Taxpayers may be subject to Massachusetts “Use Tax” on out of state purchases even though they are not required to file sales tax returns.
Rodman & Rodman Certified Public Accountants and Business Strategists alerts taxpayers to a significant rise in use tax audits. Massachusetts has stepped up enforcement and collection efforts, including tax audits, on taxpayers who purchase assets (such as computers, furniture and equipment) from out of state vendors.
In many cases auditors are assessing use tax for up to six years prior. This can lead to a substantial assessment as Massachusetts can impose not only the use tax but penalties and interest as well.
The law requires that taxpayers pay a Massachusetts use tax (similar to a sales tax) on the purchase of out of state items if the vendor does not collect Massachusetts sales tax and the item is used in Massachusetts.
The most typical instance of this usually involves a taxpayer purchasing computers from an out of state vendor and using such equipment in Massachusetts.
It is important to review your records for these types of expenditures, complete the appropriate use tax form available on the Massachusetts Department of Revenue website and pay the necessary tax.
Rodman & Rodman recommends that taxpayers file a use tax form even if they owe no tax as it reduces the risk of an audit. Additionally, a filed use tax return starts the clock running on the statute of limitations.
According to Thomas Astore, Tax Director at Rodman & Rodman, “Generally, the state can assess use tax for three years; however, the statute of limitations remains open indefinitely if you do not file the necessary tax returns. We recommend that you consult your tax advisor if you have questions.”
Rodman & Rodman, P.C.
Founded in 1961, Rodman & Rodman, P.C. provides accounting, tax and business services to small and medium-sized companies throughout New England. With a focus on strategic planning, Rodman & Rodman goes beyond traditional accounting services and takes a proactive approach when serving clients to increase, preserve and sustain clients’ financial net worth.
From business valuations, taxation, audits, fraud detection and prevention services and succession planning to a variety of accounting IT services including software selection, implementation and training, the team at Rodman & Rodman serves as comprehensive advisors to clients. For individual clients, the company offers personal advisory services such as planning for real estate transactions, obtaining financing, estate planning and retirement planning as well as planning for college education. Rodman & Rodman Certified Public Accountants are located at 3 Newton Executive Park in Newton and 25 Braintree Hill Office Park in Braintree, Mass. For more information, visit their website at www.rodmancpa.com or contact (617) 965-5959.