Code of Massachusetts Regulations
830 CMR - DEPARTMENT OF REVENUE
Title 830 CMR 62C.00 - State Tax Administration
Section 62C.8.1 - Massachusetts Reporting Requirements for Third Party Settlement Organizations

Universal Citation: 830 CMR 62C.00 MA Code of Regs 62C.8.1

Current through Register 1531, September 27, 2024

(1) Scope of Regulation; Background; Outline of Topics; Effective Date.

(a) Scope of Regulation. 830 CMR 62C.8.1 sets forth the Massachusetts reporting requirements for third party settlement organizations.

(b) Background. M.G.L. c. 62C, § 8 generally requires payors that have made payments subject to taxation under M.G.L. c. 62 during the preceding calendar year to file with the Commissioner an annual report reflecting such income on the same basis as is required by the federal government. In 2017, the Massachusetts Legislature amended M.G.L. c. 62C, § 8 to allow the Commissioner to require additional reporting requirements that differ from those required by the federal government under the Internal Revenue Code. See St. 2017, c. 47, § 34 ("An Act Making Appropriations for the Fiscal Year 2018 for the Maintenance of the Departments, Boards, Commissions, Institutions and Certain Activities of the Commonwealth, for Interest, Sinking Fund and Serial Bond Requirements and for Certain Permanent Improvements"). At the time of this statutory amendment, federal law required that a TPSO file Form 1099-K with the IRS and furnish a copy to a payee when the TPSO's payments in settlement to that payee exceeded $20,000 in over 200 transactions during a calendar year. 830 CMR 62C.8.1 applies the Massachusetts requirement that a TPSO file and furnish Form 1099-K when it pays amounts in settlement to a payee with a Massachusetts address that equal or exceed $600 in a calendar year, regardless of the number of transactions.

(c) Outline of Topics. 830 CMR 62C.8.1 is organized as follows:
1. Scope of Regulation; Background; Outline of Topics; Effective Date;

2. Definitions;

3. Reporting Requirements;

4. Payee Obligations;

5. Record Keeping; and

6. Penalties.

(d) Effective Date. 830 CMR 62C.8.1 is effective November 13, 2020.

(2) Definitions. For the purposes of 830 CMR 62C.8.1, the following terms have the following meanings:

Code. The Internal Revenue Code as amended and in effect for the taxable year.

Commissioner. The Commissioner of Revenue or the Commissioner's duly authorized representative.

Gross Amount Paid in Settlement. The total dollar amount of all amounts paid in settlement by a TPSO to a payee with no adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts. The dollar amount of each transaction is determined on the date of the transaction. See Treas. Reg. § 1.6050W-1(a)(6).

Payee. Any person who accepts money from a TPSO in settlement of a third-party network transaction. See Code § 6050W(d)(1)(a)(ii).

Third Party Settlement Organization or TPSO. A third party settlement organization as defined in Code § 6050W(b)(3). A third party settlement organization also includes any electronic payment facilitator with whom a third party settlement organization has contracted to make payments in settlement to payees on behalf of the third party settlement organization as described in Treas. Reg. § 1.6050W-1(d)(2).

(3) TPSO Reporting Requirements.

(a) A TPSO must report the gross amount paid in settlement to a payee with a Massachusetts address in a calendar year when such amount is $600 or greater, irrespective of the number of transactions between the TPSO and the payee. A TPSO must report these amounts to the Commissioner and furnish a copy of the report to the payee, even if the TPSO does not have a federal reporting obligation. Where a TPSO has a Massachusetts reporting obligation, but is not required to file IRS Form 1099-K, the TPSO may file with the Commissioner using Form 1099-K, Form M-1099-K, or any other form prescribed by the Commissioner.

(b) All Forms 1099-K must be furnished to the payee on or before January 31st following the close of the taxable year and filed with the Commissioner by February 28th of such year, or March 31st if the TSPO is filing electronically. TPSOs filing 50 or more Forms 1099-K annually must file such forms electronically with the Commissioner.

(4) Payee Obligations. A payee that receives a Form 1099-K must determine the amount reported therein that constitutes income subject to tax under M.G.L. c. 62. Because Form 1099-K reports the gross amount paid in settlement by a TPSO to a payee, the amount reported that is subject to tax may vary depending on the nature of the income. The following examples illustrate the payee reporting rules that apply when a payee receives a Form 1099-K.

Example 1: Taxpayer works as an independent driver that can be hired on the platform administered by Transportation Network Company. Transportation Network Company is a TPSO. Over the course of a calendar year, Transportation Network Company pays $5,000 in settlement to Taxpayer. Transportation Network Company must furnish a Form 1099-K to Taxpayer on or before January 31st of the following calendar year, and file it with the Commissioner on or before February 28th, or March 31st if it is filing electronically. Taxpayer should include the $5,000 amount reported on the Form 1099-K when calculating his or her gross receipts on his or her Massachusetts personal income tax return, and deduct any applicable trade or business expenses when determining his or her taxable income.

Example 2: Over the course of a calendar year, Taxpayer sells several household items on an online auction platform, for which he or she is paid $1,000 in settlement by a TPSO. Taxpayer originally purchased the household items that he or she sold for a total of $2,000. Because Taxpayer sold such items at a loss, the $1,000 reported on the Form 1099-K does not represent income that is subject to tax in Massachusetts and he or she would not need to report it on his or her Massachusetts personal income tax return.

Example 3: Taxpayer goes to dinner with his or her classmates to celebrate their graduation. Taxpayer pays $800 for the entire meal with his or her credit card, and his or her classmates reimburse him or her in the amount of $750 for the expense using a peer-to-peer payment system that is a TPSO. Taxpayer will receive a Form 1099-K from the TPSO reporting the $750. However, because this amount reflects an amount paid to reimburse Taxpayer, and was not a payment for goods or services, it is not subject to tax and Taxpayer does not need to report the amount on his or her Massachusetts personal income tax return.

(5) Record Keeping. All TPSOs and payees must maintain complete and accurate records in accordance with 830 CMR 62C.25.1.

(a) TPSOs. TPSOs must maintain records regarding their payments in settlement to payees and identifying information concerning such payees. Such records include the gross amount paid in settlement to payees, the dates of all such payments in settlement to such payees, and the names, addresses, and social security numbers or federal identification numbers of such payees.

(b) Payees. Payees receiving Form 1099-K must maintain records sufficient to enable the Commissioner to determine the correct amount of tax due. Such records include any permanent books of account, or records, including inventories, as are sufficient to establish the amount of gross income, deductions, or other items required to be shown on their Massachusetts personal income tax return. Such records must be in sufficient detail and clarity to delineate and support each line item deducted on such return.

(6) Penalties. A TPSO that fails without reasonable excuse to file Form 1099-K with the Commissioner or to furnish a copy to a payee is subject to the penalties imposed pursuant to M.G.L. c. 62C, § 77 for each instance of noncompliance.

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