Massachusetts Sales Tax Guide

Massachusetts, the sixth state in the union, is filled to the brim with history and American culture. Home to Boston and starting point of the American Revolution, you can’t turn around in this state without bumping up against some history. It’s no surprise that many people are happy to live and work in Massachusetts. If you’re one of the proud small business owners calling Massachusetts home, you’ll need to stay in compliance with the Massachusetts Department of Revenue's sales and use tax laws to keep things in check. No problem! We have assembled this all-in-one guide for sales tax so that you can meet all the sales tax requirements for a small business in Massachusetts. 

After reading this guide, you will have learned:

• How to be prepared for your call with the Massachusetts Department of Revenue.
• How to contact the Massachusetts Department of Revenue.
• When to charge sales tax in Massachusetts.
• What goods, products, and services are taxable in Massachusetts.
• When you establish a sales tax nexus with the state of Massachusetts, and the nuances of various thresholds.
• How to register for a sales tax license in Massachusetts.
• How to collect sales tax in Massachusetts.
• How to file and pay sales tax in Massachusetts.

If, after reading, you still have any questions to help you determine your tax sales obligations in Massachusetts and how to fulfill them, we are here for your small business bookkeeping needs! 

Massachusetts Sales Tax Contacts

✅  Do you need to get in touch with the Massachusetts Department of Revenue?

✅  Are you uncertain about whether to visit, call them, or contact them through their website?  

✅ Do you wonder what information you should have ready before you contact them?

If you answered “Yes” to any of these questions, please read onward, as we have just the information you need! :)

The Massachusetts Department of Revenue is reachable by phone at 617-887-6367. 

You can also shoot a message to them via their website, or you may visit one of their six convenient physical locations. If you are hoping for the fastest response, we always suggest you call rather than send https://www.mass.gov/info-details/dor-contact-us#in-person-a message or visit in person. 

When you do call the Massachusetts Department of Revenue, you will want to have some information on hand. It will save time to have the following information easily accessible before you call: 

• Taxpayer Name
• EIN
• Sales & Use Tax ID Number

If you are calling on behalf of an individual or a business, or having a third party call on your behalf, you must have a Massachusetts Power of Attorney (form  2848, PDF) signed before you call or else you will be wasting your time; they can only help if you have a completed POA form. 

Should you have more questions, please feel free to contact us so we can assist you with your sales tax needs.

Massachusetts Sales Tax Registration

Are you a new business selling tangible property in Massachusetts? If yes, you are going to want to register your business with the Massachusetts Department of Revenue so that you can pay your sales tax on time. 

You needn’t fret as this is a fairly simple process and one for which we’re about to fully prepare you. We are going to outline the steps below so you are totally ready to register for your sales tax license.

Here we go! Remember...

Preparation is key. 

Let’s get started!

How do I register to collect sales tax in Massachusetts?

You can register your Massachusetts state sales tax permit by visiting the Massachusetts Department of Revenue website and following the instructions provided.

Massachusetts doesn’t offer a paper based way to register, and we applaud them for it! 

What information do I need to register for a Massachusetts sales tax permit?

Great question!

Before you sign up for Massachusetts sales tax permit you’ll want the following information on hand:

• Business name
• Business entity type 
• Description of business activities
• Date business activities began or will begin
• Business address and mailing address
• Business contact information
• Associated business entities 
• NAICS code that best matches the business
• Federal Employer Identification Number (FEIN)

Don’t forget! Preparation is key. When you have all this information ready, you can go online and register for your permit at the Massachusetts MassTaxConnect website. 

How much does it cost to register for a Massachusetts sales tax permit?

The cost to register a new sales tax permit in Massachusetts is $0. We are always delighted to give this answer! :) 

Do I need a Federal Tax ID Number or EIN to register for a Massachusetts sales tax permit?

Indubitably! You will certainly need one, but if you don’t already have one and need to get a new EIN, it’s a painless process. You can register for a Federal EIN right here :). 

Which agencies in Massachusetts do I need to additionally register with?

You may additionally need to contact some of the following agencies: 

• Massachusetts Division of Agriculture
• Massachusetts Department of Labor Relations
• Massachusetts Board of Public Accountancy

You’ll want to give this some thought and do a little research or investigating; every business is unique and, as such, different rules, regulations, and laws that may apply. 

