Massachusetts Sales Tax Guide 2023: Compliance, Rates, and Regulations for Businesses

Massachusetts sales tax at a glance

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Massachusetts sales tax rates & calculations in 2023

The Massachusetts state sales tax rate in 2023 is 6.25%. There is only a statewide tax and no local taxes in this state.

List of local sales tax rates in Massachusetts

There are no local sales tax rates in Massachusetts. The state sales tax rate is 6.25% across all cities and counties.

FAQs

How do you calculate Massachusetts sales tax?

To calculate Massachusetts sales tax, you can use the formula:

Sales tax = (base rate + local rate) * purchase price.

For instance, since the base rate is 6.25% and there is no local rate, if the purchase price is $100, then the sales tax would be $6.25.

What are the penalties for not paying Massachusetts sales tax?

If you fail to pay Massachusetts sales tax when it is due, you may face the following penalties:

• Interest charges - You will be charged interest at the federal short-term rate plus 4%, compounded daily.
• Late payment penalty - 1% of the unpaid tax per month, up to a maximum of 25%
• Failure to file penalty - 1% of the balance due per month, up to a maximum of 25%
• Substantial understatement penalty - 20% of the underpayment if it exceeds 10% of the tax due or $1,000

What’s the difference between destination-based and origin-based sales tax states?

Destination-based sales tax states collect tax based on where the purchaser receives the product or service. Origin-based sales tax states collect tax based on where the seller is located.

Is the Massachusetts sales tax destination-based or origin-based?

Massachusetts is a destination-based sales tax state. Sales tax is collected based on where the purchaser receives the product or service.

Is Massachusetts a streamlined sales tax state?

Massachusetts is not currently a Streamlined Sales and Use Tax Agreement (SSUTA) member. The SSUTA is an agreement that standardizes and simplifies sales tax collection and administration among member states. 

Sales tax nexus table in Massachusettes

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Registration requirements for online sellers in Massachusettes

Massachusetts requires online sellers that meet certain economic thresholds to register and collect sales tax. This includes both Massachusetts-based online sellers as well as out-of-state online sellers.

Online sellers must register for a Massachusetts sales tax permit if they have over $100,000 in Massachusetts sales during the past 12 months. This includes sales through online marketplaces and platforms.

Specifically, the following online sellers need to register in Massachusetts:

• Massachusetts sellers with over $100,000 in gross Massachusetts sales
• Remote or out-of-state sellers with over $100,000 in Massachusetts sales
• Marketplace facilitators with over $100,000 in Massachusetts sales facilitated marketplace sellers

Once registered, online sellers must:

• Collect Massachusetts sales tax on taxable sales
• File Massachusetts sales tax returns based on the filing frequency allotted to their business license
• Remit sales tax to the MA Department of Revenue

Registration ensures proper payment of sales tax on online transactions. Failing to register when required can lead to interest, penalties, and other legal action.

What's taxable and exempt in Massachusetts

Let’s look at what’s taxable and exempt from sales taxes in Massachusetts.

What’s taxable 

• Tangible personal property like appliances, furniture, electronics, etc.
• Meals and food from restaurants
• Telecommunications services
• Alcoholic beverages
• Tobacco products
• Soda
• Candy
• Software delivered electronically or via physical media

What’s exempt

• Unprepared food items
• Clothing under $175
• Periodicals like newspapers and magazines
• Admission tickets
• Residential utilities
• Professional services
• Prescription drugs and medical equipment
• Casual/isolated sales
• Sales for resale with a valid exemption certificate
• Sales to exempt organizations with valid exemption certificate

Excise and discretionary taxes in Massachusetts

Let’s look at some of the different excise taxes in Massachusettes that you need ot be aware of. 

Excise taxes in Massachusetts (alcohol, tobacco, gasoline, fuel, marijuana)

• Alcohol excise tax: Malt beverages (beer) - $0.11 per gallon. Wine - $0.55 per gallon. Distilled spirits - $4.05 per gallon.
• Tobacco excise tax: Cigarettes - $3.51 per pack of 20. Smokeless tobacco - 210% of the manufacturer's price. Cigars - 40% of the wholesale price, but not less than $3.90 per cigar.
• Gasoline excise tax: $0.24 per gallon
• Diesel fuel excise tax: $0.24 per gallon
• Marijuana excise tax: 10.75% retail excise on recreational marijuana. Medical marijuana is exempt.

