Massachusetts Sales Tax
Massachusetts Sales Tax At a Glance
State rate: 6.25%
Maximum combined rate: 6.25%
Sourcing: Destination
Tax Holidays: Back to School
Governing Body: Massachusetts Department of Revenue
Whether you’re opening a business in Massachusetts, or you’re thinking of expanding your service area to include the Commonwealth, you need to know about the structure of the state’s sales tax laws to ensure you abide by them. This includes understanding what rate to charge your in-state customers, whether you have a sales tax nexus, and whether what you’re selling is even taxable in Massachusetts.
Massachusetts Sales Tax Rates
Unlike most states, Massachusetts does not allow the addition of county or local tax rates, making the state rate of 6.25% applicable for all your in-state sales. This makes calculating sales taxes on items shipped to customers in Massachusetts especially convenient, as many other states require the sales tax on shipped items to be collected at the rate in force at their final destination.
Nexus Regulations in Massachusetts
You only have to collect sales tax on purchases made by Massachusetts customers if you have a nexus, or significant presence, in the state. Massachusetts outlines conditions that can trigger a nexus for your company, including:
- Having a business location in the state
- Selling, renting, or leasing tangible personal property or certain telecommunications services in the state
- Having representatives soliciting orders for tangible personal property or telecommunications services in the state
- Selling to Massachusetts residents or businesses, and performing delivery, repair, or installation services in connection with those sales
There is an Amazon fulfillment center in Massachusetts, and that can create a nexus for sellers who use fulfillment by Amazon to complete their orders.
Massachusetts implemented a series of economic nexus laws that went into effect on October 1, 2019. Remote sellers are required to collect and remit sales taxes if they exceed $100,000 in revenue within Massachusetts in a calendar year. Before this date, the threshold was $500,000.
What’s Taxable?
In general, sales of tangible personal property are subject to sales tax in Massachusetts, as are some telecommunications services. There are notable exceptions to this, however, particularly one for furnishing telecommunications services to residential customers. Other exceptions include:
- Food, including groceries, but excluding restaurant meals
- Clothing, as long as each individual piece costs under $175
- Newspapers and magazines
- Admission to sporting events and amusement activities
- Prescription medication and over-the-counter medication sold on prescription
- Prosthetics and some other medical devices including wheelchairs, braces, supports, hearing aids, and eyeglasses sold with a prescription
Over-the-counter medication purchased without a prescription is taxable, as are all charges related to shipping and handling as long as the product itself is taxable. Personal and professional services are generally not taxable. Purchases of items of clothing costing more than $175 only require the collection of sales tax on the amount over $175.
Certain organizations and businesses are exempt from sales tax in Massachusetts, and they must present a valid exemption certificate at the time of sale. These include agencies of both the Federal and state governments, as well as certain religious, charitable, educational, and scientific organizations. Some exemption certificates are broadly applicable, while others stipulate only certain types of purchases that trigger tax-exempt status.
Certain organizations and businesses are exempt from sales tax in Massachusetts, and they must present a valid exemption certificate at the time of sale. These include agencies of both the Federal and state governments, as well as certain religious, charitable, educational, and scientific organizations. Some exemption certificates are broadly applicable, while others stipulate only certain types of purchases that trigger tax-exempt status.
Registration and Filing
To ensure sales tax compliance in Massachusetts, you must obtain a sales tax certificate by registering with the state. This can be done online through the MassTaxConnect portal, and you’ll receive one registration certificate for each business location you enter. These certificates must be on display in a conspicuous location during normal business operations.
Even if you don’t have a sales tax nexus in Massachusetts, you can voluntarily register to collect and remit sales tax on any purchases made by in-state customers. There is no fee to register, and you will receive a temporary permit to use until your permanent document arrives in the mail in 7-10 days. You do not have to renew your permit, but you must file a return for every period while you hold an active permit, even if you made no taxable sales during that time.
Your filing frequency will be determined by the amount of business tax you expect to collect. The requirements are as follows:
- File annually if you have $100 or less in expected annual tax liability
- File quarterly if you have $101 up to $1,200 in expected annual tax liability
- File monthly if you have $1,201 or more in expected annual tax liability
New businesses and those with a combined annual withholding, sales and use tax liability, and room occupancy excise liability of $5,000 or more must file returns and make payments electronically. Once you have reached that threshold for one year, you must file and pay online in all subsequent years.
Massachusetts Sales Tax Due Dates and Penalties
Sales tax due dates are based on the amount of annual tax collected, and may be annual, quarterly, or monthly. Returns are due 30 days after the close of a period, therefore annual returns are due on January 30 for the previous year. Other due dates are shown below.
As of April 2021, Massachusetts requires that taxpayers with over $150,000 in cumulative tax liability in the previous year make advance payments. To learn more, visit this page.
Monthly Due Dates
Period | Due Date |
---|---|
January | March 1 on a leap year; March 2 on non-leap years |
February | March 30 |
March | April 30 |
April | May 30 |
May | June 30 |
June | July 30 |
July | August 30 |
August | September 30 |
September | October 30 |
October | November 30 |
November | December 30 |
December | January 30 |
Quarterly Due Dates
Period | Due Date |
---|---|
January – March (Q1) | April 30 |
April – June (Q2) | July 30 |
July – September (Q3) | October 30 |
October – December (Q4) | January 30 |
Electronic returns are considered received when they are submitted as long as all information in accurate. To be considered timely, paper returns must be received on or before the due date, or they must be postmarked at least two days before the due date.
Both late filing and payment incur a penalty of 1% of the total tax due per month, up to a maximum of 25%. Interest also accrues on these unpaid balances at four percentage points over the federal short-term rate, and it is compounded daily. Massachusetts reserves the right to impose more severe penalties for deliberate underpayment or evasion.
Massachusetts Sales Tax Resources
- Massachusetts Sales and Use Tax Guide
- Sales and Use Tax for Businesses
- Massachusetts Sales and Use Tax Forms
Massachusetts Sales Tax Software
Whether you only sell in Massachusetts or your service area encompasses many states, you must stay on top of all of the registration and filing requirements for the state. You also need to keep abreast of any changes in Massachusetts sales tax regulations to ensure you always remain compliant and that your small business remains in good standing. Of course, you’d likely prefer to devote your attention to plenty of other areas, and that’s why TaxTools can be such a wonderful resource for your company.
TaxTools combines a sales tax calculator, advanced tracking, and record-keeping software to manage all of your sales tax obligations smoothly and efficiently. It can produce up-to-date reports complete with location information and periodically check for any applicable changes to state sales tax laws that may impact your business. TaxTools also integrates smoothly with all eCommerce platforms, so no matter how you reach your customers, this software can help streamline your sales tax tracking and filing procedures.
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Last updated April 2024