Legislature Refuses MassHealth Reforms for Now:

Enacts $200M Employer Health Care Tax

The Massachusetts Legislature broke for their summer recess at the end of July, but not before approving a $200 million health care tax increase on employers.

Disappointingly, the state budget plan advanced by the Legislature did not include the full Medicaid (MassHealth) reform package that the Baker Administration and the business community had negotiated and agreed upon.  That agreement, reached after six months of negotiations, resulted in the business community willing to support a temporary assessment contingent upon adoption of a larger package that included long-term changes to the MassHealth program and important reforms to the private insurance market.  The Legislature went along with the increased health assessment but stated that they needed more time to consider a reform package and that they would bring their own cost saving reforms to the debate this fall.

Gov. Charlie Baker had not yet indicted whether or not he would sign or veto the assessment, with a decision due likely toward the end of next week. 

The budget includes a temporary increase in the Employer Medical Assistance Contribution (EMAC) for most employers, and an additional temporary assessment on employers with employees on public health assistance.  The EMAC is an existing tax that most employers now pay as part of their unemployment insurance taxes.  EMAC funds are used to pay for subsidized health care for low-income residents of the Commonwealth.  For each non-disabled employee who receives state subsidized health insurance coverage through MassHealth or the MA Health Connector, the additional assessment would max out at $750 per employee, annually. 

For all employers with 6 or more employees:

  • Increases the current EMAC rate from 0.34% to 0.51% of annual wages, up to the annual wage cap of $15,000.  This equates to raising the maximum per-employee contribution rate from the current $51 to $77 annually.
  • Expires on December 31, 2019.


Additional tax on employers with employees on state subsidized public health assistance: 

  • Employers to pay an additional 5% of annual wages for each employee on public coverage, up to the annual wage cap of $15,000, resulting in an annual maximum per employee contribution rate of $750.
  • Applies to all employers with 6 or more employees.
  • Expires on December 31, 2019.


The plan does include some employer friendly changes to the UI rate schedule to partially offset the EMAC increases, and those changes are included in the budget, meaning collectively, employers will pay $334M less over the next two years than what they would have paid on the current schedule.


“Real Time” Sales Tax Collection

The final budget also included language calling for the Department of Revenue (DOR) to go through a regulatory process to determine how to best effectuate accelerated sales tax remittance, or “real time” sales tax collection.  The DOR is instructed to hold hearings on the topic and issue a small business impact statement, and take into consideration the following: (i) established industry practices; (ii) technological feasibility; (iii) financial impacts on consumers and businesses; (iv) the fiscal impact on the commonwealth; (v) relevant federal or state laws and regulations; and (vi) limitations on applicability to mobile telecommunications services.  If the DOR finds and certifies that “real time” collection is not cost-effective to implement before June 1, 2018, then the state Comptroller is directed to essentially credit $125 million in sales tax collections from FY19 back into FY18, and no further action would be taken to implement accelerated collections.  The DOR must make that determination by November 1, 2017.

RAM has strongly objected to the consideration of accelerated “real time” sales tax collection and we will be engaged with the DOR in its process moving forward to prove that this is not a cost effective or workable solution. 


No Sales Tax Holiday in 2017

The Massachusetts House and Senate left for the summer recess without taking any action on legislation to authorize a Sales Tax Holiday for this August, marking the second year in a row without the tax free event.  RAM and our members lobbied the issue aggressively in June and July, but lawmakers repeatedly pointed to disappointing state revenue collections that saw the state end the 2017 fiscal year with a revenue gap of $431 million.


MA DOR Resubmits Regulation to Require Online Sales Tax Collection

The Department of Revenue (DOR) has reissued a proposed regulation to require sales tax collection from online retailers who do not have a physical presence in the state but do make a significant amount of annual sales into the state.  The DOR had earlier this year proposed a directive requiring the same, but was forced to rescind that and pursue the issue via a regulation, which allows for a public hearing and comment process.

Under the proposed 830 CMR 64H.1.7: Vendors Making Internet Sales, the state imposes an obligation to collect and remit sales tax on all out-of-state internet vendors with sales into Massachusetts in excess of $500,000 and more than 100 transactions.  The regulation has a proposed effective date of October 1, 2017.  The DOR has taken a unique approach in that they have interpreted the presence of in-state software and “cookies” that are installed on MA residents’ computers, laptops and mobile devices when they purchase from online sellers, as enough to satisfy the physical presence requirement.  RAM has long advocated for the Department to take a more aggressive approach in going after online sellers that fail to collect and remit and we support this action.  Groups representing online sellers challenged the earlier directive in MA Superior Court, and we fully expect that they will be back in court challenging the regulation once it is finalized. 

A public hearing will be held on the proposed regulation on Thursday, August 24, 2017, at 10:00 a.m. at the DOR offices in Boston.

Thank you.