WHICH GOODS AND SERVICES ARE TAXABLE?
Determining whether or not the products or services your company sells are taxable in Massachusetts is the first step in sales tax compliance.
Traditional Goods or Services
Goods that are subject to sales tax in Massachusetts include physical property, like furniture, home appliances, and motor vehicles.
Prescription medicine, groceries, gasoline, and clothing are all tax-exempt.
Some services in Massachusetts are subject to sales tax. For a detailed list of taxable services view the list of tax-exempt items from the Massachusetts Department of Revenue website.
Digital Goods or Services
A digital good or service is anything electronically delivered, such as an album downloaded from iTunes or a film purchased from Amazon.
Massachusetts does not require businesses to collect sales tax on the sale of digital goods.
However, Massachusetts has one exception to this policy. Businesses must collect sales tax on pre-written computer software that is sold online.
HOW TO REGISTER FOR MASSACHUSETTS SALES TAX
If you determined that you need to charge sales tax on some or all of the goods and services your business sells, your next step is to register for a seller's permit. This allows your business to collect sales tax on behalf of your local and state governments.
In order to register, you will need the following information:
- Identifying information about your business
- Type of business
- Owners and officers
- Description of business activities
Save Money with a Resale Certificate
With a resale certificate, also known as a reseller's permit, your business does not have to pay sales tax when purchasing goods for resale.
COLLECTING SALES TAX
After getting your seller's permit and launching your business, you will need to determine how much sales tax you need to charge different customers. To avoid fines and the risk of costly audits, it's important for business owners to collect the correct rate of sales tax.
When calculating sales tax, you'll need to consider the following kinds of sales:
- Store Sales
- Shipping In-State
- Out-of-State Sales
Calculating sales tax on goods sold in Massachusetts is easy. Simply charge the 6.250% flat sales tax rate on all items whether selling in store or shipping across the state.
Massachusetts businesses only need to pay sales tax on out-of-state sales if they have nexus in other states. Nexus means that the business has a physical presence in another state.
Common types of nexus include:
- A physical location, such as an office, store, or warehouse
- An employee who works remotely or who is a traveling sales representative
- A marketing affiliate
- Drop-shipping from a third party seller.
- A temporary physical location, including festival and fair booths.
FILE YOUR SALES TAX RETURN
Now that you’ve registered for your Massachusetts seller's permit and know how to charge the right amount of sales tax to all of your customers, you are all set to file your sales tax return. Just be sure to keep up with all filing deadlines to avoid penalties and fines.
Recommended: Hiring a business accountant can help your business file tax returns as well as issue payroll and manage bookkeeping. Schedule a consultation with a business accountant today to save thousands of dollars on your taxes.
How to File
Massachusetts requires businesses to file sales tax returns and submit sales tax payments online.
How Often Should You File?
How often you need to file depends upon the total amount of sales tax your business collects.
- Annual filing: If your business collects less than $8.33 in sales tax per month then your business should elect to file returns on an annual basis.
- Quarterly filing: If your business collects between $8.33 and $100 in sales tax per month then your business should elect to file returns on a quarterly basis.
- Monthly filing: If your business collects more than $100 in sales tax per month then your business should file returns on a monthly basis.
Note: Massachusetts requires you to file a sales tax return even if you have no sales tax to report.
All Massachusetts sales tax return deadlines fall on the 20th day of the month, unless it is a weekend or federal holiday, in which case the deadline is moved back to the next business day. Below is a list of this year’s filing deadlines:
Annual filing: January 20, 2020
- Q1 (Jan. 20 - March 20): Due April 20
- Q2 (April 20 - June 20): Due July 20
- Q3 (July 20 - Sept. 20): Due Oct. 22
- Q4 (Oct. 20 - Dec. 20): Due Jan. 22
Monthly filing: The 20th of the following month, or the next business day, e.g. April 20th for the month of March, or May 22th for the month of April.
Penalties for Late Filing
Massachusetts charges a late filing penalty of 1% per month or partial month up to a maximum of 25% of the tax that is reported on the tax return. If this penalty has been applied, no other penalty will be applied.
Massachusetts also charges a late filing penalty that is equal to 1% per month up to 25% of the tax that has been filed but remains unpaid.
The state assesses an interest rate that is charged on any unpaid sales tax based on the federal short-term rate plus an additional 4%; compounded daily. This rate can change every quarter.
Massachusetts Helpful Resources
Department of Revenue Customer Service Number:
617 - 887 - 6367