Massachusetts sales tax state guide
All you need to know about sales tax in the Bay State
Learn about sales tax automation
Introducing our Sales Tax Automation 101 series. The first installment covers the basics of sales tax automation: what it is and how it can help your business.
Sales tax 101
Sales tax is a tax paid to a governing body (state or local) on the sale of certain goods and services. Massachusetts first adopted a general state sales tax in 1966, and since that time, the rate has risen to 6.25 percent. In many states, localities are able to impose local sales taxes on top of the state sales tax. However, as of March 2019, there are no local sales taxes in Massachusetts.
As a business owner selling taxable goods or services, you act as an agent of the commonwealth of Massachusetts by collecting tax from purchasers and passing it along to the appropriate tax authority. Sales and use tax in Massachusetts is administered by the Massachusetts Department of Revenue (DOR).
Any sales tax collected from customers belongs to the commonwealth of Massachusetts, not you. It’s your responsibility to manage the taxes you collect to remain in compliance with state and local laws. Failure to do so can lead to penalties and interest charges.
When you need to collect Massachusetts sales tax
In Massachusetts, sales tax is levied on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state tax authorities. The seller acts as a de facto collector.
To help you determine whether you need to collect sales tax in Massachusetts, start by answering these three questions:
- Do you have nexus in Massachusetts?
- Are you selling taxable goods or services to Massachusetts residents?
- Are your buyers required to pay sales tax?
If the answer to all three questions is yes, you’re required to register with the state tax authority, collect the correct amount of sales tax per sale, file returns, and remit to the state.
Failure to collect Massachusetts sales tax
If you meet the criteria for collecting sales tax and choose not to, you’ll be held responsible for the tax due, plus applicable penalties and interest.
It’s extremely important to set up tax collection at the point of sale — it’s near impossible to collect sales tax from customers after a transaction is complete.
Sales tax nexus
The need to collect sales tax in Massachusetts is predicated on having a significant connection with the state. This is a concept known as nexus. Nexus is a Latin word that means "to bind or tie," and it’s the deciding factor for whether the state has the legal authority to require your business to collect, file, and remit sales tax.
Sales tax nexus in all states used to be limited to physical presence: A state could require a business to register and collect and remit sales tax only if it had a physical presence in the state, such as employees or an office, retail store, or warehouse.
In June 2018, the Supreme Court of the United States overruled the physical presence rule with its decision in South Dakota v. Wayfair, Inc. States are now free to tax businesses based on their economic and virtual connections to the state, or economic nexus.
While physical presence still triggers a sales tax collection obligation in Massachusetts, it’s now possible for out-of-state sellers to have sales tax nexus with Massachusetts.
Out-of-state sellers with no physical presence in a state may establish sales tax nexus in the following way:
Cookie/software nexus: Using in-state software to sell or lease taxable tangible personal property or services to consumers in Massachusetts. As of October 1, 2017, a remote internet vendor must register with the state then collect and remit Massachusetts sales tax if the remote internet vendor meets both of the following criteria:
- The remote internet vendor had in excess of $500,000 in Massachusetts sales from transactions completed over the internet during the preceding 12 months, and
- The remote internet vendor made sales resulting in 100 or more transactions for delivery into the state in the preceding calendar year
If you have sales tax nexus in Massachusetts, you’re required to register with the Massachusetts DOR and to charge, collect, and remit the appropriate tax to the state.
For more information, see the Massachusetts Guide to Sales and Use Tax, and 830-CMR-64H.1.7: Vendors Making Internet Sales.
Sales tax nexus can linger even after a retailer ceases the activities that caused it to be “engaged in business” in the state. This is known as trailing nexus. As of March 2019, Massachusetts does not have an explicitly defined trailing nexus policy.
Fulfillment by Amazon (FBA)
If you’re an active Amazon seller and you use Fulfillment by Amazon (FBA), you need to know where your inventory is stored and if its presence in a state will trigger nexus. FBA sellers can also download an Inventory Event Detail Report from Amazon Seller Central to identify inventory stored in Massachusetts.
If you sell taxable goods to Massachusetts residents and have inventory stored in the state, you likely have nexus and an obligation to collect and remit tax. To begin to understand your unique nexus obligations, check out our free economic nexus tool or consult with a trusted tax advisor.
Sourcing sales tax in Massachusetts: which rate to collect
In some states, sales tax rates, rules, and regulations are based on the location of the seller and the origin of the sale (origin-based sourcing). In others, sales tax is based on the location of the buyer and the destination of the sale (destination-based sourcing).
Massachusetts is a destination-based state. This means you’re responsible for applying the sales tax rate determined by the ship-to address on all taxable sales.
