ETA Blocks Real Time Sales Tax Proposals, Saves Payments Industry Billions

Earlier this week, Massachusetts Governor Charlie Baker signed the operating budget into law. While most people focus on what is included in the budget, what is notable about this budget is what is NOT in it. Thanks to ETA and a coalition of payments industry and merchants, the Massachusetts budget does NOT include a proposal to create a Real Time Sales Tax (RTST). Through countless phone calls, emails, video calls, and mask-wearing advocates in Boston, the ETA successfully led the charge to keep the proposal out of the budget.

RTST- An Expensive Solution in Search of a Problem
If a state were to adopt RTST, it will create an entirely new system of daily sales tax collection and remittance and place new, redundant and expensive burdens on the payments industry. The current sales tax collection system asks merchants to perform these tasks and remit sales tax on all sales, regardless of purchase method, on a monthly basis. If enacted, an RTST would have shifted the burden of calculating, collecting and remitting sales tax to payment processors. The RTST would ask processors to become tax collecting agents of the Commonwealth and to remit sales tax on a daily basis but only for credit and debit card purchases. Sales tax generated from purchases made with cash or check would continue to utilize the current system. Thus, an RSTS proposal would have resulted in two sales tax remittance systems- processors remitting sales tax on electronic payments on a daily basis and merchants remitting sales tax on cash and check sales on a monthly basis.

The cost of an RTST to the payments industry would have been staggering. According to the State Tax Research Institute, the implementation of RTST in Massachusetts alone would have cost the industry $1.22 billion in up-front costs and $28 million annually. To make matters worse, proponents of an RTST failed to identify any corresponding benefit to consumers, merchants, or the Commonwealth from an RTST. The effort ETA put forth in defeating the RTST was not unique. ETA has been fighting the RTST for three years in Boston, as well as defeating proposals in Arizona and Connecticut.

ETA wants to thank all of its members and coalition partners who worked tirelessly during 2020 as well as the over the last four years, to defeat a harmful RTST. Despite the long campaign against the RTST, we cannot rest. ETA will continue to remain vigilant against RTST resurfacing in Boston or being introduced in other states. ETA will continue to fight against these, and other provisions, that seeks to impose undue harm on the industry.

Click here to read more about ETA’s advocacy work.