John M. Hoffman & Associates CPAs
Frequently Asked Tax Questions
Tell me about that "purchase subject to Massachusetts Use Tax" you ask about on the Massachusetts Information page of the organizer.
The Massachusetts use tax is the equivalent of the Massachusetts sales tax. Both are at a rate of 5%. If you purchase something, typically out of state, that would otherwise have been subject to the 5% sales tax, Massachusetts wants you to volunteer the equivalent 5% as use tax.
So, for example, you drive to New Hampshire and purchase a $500 television. Despite the advertising touting the "tax free" existence of New Hampshire you are technically supposed to pay that $25 as "use tax" to Massachusetts.
Another example is when you purchase a piece of jewelry in St. Thomas U.S. Virgin Islands. Again, you are supposed to volunteer that tax to Massachusetts.
You may wonder how many people actually pay this tax and whether anyone gets caught not paying this tax.
Businesses that make any kind of purchases of materials and supplies over the internet might consider volunteering some level of use tax as it would be rare that they would not purchase something subject to the tax. By paying something in this area, they will not be one of those businesses that pay zero use tax that the state likes to audit for such.
As to people getting caught, please realize that the Massachusetts Department of Revenue has gone to a large furniture retailer with "underprices" in Nashua, New Hampshire and tracked down all the folks who took delivery in Massachusetts and did not pay sales tax. They have also gone to jewelers in Palm Beach Florida looking for Massachusetts residents purchasing jewelry in Florida.
If you buy a camera in New York City and pay 8% sales tax to New York, there is no use tax due to Massachusetts as you already paid a sales tax higher than the Massachusetts rate.
Don't forget that Dennis Kozlowsky from Tyco (who I think is still spending time in jail) had his unraveling start by attempting to avoid sales tax on artwork purchased in New York City.
So do many clients tally up their purchases on amazon.com, those made while leaf peeping in New Hampshire, or the jewelry from the Caribbean cruise? It is rather rare, but we feel it is our responsibility to keep you informed of the legal requirements. Should you have any specific questions regarding this, as always, please contact our office.