Food and beverage tax in Massachusetts

Massachusetts does not have a general sales tax on food and beverages. However, there are excise taxes on some specific items:

• Meals at restaurants are subject to the 6.25% sales tax.
• Alcoholic beverages are subject to alcohol excise taxes.
• Soda and soft drinks are subject to the 6.25% sales tax.

Remote sellers in Massachusetts

Remote sellers with over $100,000 in Massachusetts sales must register and collect Massachusetts sales tax. Marketplace facilitators must collect tax for marketplace sellers exceeding $100,000 in Massachusetts sales.

Prepaid sales tax rates for fuel products in Massachusetts

The prepaid sales tax rates on fuel products in Massachusetts are:

• Gasoline: $0.24 per gallon
• Diesel Fuel: $0.24 per gallon

Discretionary taxes in Massachusetts

There are currently no local discretionary sales taxes imposed in Massachusetts. The state sales tax rate of 6.25% applies uniformly across all cities and counties. Local governments in Massachusetts need the authority to impose local sales taxes.

Collecting sales tax in Massachusetts

Due to the simplicity of a single statewide tax, it becomes easier to collect and remit taxes in Massachusetts. 

Since Massachusetts is a destination-based sales tax state, you must collect a 6.25% tax whenever you sell to a customer based in the state. 

Should you collect sales tax on shipping charges in Massachusetts?

Based on Directive 98-5 from the Massachusetts Department of Revenue, shipping and handling charges are generally excluded from the sales price subject to sales and use tax if the following conditions are met:

• The charge is separately stated on the invoice.
• The charge reasonably reflects the costs of transportation.
• The transportation occurs after the customer purchases the tangible personal property.
• No written contract or agreement specifies that the title to the goods will transfer to the purchaser only upon delivery.

If these conditions are not met, the shipping and handling charges are included in the sales price and are subject to tax.

Schedule for paying sales taxes in Massachusetts

The filing schedule for sales taxes in Massachusetts depends on your sales tax collection. Let’s look at Massachusetts's requirements and the due dates for monthly, quarterly, and annual filing in Massachusetts.

Monthly Filing Schedule

For vendors who collect $1,201 or more in sales/use tax, the filing frequency is monthly. The returns for each month are due 30 days after the end of the filing period. For example, for the period from April 1-30, the due date would be May 30.

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Quarterly Filing Schedule

Vendors who collect between $101 and $1,200 in sales/use tax are required to file every quarter. The due date for these quarterly returns is 30 days after the end of the filing period. For instance, from April 1 to June 30, the due date would be July 30.

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Annual Filing Schedule

Vendors who collect $100 or less in sales/use tax are required to file annually. The return for the year is due 30 days after the end of the filing period, which ends on December 31. Therefore, the due date for the annual return would be January 30.

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Inaccurate or late sales tax filing penalties in Massachusetts

If you miss the deadline for filing your sales or use tax returns in Massachusetts, you're looking at some pretty steep penalties and interest charges. Here's the breakdown:

• Late payment: If you do not pay your taxes by the deadline, you will be charged a late penalty fee. The penalty is 1% of the amount of unpaid tax for each month or partial month that the payment is late.
• Late filing: Not filing your tax return by the deadline will also result in a penalty. The penalty is 1% of the amount owed for each month or partial month the tax return is filed late. This penalty can add up to 25% of the balance due.
• Interest charges: On top of the penalties, you'll also be charged interest on the unpaid amount. The rate is the federal short-term rate plus 4%, and it's compounded daily. You can call the Department of Revenue's Contact Center at (617) 887-6367 to get the current rates.
• Underpayment penalties: If you underpay your tax because you neglected or disregarded tax laws or substantially understated your tax liability, you could face a penalty of 20% of the underpayment. This kicks in if the underpayment exceeds 10% of the tax required to be shown on the return or $1,000, whichever is more.
• Willful tax evasion: This is a felony and comes with a fine of up to $100,000 for individuals or $500,000 for corporations. You could also end up in prison for up to 5 years.
• Failure to collect and pay over taxes: This is another felony, punishable by a fine of up to $10,000 and/or imprisonment for up to 5 years.
• Non-compliance penalties: If you don't comply with the requirements for filing returns, making payments, or electronically submitting data, you could be penalized up to $100 for each incorrect submission.

It’s best to hire a tax expert like Numeral to avoid such hefty penalties. Numeral guarantees 100% accuracy in any filings, or Numeral bears the penalties. Top DTC brands like Obvi, immi, and many others spend less than 10 minutes each month on their sales tax—and you can too. 

FAQs

What are the Massachusetts sales tax due dates?