We suggest contacting the Massachusetts Department of Revenue to verify which additional government agencies you may be required to register with. 

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Hooray!!!

You are now prepared to register for your Massachusetts sales tax permit in Massachusetts. 

Let’s summarize what we have covered so far:  

• Have all the required information easily accessible before registering online.
• Acquire a tax ID or EIN before registering for a Massachusetts sales tax permit.
• Register online at the Massachusetts MassTaxConnect site.
• Look into what other agencies you may have to additionally register with.

Registering for your Massachusetts sales tax permit will be stress free as long as you are adequately prepared. We always recommend organizing all the essential information in a folder, preferably mirroring paper files with a system like Box.com or Dropbox (something we’re happy to handle for our customers). 

Massachusetts Sales Tax FAQ 

By now, you may have already contacted the Massachusetts Department of Revenue and applied for a Massachusetts sales tax permit. 

Once you have a license to collect and remit sales taxes in Massachusetts, you will probably be asking yourself two questions: 

• When do I charge a sales tax in Massachusetts?

• What goods and services are subject to sales taxes in Massachusetts? 

We are going to go over the most common sales tax questions our clients ask. We believe the answers to these questions will help you appreciate the nuances of taxable goods so you can be confident in fulfilling your tax obligations. 

Let’s start with the first question…

What goods and services are considered taxable in Massachusetts?

The following items are all taxable in the state of Massachusetts: 

• Sales of most tangible goods at retail.
• Property rentals, leases, or licenses [e.g. commercial, mini-warehouse]
• Manufacturing or producing goods for retail sales.
• Clothing over $175 an item

With exception to a few special cases, most tangible goods are taxed in Massachusetts.

The bottom line is …

Your business must pay taxes on sales of any non-exempt goods.

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Let’s now review some of our clients’ frequently asked questions:

• Is Massachusetts an Origin or Destination sales tax State?

• What creates a sales tax nexus in Massachusetts?

• What is the economic threshold in Massachusetts?

• Does Amazon have fulfillment centers in Massachusetts?

• Does Massachusetts have a Click-Through Nexus?

To best understand your tax obligations, new businesses need to consider how they are doing business and the type of relationships they have with buyers and any third parties to their transactions (such as affiliate marketers). 

 Let’s discuss some questions that will help you understand the nature of your small business and the subsequent tax implications.   

Is Massachusetts an origin or destination-based sales tax state?

Massachusetts is a destination-based sales tax state. This means you charge sales tax based on the location of the purchaser rather than that of the seller. Massachusetts is one of those magical states that doesn’t permit additional local taxing, so it’s the same rate throughout the state! 

 Protip: Charge the customer tax based on their location.

What creates a tax nexus with the State of Massachusetts?  

Having nexus, also known as "sufficient business presence,” with Massachusetts means your business has established a taxing connection with a state. When this happens, you are required to collect and remit sales tax in Massachusetts because you created a sales tax Nexus.

Even if your business maintains its main headquarters in another state, you may still have to charge and pay sales tax to the Massachusetts Department of Revenue even if you never step foot in Massachusetts.   

So, how do you create Sales Tax Nexus in Massachusetts?

A business establishes a nexus in Massachusetts by:

• having a business location in Massachusetts;
• having property stored in Massachusetts;
• employing any person in Massachusetts;
• contracting with a salesperson or other agent in Massachusetts;
• leasing equipment used in Massachusetts;
• performing services in Massachusetts;
• licensing the use of intangible property in Massachusetts, or transporting property in Massachusetts using the taxpayer’s vehicles.

Let’s talk a bit more specifically about where your goods are stored, such as in the instance of an Amazon warehouse. 

Does Amazon have fulfillment centers in Massachusetts?

Yes, just one of them at the time of this article’s publishing:

• 1180 Innovation Way, Fall River MA 02722

This is relevant if you sell your products on Amazon or are recognized as an Amazon FBA (Fulfillment by Amazon) seller. When Amazon stores your products in one of its fulfillment centers in any state, including Massachusetts, this triggers a sales tax requirement. If Amazon is storing your products in a warehouse in Massachusetts, you have created a taxing connection with the state of Massachusetts.

We can help guide your small business through this! We use tools like A2X and Wherestock to identify where our clients' inventory is currently being held and shipped from so that we can keep them in compliance.

Does Massachusetts have economic nexus?

