Massachusetts Tax Legislation Approved

Governor Mitt Romney recently signed a lengthy tax law that amends Massachusetts corporate excise (income) tax, personal income tax, sales and use tax, property tax, and other tax provisions to close tax loopholes and improve tax administration and collection. Among the highlights of the law are the following:

Corporate Excise (Income) Tax Changes

Allocation of income to Massachusetts: For income recognized on or after July 1, 2004, the portion of the taxable net income of a corporation or financial institution that a non-domiciliary state is prohibited from taxing under the U.S. Constitution is allocated in full to Massachusetts if the commercial domicile of the corporation or financial institution is in Massachusetts.

Apportionment sales factor: For corporations that license intangible property, the income-producing activity of a taxpayer is deemed to be performed in Massachusetts to the extent that the intangible property is used in Massachusetts. 

Personal Income Tax Changes

Nonresident partners: Applicable to tax years beginning on or after January 1, 2005, a nonresident who is a member of a partnership that is engaged in the conduct of a trade or business in Massachusetts or that owns or leases real property in Massachusetts is subject to income tax on his or her distributive share of the income received or earned by the partnership from sources taxable by Massachusetts.

Estimated tax threshold: Applicable to tax years beginning on or after January 1, 2005, estimated tax payments are required if an individual can reasonably expect to have tax liability of more than $400 (formerly, $200) in a taxable year. 

Sales and Use Tax Changes

Delivery of items in Massachusetts: For purchases made on or after January 1, 2004, the definition of "sale at retail" is amended to add that when tangible personal property is physically delivered by an owner to the ultimate purchaser residing in or doing business in Massachusetts or to any person for redelivery to the purchaser, pursuant to a retail sale made by a vendor not engaged in business in Massachusetts the person making the delivery will be deemed the vendor of the property. In addition, the transaction will be deemed to be a retail sale in Massachusetts by such person, and the person, if engaged in business in Massachusetts will be required to include the retail selling price in its gross receipts, regardless of any contrary statutory or contractual terms concerning the passage of title or risk of loss applicable to any contract or other agreement for sale, transportation, shipment, or delivery. 

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