Bloomberg Tax
Aug. 18, 2021, 8:00 AM

Massachusetts State and Local Tax Update: Spring 2021

Philip S. Olsen
Philip S. Olsen
Davis Malm

Despite the ongoing impact of the pandemic, spring saw several significant judicial and administrative developments in Massachusetts. Among other things, a lingering sales tax apportionment question was answered, property tax assessments increasingly presented problems for taxpayers, and the governor continued a program of incentivizing clean energy technologies.

On May 21, 2021, the Massachusetts Supreme Judicial Court affirmed the decision of the Appellate Tax Board, allowing taxpayers to apportion sales tax on their purchases of software downloaded onto servers in Massachusetts for later use by employees both within and outside Massachusetts. In Oracle USA Inc., the Appellate Tax Board previously ruled taxpayers were entitled to refunds despite failing to comply with additional procedural requirements imposed by the Department of Revenue’s software regulation. Massachusetts General Laws, Chapter 64H, Section 1, provides taxpayers a statutory right to apportion sales tax on software transferred for use in more than one jurisdiction. The regulation sets forth options for apportionment and relief of vendor liabilities. However, it is not a vendor’s exclusive remedy and does not foreclose apportionment through the standard abatement process.

The Massachusetts Supreme Judicial Court granted direct appellate review in the appeal of VAS Holdings & Investments LLC v. Commissioner of Revenue. The question is whether Massachusetts can tax a gain realized by a nonresident corporate taxpayer on the sale of an interest in an LLC that conducted business activities in Massachusetts. The Appellate Tax Board agreed with the Commissioner and held that corporate income tax was properly imposed on the gain. The appellant tried to distinguish its distributive share income (derived from regular business activities in Massachusetts) from the capital gain income. It argued this discrete act of selling an LLC interest had only “an indirect link” to Massachusetts, which did not provide the requisite minimum connection to Massachusetts. The board disagreed and held the LLC value increase was inextricably connected to and derived from its business activities in Massachusetts.

On June 28, 2021, the U.S. Supreme Court in New Hampshire v. Massachusetts denied New Hampshire’s effort to strike down a Massachusetts regulation governing personal income taxation for nonresidents who have been telecommuting since the start of the Covid-19 pandemic. New Hampshire argued the regulation was unconstitutional because it sought to tax New Hampshire residents who earned income from activities they undertook solely within New Hampshire. The U.S. solicitor general pointed out the constitutional claims New Hampshire sought to present could adequately, and more appropriately, be raised and litigated by the aggrieved New Hampshire residents through the established judicial and administrative processes in Massachusetts. Moreover, original jurisdiction should be invoked “sparingly” by the court and only when absolutely necessary.

On June 21, 2021, the Appellate Tax Board ruled against the owner of a liquefied natural gas facility in a local property tax case holding the owner failed to prove that the property was overvalued. The key takeaway from Hopkinton LNG Corp. v. Hopkinton is that valuation of regulated utility property for property tax purposes is generally accomplished through a cost-approach analysis rather than an income capitalization approach. Here, the purpose of the plant was to store and make available natural gas for peak demand periods, resulting in lower gas prices. The savings were passed along to consumers. The facility, therefore, was a cost-saving rather than an income-producing asset. As such, the cost method was the proper valuation approach.

On May 18, 2021, in Macy’s Retail Holdings Inc. v. Burlington, the Massachusetts Appeals Court affirmed the Appellate Tax Board’s decision that an improved three-story department store was overvalued for property tax purposes. The board rejected the town’s argument that the potential for further site development should be factored into the current year valuation.

The case of Shaw’s Supermarket v. Brookline illustrates the unpredictability of litigating a property tax appeal in Massachusetts. The town contended some form of mixed-use redevelopment was its highest and best use, as opposed to its existing use as a supermarket. The board agreed with the appellant’s expert, finding a change in use for redevelopment was too remote, speculative, and unlikely. Further, appellant’s income-capitalization technique was the most appropriate methodology for valuing the subject property. The board rejected the town’s valuation methodologies as lacking and unsupported in numerous respects. Despite its criticism of the town, and its agreement in large part with the appellant, the board made its own determination of value and ruled the property was undervalued for the first year and only slightly overvalued for the second year. Accordingly, only a nominal refund was awarded. The case was decided on March 31, 2021.

On March 26, 2021, Gov. Charlie Baker (R) signed a comprehensive climate change bill (Senate Bill 9 – An Act Creating a Next Generation Roadmap for Massachusetts Climate Policy) designed to eliminate carbon emissions in Massachusetts by 2050 by promoting renewable energy and reducing the state’s reliance on fossil fuels. The act exempts wind, solar, energy storage, and fuel cell systems from local property taxation. In order to qualify for the exemption, the system may not produce more than 125% of the annual energy needs of the real property upon which it is located. In addition, municipalities have been given greater authority to enter into agreements for payments in lieu of taxes for solar and wind systems, storage batteries, and fuel cells.

Beginning April 2021, Massachusetts requires some vendors and operators (depending on the amount of tax or excise liability from the previous year) to make an advance payment before the related tax return is due. This requirement will begin for tax periods ending after April 1, 2021. Taxpayers with over $150,000 in cumulative tax liability in the prior year for sales and use, meals, rooms, or marijuana tax will be required to make advance payments. Sales taxes related to sales made the first three weeks of the month must be remitted by the 25th day of the month. The remaining tax for the month will be due with the tax return, 30 days after the filing period closes.

On April 26, 2021, following the Commissioner’s loss in New Cingular Wireless PCS LLC v. Commissioner of Revenue, the department issued Technical Information Release 21-5 to explain the taxation on Internet access in Massachusetts. In New Cingular, the Appeals Court affirmed certain data charges were not taxable under the Internet Tax Freedom Act because the taxpayer complied with the screening software and accounting rule provisions of the ITFA. The department views the New Cingular decision as applying to a particular set of facts and circumstances rather than a comprehensive bar on imposing sales and use taxes on the internet access services sales. Going forward, the department will review each case to ensure that internet access providers meet the accounting and screening requirements before they are deemed eligible to claim ITFA protection.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Philip S. Olsen is a tax attorney at the Boston law firm of Davis Malm, where he focuses on state and local tax consulting and litigation. He has over 25 years’ experience litigating and resolving major tax controversies before courts and administrative boards. He can be contacted at

Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact us at

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