Yes! This means that even if your business isn’t located in the state or doesn’t in any traditional way create nexus, you may still have to register and pay sales tax in Massachusetts.

The threshold for creating economic nexus with Massachusetts is to have over $500,000/year in sales to Massachusetts purchasers and 100 separate transactions in a year. Remote sellers must meet both qualifications to be required to register. 

For more information keep an eye on Massachusetts DOR’s remote sellers page.

Does Massachusetts have click-through nexus?

No, Massachusetts has no special requirements for affiliate sales at this time. Phew :)

Is Massachusetts a streamlined sales tax state?

No, Massachusetts is not a member of the SSP. Fingers crossed they might join this efficiency boosting project 🤞!

More effectively manage your tax needs by keeping this guide handy. 

You and your business can be better equipped to avoid situations like paying fines, paying back taxes that you did know you had to pay in the first place, or facing an audit by the tax authorities in Massachusetts.

Collecting Sales Tax in Massachusetts

By now you know if you are a business that has established a nexus with Massachusetts. So you have an understanding about whether, or when, you are required to collect sales tax. Knowing this is just half the battle! Now, we are going to help you with the next half of the battle: how to navigate the process of collecting taxes.

Let’s review some common questions our clients have asked regarding their Massachusetts Sales Tax obligations. 

• How do I collect Massachusetts Sales Tax?
• Who is eligible for Massachusetts Sales Tax exemptions?
• What should I do if my customer is exempt from sales tax in Massachusetts?
• What happens if I lose a Massachusetts nontaxable transaction certificate? 

After reading this, you will be better equipped to determine when --and when not-- to collect sales tax in Massachusetts.

How do I collect Massachusetts sales tax?

Because Massachusetts is a destination-based sales tax state, your business should charge sales tax based on the location of the purchaser, at the time of the transaction. This is usually as simple as configuring the Point-of-Sales system accordingly. The nice thing with Massachusetts is that there are no complicating, compounding jurisdictions. Just one simple rate for the state.

What are the current Massachusetts sales tax rates?   

At the time of this article’s publication, Massachusetts’s state-wide sales tax rate is 6.25%. Since sales tax rates may change, we suggest utilizing this link to stay up to date.

It always helps to be accurate and up to date with this type of information! :) 

What is exempt from Massachusetts sales tax?

Here is a sample list of exemptions: 

• Purchases for resale
• Everyday clothing items under $175
• Medical supplies
• Groceries, unprepared food 

Massachusetts has a page that goes into detail on their tax exempt goods. Beyond that, everything is included in taxable goods. 

Who are eligible for Massachusetts sales tax exemptions?

At this point, you should know what products are exempt from sales tax in Massachusetts. You also want to know who may be exempt. 

Under Massachusetts law, the type of buyer or the way the goods will be used can qualify can buyer for a sales tax exemption. A good example of this is a merchant purchasing goods for resale, aka a wholesaler.

Other common examples of an exempt buyer may include:

• Government agencies
• Non-profit organizations
• Religious groups
• Out-of-state buyers (should their business not have nexus in their home state).

What should I do if my customer is exempt from sales tax in Massachusetts?

Purchasers who are tax exempt must have completed an exemption certificate ST-4 (PDF) and must present their completed exemption certificate at the time of purchase. It is then up to the seller to hang on to this exemption certificate. Failure to do so may leave you unable to justify tax exempt sales.

Massachusetts provides a website to determine whether an exemption certificate is valid. Note that determining the validity via the website doesn’t reduce the requirement to hold on to the certificate for bookkeeping purposes.

What happens if I lose a Massachusetts sales tax exemption certificate?

Ideally this situation is to be avoided entirely! Finding out you’ll be audited and then discovering you cannot produce a required exemption certificate is a bad day. That scenario would mean you could be held liable to pay all taxes on behalf of the buyer. This whole ordeal could be easily avoided by taking proper care with your paperwork… which happens to be one of our specialties! :) 

Does Massachusetts have a sales tax holiday?

Nope :( Boo! 

***** 

We have now covered who you need to collect sales taxes from, how to determine whether goods for sale are deemed taxable, what goods and services fall under tax exemptions, who is eligible for tax exemption certificates, and, finally, the process of collecting sales tax in Massachusetts state. 

Now that we’re this far down the rabbit hole there’s only one thing we need to learn about next… how to pay the piper! 

