massachusetts tax to the extent the employer remains required to withhold the tax in such other state.
    • Massachusetts Emergency 830 CMR 62.5A.3, December 8, 2020.
  • Massachusetts proposed a regulation on the sourcing of income of nonresident and certain resident employees telecommuting due to the COVID-19 pandemic for individual income tax purposes. The rule includes measures to 1) continue to source to Massachusetts the income of nonresident employees of Massachusetts employers temporarily telecommuting due to the pandemic; and 2) allow a credit for resident employees working in Massachusetts due to the pandemic for income tax liability in another state due to that state’s sourcing rule. A public hearing will be held on January 20, 2021, and written comments on the proposed rule may be emailed. The regulation will apply to the sourcing of wage income attributable to employee services performed commencing March 10 through 90 days after the date on which the governor gives notice that the Massachusetts COVID-19 state of emergency is no longer in effect.
    • Massachusetts Proposed 830 CMR 62.5A.3, December 8, 2020.
  • Massachusetts has suspended sales and use tax return filing and tax payment due dates for certain vendors during the COVID-19 state of emergency declared by the governor. Returns and payments with due dates falling during the period beginning March 20, 2020, and ending on April 30, 2021, for vendors with a cumulative sales tax liability less than $150,000 for the 12-month period ending February 29, 2020, were rescheduled to May 20, 2021. However, the suspension doesn’t apply to marijuana retailers, marketplace facilitators, or motor vehicle vendors.
    • Massachusetts 830 CMR 62C.16.2, amended December 11, 2020, and effective retroactively to September 16, 2020.
  • Massachusetts has suspended the room occupancy tax return filing and payment remittance obligations for certain operators during the COVID-19 pandemic. The filing and payment requirements for operators whose cumulative liability was less than $150,000 in the 12-month period ending February 29, 2020, for returns and payments due during the period beginning March 20 and ending April 30, 2021, has been extended to May 20, 2021. However, the suspension doesn’t apply to intermediaries, who must continue to file returns and make payments as per the standard process.
    • Massachusetts 830 CMR 64G.1.1(11)(g), amended December 11, 2020, and effective retroactively to September 16, 2020.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

Return to SALT Resource Center

Kate & Ben — How can we help you? Contact Us!

How can we help you?