Recently, Massachusetts state representative Michelle L. Ciccolo introduced House Docket No. 3880, Act proposing a transportation excise tax on “large employers” which would apply to employers with as few as 50 employees in Massachusetts with the potential of costing employers between $10 and $100 per employee per year.
While this amount may not be material for some companies, when costs of compliance for other states’ “immaterial” taxes are included, for example the new FAMLI tax Colorado imposed on companies with a single employee in the state but that have 10 or more employees anywhere in the US, the overall compliance burden clearly becomes material.
“Where does this end?”
Unpacking the tax
By way of background, the proposed transportation excise tax is a tax levied against employers for the purpose of funding transportation related activities through the Commonwealth Transportation Fund. The irony of the bill, entitled “An Act Relative to a Transportation Excise Tax For Large Employers”, is that it applies to any employer who has a mere 50 annual employees.
For perspective, the tax is calculated by a ratio of the employees of the employer to the total number of employees employed in Massachusetts by business owing the tax, multiplied by the total excise tax amount. The total excise tax due from all employers in Massachusetts increases based on the number of annual employees.
Interestingly, the definition of “employee” under the proposed bill includes anyone who (1) “physically commutes to an employer’s location in Massachusetts regardless of residence” and (2) resides in Massachusetts and works for an employer with a physical presence in Massachusetts.
pervasive implications
Categorically, classifying an employer with 50 employees as a “large employee” is a stretch. It is likely that businesses headquartered or primarily doing business in Massachusetts will be impacted by the tax if it is passed. For those employers, expect an estimated liability of at least $10 per employee, as well as another return filing and remittance requirement.
Because the proposed transportation excise tax would result in millions of tax dollars to Massachusetts, other states will inevitably consider a similar, new tax.
IN OUR OPINION
Sales tax compliance has taken on its own identity. Please know you do not need to go it alone with this. There is no need to shut down your website, cancel your dreams of owning your own business, etc. Do your due diligence and then stand your ground. We can help. info@libertasunlimited.com.