After determining you have sales tax nexus in Massachusetts, you need to register with the proper state authority and collect, file, and remit sales tax to the state. We get a lot of questions about this and recognize it may be the most difficult hurdle for businesses to overcome. Avalara Licensing can help you obtain your Massachusetts business license and sales tax registration.
How to register for a Massachusetts seller's permit
You can register for a Massachusetts seller’s permit online through MassTaxConnect. To apply, you’ll need to provide the Massachusetts DOR with certain information about your business, including but not limited to:
- Business name, address, and contact information
- Federal EIN number
- Date business activities began or will begin
- Projected monthly sales
- Projected monthly taxable sales
- Products to be sold
Cost of registering for a Massachusetts seller's permit
There is currently no cost to register for a seller’s permit in Massachusetts.
Acquiring a registered business
You must register with the Massachusetts Department of Revenue if you acquire an existing business in Massachusetts. The state requires all registered businesses to have the current business owner’s name and contact information on file.
Streamlined Sales Tax (SST)
The Streamlined Sales and Use Tax Agreement (SSUTA), or Streamlined Sales Tax (SST), is an effort by multiple states to simplify the administration and cost of sales and use tax for remote sellers. Remote sellers can register in multiple states at the same time through the Streamlined Sales Tax Registration System (SSTRS).
As of March 2019, Massachusetts is not an SST member state.
Collecting sales tax
Once you've successfully registered to collect Massachusetts sales tax, you'll need to apply the correct rate to all taxable sales, remit sales tax, file timely returns with the Massachusetts DOR, and keep excellent records. Here’s what you need to know to keep everything organized and in check.
How you collect Massachusetts sales tax is influenced by how you sell your goods:
Brick-and-mortar store: Have a physical store? Brick-and-mortar point-of-sale solutions allow users to set the sales tax rate associated with the store location. New tax groups can then be created to allow for specific product tax rules.
Hosted store: Hosted store solutions like Shopify and Squarespace offer integrated sales tax rate determination and collection. Hosted stores offer sellers a dashboard environment where Massachusetts sales tax collection can be managed.
Marketplace: Marketplaces like Amazon and Etsy offer integrated sales tax rate determination and collection, usually for a fee. As with hosted stores, you can set things up from your seller dashboard and let your marketplace provider do most of the heavy lifting.
Mobile point of sale: Mobile point-of-sale systems like Square rely on GPS to determine sale location. The appropriate tax rate is then determined and applied to the order. Specific tax rules can be set within the system to allow for specific product tax rules.
Massachusetts sales tax collection can be automated to make your life much easier. Avalara AvaTax seamlessly integrates with the business systems you already use to deliver sales and use tax calculations in real time.
Some goods are exempt from sales tax under Massachusetts law. Examples include most non-prepared food items, some clothing, and home heating fuels.
We recommend businesses review the laws and rules put forth by the Massachusetts DOR to stay up to date on which goods are taxable and which are exempt, and under what conditions.
Some customers are exempt from paying sales tax under Massachusetts law. Examples include government agencies, some nonprofit organizations, and merchants purchasing goods for resale.
Sellers are required to collect a valid exemption or resale certificate from buyers to validate each exempt transaction.
Misplacing a sales tax exemption/resale certificate
Massachusetts sales tax exemption and resale certificates are worth far more than the paper they’re written on. If you’re audited and cannot validate an exempt transaction, the Massachusetts DOR may hold you responsible for the uncollected sales tax. In some cases, late fees and interest will be applied and can result in large, unexpected bills.
Sales tax holidays
Sales tax holidays exempt specific products from sales and use tax for a limited period, usually a weekend or a week. Approximately 17 states offer sales tax holidays every year.
As of March 2019, Massachusetts has the following tax holiday scheduled:
- August 10–11, 2019: Single items of tangible personal property costing $2,500 or less
Filing and remittance
You're registered with the Massachusetts Department of Revenue and you've begun collecting sales tax. Remember, those tax dollars don't belong to you. As an agent of the commonwealth of Massachusetts, your role is that of intermediary to transfer tax dollars from consumers to the tax authorities.
How to file
Once you’ve collected sales tax, you’re required to remit it to the Massachusetts DOR by a certain date. The Massachusetts DOR will then distribute it appropriately.
Filing a Massachusetts sales tax return is a two-step process comprised of submitting the required sales data (filing a return) and remitting the collected tax dollars (if any) to the Massachusetts DOR. The filing process forces you to detail your total sales in the state, the amount of sales tax collected, and the location of each sale.
Online filing is required for all newly registered businesses, businesses applying for additional registrations, or existing businesses with a total tax liability of $5,000 or more for any combination of:
- Annual withholding liabilities
- Sales/use tax liabilities (including sales tax on meals and telecommunications services)
- Room occupancy excise liabilities
Once a business meets this threshold, it’s required to submit an electronic return for all subsequent years. For those business still eligible for paper filing, form ST-9 can be downloaded.