Filing and Paying Sales Tax in Massachusetts

It is time to talk about filing and paying your sales taxes in Massachusetts. In this section, We are going to cover the following frequently asked questions from our clients:

• When is Massachusetts Sales Tax due?
• What are the Massachusetts Sales Tax thresholds?
• What if a Massachusetts Sales Tax filing date falls on a weekend or holiday?
• How do I file a Massachusetts Sales Tax Return?
• How do I correct a Massachusetts Sales Tax return?
• What happens if I don’t collect sales tax?
• What happens if I file or pay my sales tax return late?
• Do I need to file a return if I don’t collect any sales tax in Massachusetts?
• If I close my business, do I need to file a final sales tax return?
• Does the Massachusetts Department of Revenue offer a discount for filing on time?

By the time you finish reading this, you will feel confident enough to file and pay your Massachusetts Sales Tax.

When is Massachusetts sales tax due?

Massachusetts sales tax payments are due no later than the 20th day following the reporting interval.

What are the Massachusetts sales tax filing interval thresholds?

The thresholds for filing intervals are based on the expected or actual tax liability owed:

*based on actual sales for existing companies or projected for new ones

Not sure how to determine your tax filing frequency?

You can review your eCommerce or Point-of-Sale Software to see the volume of sales you have generated. 

Don't worry though! The state will let you know when your due dates change. :) 

Keep an eye out for notices in your mail from the State of Massachusetts so that you don't miss any shift in deadlines.

What if a Massachusetts sales tax filing date falls on a weekend or holiday?

The deadline is moved to the next business day, typically the Monday following the weekend or the day after the holiday. Where possible, we always suggest filing well before the holiday, of course ;). 

How do I file a Massachusetts sales tax return?

Paper: Fill out form ST-9 (PDF) and mail it to the address on the form. 

Electronic: File online via the MassTaxConnect website and submit payment via EFT.

How do I correct a Massachusetts sales tax return?

Paper: File a new form ST-9 (PDF), check the “Amended return” box, mail to address on form.

Electronic: Correct the submitted return via the MassTaxConnect site and submit payment via EFT

What happens if I fail to collect sales tax?

If you were required to collect sales taxes and failed to do so for whatever reason, that’s a big no-no! The business will be held liable for the due tax.

Always be sure to collect sales tax at the point of sale. Attempting to collect after the fact will be time consuming and most likely unsuccessful. 

Protip: You may still be responsible for remitting sales taxes even if you failed to collect them. 

What happens if I file or pay my sales tax return late?

The Massachusetts Department of Revenue charges 1% penalty for late filing or failure to pay, up to a maximum of 25%. Additionally, interest is applied to any outstanding balance. The rate is tied to federal short-term rate, plus 4%, compounded daily. We suggest you file and pay on time! :) 

Do I need to file a return if I don’t collect any sales tax in Massachusetts?

Yes, Massachusetts requires businesses file a “Zero-Tax” return even when they have no sales during a taxing period. 

If I close my business, do I need to file a final sales tax return?

Yes, Massachusetts requires businesses to file a final return via the MassTaxConnect site when closing their doors.

Does the Massachusetts Department of Revenue offer a discount for filing on time?

Nope, no discount for filing sales tax on time in Massachusetts. Unless you count not being fined for paying late! Which, we don’t. :)

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Now that we have covered all the bases for filing and paying sales taxes in the state of Massachusetts, you should feel more at ease about the process.

Some things to remember:

• Due dates are important. If anything, file and pay your taxes early.
• There are three payment plans for filing and paying your sales taxes depending on how much you collect in sales tax on average in a month.
• You can file and pay your taxes electronically or by mail
• If you need to amend a return, you may do so electronically or by paper.
• If you don’t collect sales tax and you were supposed to, you (not the buyer) is liable to pay the sales tax to the state of Massachusetts.
• You will have to pay late fees if you fail to file your tax return on time and/or if you fail to make your tax payment on time.
• Even if you collect no sales tax, you still need to file a return.
• You need to file a “Final return” when you close your business.

Now you are ready to file and pay your sales tax in Massachusetts! If you have any more questions, feel free to contact us.

Please note: This blog is for informational purposes only and the information is accurate as of 7/31/2019. If you want legal advice on sales tax law for your business, please contact a Sales Tax professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog possibly may be out of date by the time you review it.