Tax Collector’s Reach

Tax collectors have long arms, and those in Massachusetts reached all the way to Los Angeles to collect $7.4 million in fiscal 1985 taxes owned by Western companies that do business in the Bay State.

The Massachusetts Department of Revenue, which operates five audit and collection offices across the country in addition to smaller satellite offices in 10 other cities, has stepped up its efforts to collect taxes owed by out-of-state firms in recent months, said Harry Durning, a spokesman for the Massachusetts Department of Revenue.

But the task was made more difficult by a court decision on the unitary method of taxation that went against Massachusetts.

In December, the Massachusetts Supreme Judicial Court ruled that the state didn’t have the statutory authority to tax national and multinational companies by using the unitary method, a complicated formula for computing taxes based on a firm’s worldwide operations rather than simply business done within state lines.

(The Massachusetts legislature is considering a bill that would allow the state to apply a unitary tax on a “water’s edge” basis, which doesn’t count the income of foreign corporations.)

In fiscal 1985, which ended June 30, the offices of the Multistate Bureau identified $46.8 million in unpaid taxes but were able to collect only $38.2 million because of the unitary tax ruling.

The 5-year-old regional office in Los Angeles--covering California and 10 other Western states--ranked third among the five offices in 1985 assessments, taking in a total of $7.1 million. Including payment of some assessments from earlier years, the total came to $7.4 million, compared with only $2.4 million in 1984. Fiscal 1985 “was a good year for Los Angeles,” said Robert MacPhail, deputy director of the Multistate Bureau.