The Massachusetts DOR will assign you a filing frequency. Typically, this is determined by the size or sales volume of your business. State governments generally ask larger businesses to file more frequently. See the filing due dates section for more information.
Massachusetts sales tax returns and payments must be remitted at the same time; both have the same due date.
You may file directly with the Massachusetts DOR by visiting their site and entering your transaction data manually. This is a free service, but preparing Massachusetts sales tax returns can be time-consuming — especially for larger sellers.
Using a third party to file returns
To save time and avoid costly errors, many businesses outsource their sales and use tax filing to an accountant, bookkeeper, or sales tax automation company like Avalara. This is a normal business practice that can save business owners time and help them steer clear of costly mistakes due to inexperience and a lack of deep knowledge about Massachusetts sales tax code.
Avalara Returns for Small Business is an affordable third-party solution that helps business owners simplify the sales tax returns process and stay focused on growing their business. Learn how automating the sales tax returns process could help your business.
Filing when there are no sales
Once you have a Massachusetts seller's permit, you’re required to file returns at the completion of each assigned collection period regardless of whether any sales tax was collected. When no sales tax was collected, you must file a "zero return” electronically.
Failure to submit a zero return can result in penalties and interest charges.
Closing a business
The Massachusetts DOR requires all businesses to "close their books" by filing a final sales tax return. This also holds true for business owners selling or otherwise transferring ownership of their business.
Timely filing discount
Many states encourage the timely or early filing of sales and use tax returns with a timely filing discount.
As of March 2019, the Massachusetts DOR does not offer sales tax filers a discount.
Filing due dates
It's important to know the due dates associated with the filing frequency assigned to your business by the Massachusetts Department of Revenue. This way you'll be prepared and can plan accordingly. Failure to file by the assigned date can lead to late fines and interest charges.
The Massachusetts DOR requires all sales tax filing to be completed by the 20th of the month following the end of the filing period. Below, we've grouped Massachusetts sales tax filing due dates by filing frequency for your convenience. Due dates falling on a weekend or holiday are adjusted to the following business day.
Massachusetts 2019 monthly filing due dates
|Reporting period||Filing deadline|
|January||February 20, 2019|
|February||March 20, 2019|
|March||April 22, 2019|
|April||May 20, 2019|
|May||June 20, 2019|
|June||July 22, 2019|
|July||August 20, 2019|
|August||September 20, 2019|
|September||October 21, 2019|
|October||November 20, 2019|
|November||December 20, 2019|
|December||January 21, 2020|
Massachusetts 2019 quarterly filing due dates
|Reporting period||Filing deadline|
|Q1 (January 1–March 31)||April 22, 2019|
|Q2 (April 1–June 30)||July 22, 2019|
|Q3 (July 1–September 30)||October 21, 2019|
|Q4 (October 1–December 31)||January 21, 2020|
Massachusetts 2019 annual filing due date
|Reporting period||Filing deadline|
|January 1–December 31||January 21, 2020|
Filing a Massachusetts sales tax return late may result in a late filing penalty as well as interest on any outstanding tax due. For more information, refer to our section on penalties and interest.
In the event a Massachusetts sales tax filing deadline was missed due to circumstances beyond your control (e.g., weather, accident), the Massachusetts DOR may grant you an extension. However, you may be asked to provide evidence supporting your claim.
Penalties and interest
Hopefully you don't need to worry about this section because you're filing and remitting Massachusetts sales tax on time and without incident. However, in the real world, mistakes happen.
If you miss a sales tax filing deadline, follow the saying, “better late than never,” and file your return as soon as possible. Failure to file returns and remit collected tax on time may result in penalties and interest charges, and the longer you wait to file, the greater the penalty and the greater the interest.
If you’re in the process of acquiring a business, it’s strongly recommended that you contact the Massachusetts DOR and inquire about the current status of the potential acquisition. Once you've purchased the business, you’ll be held responsible for all outstanding Massachusetts sales and use tax liability.
Shipping and handling
If you’re collecting sales tax from Massachusetts residents, you’ll need to consider how to handle taxes on shipping and handling charges.
Taxable and exempt shipping charges
Massachusetts sales tax generally does not apply to charges for shipping, handling, delivery, freight, and postage, provided:
- They are separately stated on the invoice from the sale of goods
- Delivery occurs after the purchase takes place
- The charge is reasonably assessed
There are exceptions to almost every rule with sales tax, and the same is true for shipping and handling charges. Specific questions on shipping in Massachusetts and sales tax should be taken directly to a tax professional familiar with Massachusetts tax laws.
For additional information, see Massachusetts Directive 04-5: Transportation Charges.