The scheduled dates for filing sales tax returns in Massachusetts depend on your filing frequency. For monthly filers, the due date is 30 days after the end of each month. For quarterly filers, the due date is 30 days after the end of each quarter. For annual filers, the due date is January 30th, following the end of the calendar year.

I didn’t collect any Massachusetts sales tax during this period. Do I still need to file a return?

Yes, you must still file a sales tax return in Massachusetts even if you didn't collect any sales tax during the period. Filing a return ensures that your records with the Department of Revenue are up-to-date.

Can I get an extension on filing my Massachusetts sales tax return?

You can request an extension for filing your sales tax return in Massachusetts, but you must make a payment along with your extension request. Extensions without payments are not granted. If the extension payment is $5,000 or more, you must pay electronically. Electronic extensions can be filed. through MassTaxConnect or using commercial software.

Can I amend a Massachusetts sales tax return?

Yes, you can file an amended sales tax return in Massachusetts. If you owe additional tax, you'll also need to pay any interest or penalties that may apply.

What is the penalty for filing and/or paying Massachusetts sales tax late?

Massachusetts imposes a 1% penalty per month on late payments and late filings, up to a maximum of 25%. If you fail to pay the tax when due, you'll also be charged interest at the federal short-term rate plus 4%, compounded daily. Additional penalties may apply for underpayment or willful evasion of taxes.

Audits and appeals in Massachusetts

So, you've received an audit notice from a tax examiner. This usually means they either need more information about something on your tax return, or they've spotted an error that needs fixing. 

Remember, whatever the case is, you must respond to these notices, or you could owe more in interest and penalties.

What to expect during a tax audit in Massachusetts

• Initial contact: You get a notice from the tax examiner. It tells you what's wrong and how to fix it.
• Types of audits: Two kinds—Desk Audits and Field Audits. We’ll explain this further.
• The meeting: You and the auditor look at your records and talk about any issues. You can ask questions, too.
• Time frame: Usually covers three years, but can go up to 6 years if you missed filing your returns.
• Extending audit: Sometimes, they ask for more time to do the audit. You can say yes or no.
• Representation: You can bring someone like a lawyer to help you. Fill out a Power of Attorney form if you do.
• Communication: Always answer the DOR's letters and questions. If you don't, you might have to pay more money later.

Types of audits

• Desk Audits: These are straightforward and usually resolved through letters between you and the DOR. You'll get a Notice of Intent to Assess (NIA) or a Notice of Failure to File (NFF), depending on the issue. Responding promptly is key to avoiding additional charges.
• Field Audits: These are in-depth and involve a meeting, usually at your business location or your accountant's office. The auditor will explain what records you must show and how the audit will be conducted.

Audit representation

You can bring an attorney or anyone else when meeting with a DOR employee. If you want someone to represent you fully, you must fill out a Power of Attorney form (Form M-2848).

Filing an appeal in Massachusetts

Once the audit is done, you'll be briefed on the findings. If you disagree with the audit findings, you have options. You can either pay the amount stated in the NIA within 30 days or wait for a formal bill, known as a Notice of Assessment (NOA). 

You can also request a settlement or a pre-assessment conference to dispute the findings. If you're unhappy with the outcome, you can apply for abatement. However, note that if you owe back taxes, it's a good idea to pay them to avoid further penalties, even if you are going through an appeal.

How to register for sales tax in Massachusetts

Here are the steps to follow for registering for a Massachusetts sales tax license. 

Register online

• Use MassTaxConnect to register your business and sign up for sales tax and other tax types.
• You'll need your EIN, business start date, addresses, and owner/officer info.
• Sole proprietors can use their SSNs to register.

Receive registration certificate

• You'll receive a Form ST-1 sales tax certificate by mail after registering.
• Display this certificate prominently at your business location.

File returns and pay sales tax

• Start charging, collecting, and remitting MA sales tax on taxable sales.
• File sales tax returns even for periods with no sales. Do it electronically if required.
• Keep detailed sales records for at least three years.

More Information & Contacts

For sales tax filing queries and appeals in Massachusetts, contact:

• Authority Name: Massachusetts Department of Revenue (DOR)
• Phone number: (617) 887-6367
• Website: https://www.mass.gov/orgs/massachusetts-department-of-revenue

There you have it—an in-depth guide on MA's sales tax for ecommerce companies. Also, in case you need someone to deal with the sales tax fiasco, Numeral can lend a hand. We have done this for the likes of immi and Amberjack and would be delighted to help you folks as well.