Massachusetts Sales Tax Guide

Massachusetts’ sales tax rate is 6.25 percent for tangible personal property. Businesses add sales tax and various other taxes to the purchase price of goods and services, then submit the payments to the Massachusetts Department of Revenue.

This guide does not fully describe all of Massachusett’s laws and regulations regarding taxes. Businesses should contact a business attorney or visit the Massachusetts Department of Revenue to learn more about the rules, regulations, tax laws, and tax information associated with their industries and the types of taxes due.

Types of taxes

Massachusetts has several taxes related to the sales and use tax that a business taxpayer must pay, including a telecommunications tax, tobacco tax, room occupancy excise tax, and others.

Sales and use tax

The sales tax has some exemptions, as does the use tax. The use tax rate is also 6.25 percent. A business pays one or the other – it pays the use tax on items it purchased for use in the business if it did not pay sales tax at the time of purchase.

Businesses also pay use tax if they purchase items from out of state, and the out-of-state vendor did not collect the Massachusetts tax rate.

Telecommunications tax

Massachusetts collects a 6.25 percent sales tax rate on most telecommunications services, including:

  • Voice and non-voice telephone services.
  • Long-distance calls billed per minute or otherwise billed separately, whether the call is made online or not.
  • Beeper and paging services.
  • Telegraph services.
  • Voicemail services.
  • Teleconferencing services.
  • Facsimile services.
  • Cellular phone services, including any roaming charges.
  • Auxiliary services, including call waiting, call block, and call forwarding.
  • Fees structured as phone service, set up fees, activation charges, membership fees, and access charges.

Room occupancy excise tax

The Massachusetts room occupancy excise tax is 5.7 percent. Local jurisdictions may also impose a local room occupancy excise tax and a short-term rental community impact fee. Any room rental for 90 or fewer days is subject to the tax.

Businesses that often rent rooms include:

  • Hotels.
  • Motels.
  • Bed and breakfasts.
  • Lodging houses.

Additionally, those who run short-term rentals of property for 31 or fewer days must also collect the tax.

The exception is if the room rent is less than $15 per day, the lessor does not have to collect and pay the tax.

Cities and counties that levy an additional tax include:

  • Boston: 6.5 percent for convention center funding.
  • Worcester, Cambridge, Springfield, West Springfield, and Chicopee: 2.7 percent for convention center funding.
  • Barnstable, Nantucket, and Duke Counties: 2.75 percent for the Cape Cod and Islands Water Protection Fund.

Certain cities and towns also charge a community impact fee of 3 percent if the operator has more than one property in the city or town or rents an owner-occupied two- or three-family home on a short-term basis.

Cigarette, tobacco, and vaping tax

Businesses that sell cigarettes, tobacco and vaping products are also subject to an excise tax as follows:

  • Cigarettes: $3.51 per pack of 20 cigarettes. If a pack has more than 20 cigarettes, the tax increases.
  • Smoking tobacco and cigars: 40 percent of the wholesale price.
  • Smokeless tobacco: 210 percent on the wholesale price.
  • Vaping products: 75 percent on the wholesale price.

The payments are made by the vendors, not the consumers. However, vendors include the taxes in the cost of the product. Businesses should still collect and pay the state’s sales tax of 6.25 percent on top of cigarette taxes.

Apparel and fabric

Most clothing is exempt from Massachusett’s sales tax. However, retailers must charge and collect sales tax on items that cost $175 or more. For example, if a piece of clothing costs $200, the retailer must collect tax on $25 at the 6.25 sales tax rate. Thus, the item of clothing would cost $201.56 (25 times .0625 equals 1.56).

Discretionary taxes

Local governments and other jurisdictions in Massachusetts do not charge a local sales tax. However, locales might charge certain industries an excise tax. Check with your local jurisdiction – city or county – to learn more about local excise taxes.

Registering for and filing Massachusetts' taxes

New businesses can register for a Massachusetts Department of Revenue account to register a business, make tax payments, submit sales tax reports and other tax reports, and otherwise manage their business accounts.

Taxes are due on the 30th day after the collection period ends. Due dates are as follows:

  • Annual filers: Those who collected $100 or less in the previous year. Tax returns and payments are due January 30 of the next year. For example, taxes collected from January 2022 through December 2022 are due by January 30, 2023.
  • Quarterly filers: Those who collected from $101 up to $1,200 in the previous year can remit payments quarterly. The payments and tax returns are due on the 30th day of the month following the end of the quarter. For example, the first quarter is January through March. Payments and reports are due on or before April 30.
  • Monthly filers: Those who file monthly must remit payments and report on or before the 30th day of the following month. For example, for taxes collected in February, payments and reports are due before March 30.

Any business that has more than $150,000 in tax liability for all taxes due must make advance payments.

Calculating Massachusetts' sales and use tax rates

When calculating Massachusetts sales tax for your business location, you must check for local taxes for certain industries, such as hotels. Cities and towns do not levy discretionary taxes over all industries.

If a location does not have an extra hotel tax, the tax is 6.25 percent. Figure the amount that you should collect by multiplying 0.0625 by the sales price. For example, Widget A costs $200 (200 times .0625 equals 12.50. The total you need to collect from the buyer is $212.50.

Remote retailers

Remote sellers and marketplace sellers must collect Massachusetts sales tax if they had sales of at least $100,000 for goods and services in the previous year. However, as a convenience to their customers, most out-of-state businesses collect taxes without meeting this threshold.

Additionally, businesses that file certain tax returns must make advanced payments. These businesses include:

  • Any business that collects sales and use taxes.
  • Sales tax on services.
  • Room occupancy excise tax.
  • Meals tax.
  • Marijuana retail sales tax.

Massachusetts sales tax holiday

In 2018, the Massachusetts legislation signed an annual sales tax holiday into law. The tax holiday is one weekend per year. The 2021 tax holiday was August 14 and 15. Individuals making purchases for personal use are exempt from paying sales tax. Items for business use are still taxable.

Items that do not qualify for the tax holiday include:

  • Meals.
  • Motorboats.
  • Motor vehicles.
  • Gas.
  • Telecommunicatins services.
  • Tobacco products.
  • Steam.
  • Electricity.
  • Marijuana and marijuana products.
  • Alcoholic beverages.

Additionally, any item with a price that is more than $2,500 is taxable.

Additional information includes:

  • Internet sales qualify for the tax holiday.
  • Layaway sales do not qualify for the tax holiday.
  • Rentals qualify as long as the item is not a taxable item during the sales tax holiday. The rental may be tax-free for up to 30 days but must be paid for in full on the holiday weekend.
  • All retailers must participate in the sales tax holiday, including internet vendors.
  • If an item costs $2,500 or more, the purchaser must pay the tax on the full amount.
  • If a buyer prepays for an item or service or puts a deposit down on an item prior to the sales tax holiday, that item or service is taxable.

Businesses must report the amount of tax they did not charge during the sales tax holiday on the “Exempt Sales” line on their tax returns. Thus, a business must keep track of the items and services it sells during the sales tax holiday weekend and report those sales.

FAQs

The Massachusetts sales and use tax for 2022 is 6.25 percent. Businesses pay either a sales tax or a use tax on each item they sell or use, not both.

Businesses purchasing items and services for resale must have a Form ST-4 Sales Tax Resale Certificate. The purchaser must complete the form and give a copy to the vendor.

Businesses purchasing tools, materials, and fuel for the processing or manufacturing process need Form ST-12 Exempt Use Certificate.

Businesses who are exempt from paying sales and use tax should use Form ST-5 when making qualified purchases.

It depends on the state’s laws. Most states only require an out-of-state business to collect another state’s sales and use taxes if they meet a threshold of $100,000 in sales or 200 transactions. However, most businesses collect another state’s sales tax as a convenience to the customer.

Share this post

Share on facebook
Share on twitter
Share on linkedin
Share on pinterest
Share on print
Share on email