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Recent developments

Recent developments

Have there been any notable recent developments concerning state and local taxation in your state, including any regulatory changes or case law?

The Massachusetts Department of Revenue recently adopted a regulation that targets sales and use tax collection by remote (ie, online) vendors. The regulation, 830 CMR 64H.1.7, provides that:

An Internet vendor with a principal place of business located outside the state that is not otherwise subject to tax is required to register, collect and remit Massachusetts sales or use tax with respect to its Massachusetts sales as follows:  (a) For the period beginning October 1, 2017 through December 31, 2017, if during the preceding 12 months, October 1, 2016 to September 30, 2017, it had in excess of $500,000 in Massachusetts sales from transactions completed over the Internet and made sales resulting in a delivery into Massachusetts in 100 or more transactions.  (b) For each calendar year beginning with 2018, if during the preceding calendar year it had in excess of $500,000 in Massachusetts sales from transactions completed over the Internet and made sales resulting in a delivery into Massachusetts in 100 or more transactions. 

The apparent rationale for the registration requirement is that:

internet vendors with a large volume of Massachusetts sales invariably have one or more of the following contacts with the state that function to facilitate or enhance such in-state sales and constitute the requisite in-state physical presence:

a. property interests in and/or the use of in-state software (e.g., “apps”) and ancillary data (e.g., “cookies”) which are distributed to or stored on the computers or other physical communications devices of a vendor's in-state customers, and may enable the vendor's use of such physical devices;

b. contracts and/or other relationships with content distribution networks resulting in the use of in-state servers and other computer hardware and/or the receipt of server or hardware-related in-state services; and/or

c. contracts and/or other relationships with online marketplace facilitators and/or delivery companies resulting in in-state services, including, but not limited to, payment processing and order fulfillment, order management, return processing or otherwise assisting with returns and exchanges, the preparation of sales reports or other analytics and consumer access to customer service.

The regulation is the subject of litigation brought outside of Massachusetts.

General framework

Legislation

What primary and secondary legislation governs the collection and remittance of taxes in your state?

Most Massachusetts taxes are controlled and governed by Chapters 58 to 65 of the Massachusetts General Laws.

Government authorities

What government authorities (at both state and local level) are charged with the collection and administration of taxes, and what is the extent of their powers?

The Massachusetts Department of Revenue is generally responsible for the collection and enforcement of all state taxes, except local property taxes and unemployment insurance. Localities administer their own property taxes.

State/local balance

How would you describe the balance between taxes collected at state and local level?

The state (i.e., the Massachusetts Department of Revenue) is responsible for most taxes. Localities generally administer only local property taxes.  

Tax year and filing deadlines

What is the prescribed tax year in your state and what filing deadlines apply?

Tax years and filing deadlines vary significantly from tax to tax. 

Government policy

How competitive is your state in terms of taxation in relation to other states? What is the government’s general policy and approach to taxation?

Massachusetts has historically been called ‘Taxachusetts’; that said, it is relatively competitive for certain sectors of the economy that can benefit from credits and other reductions to tax.  Massachusetts has a robust department of revenue that is experienced and relatively efficient in administering and enforcing the tax laws and tax system.

Corporate income and franchise taxes

Taxable income

How is taxable income determined in your state? To what extent is the state income tax base aligned with the federal income tax base?

The Massachusetts Corporation Excise Tax is imposed on a taxpayer’s apportioned ‘net income’ (Mass. G.L. c. 63, § 39). “The starting point for calculating the corporate excise tax in Massachusetts is Federal gross income” (PMAG, Inc. v. Comm’r of Revenue, 429 Mass. 35, 39 (1999)). The Massachusetts statutes define ‘gross income’ as “gross income as defined under the provisions of the Federal Internal Revenue Code, as amended and in effect for the taxable year” with statutory adjustments (G. L. c. 63, § 30(3)).

Once a corporation's gross income is determined, its ‘net income’ must then be calculated. Net income is defined in G. L. c. 63, § 30(4) ... as 'gross income less the deductions, but not credits, allowable under the provisions of the Federal Internal Revenue Code.’ 

(Farrell Enters., Inc. v. Comm’r of Revenue, 46 Mass. App. Ct. 564, 567-568 (1999)).  

As noted in the previous paragraph, there are several statutory modifications that may increase or decrease the tax base. 

How is in-state income apportioned for multi-state businesses? Does your state regulate transfer pricing?

General business corporations use a three-factor apportionment formula consisting of a property, payroll, and double-weighted sales factor. Manufacturing corporations and mutual fund service corporations use single-sales factor apportionment.

Nexus

How is nexus determined for corporate income tax purposes?

Generally, the Massachusetts statutes impose tax on “every business corporation, organized under the laws of the commonwealth, or exercising its charter or other means of legal authority, or qualified to do business or actually doing business in the commonwealth, or owning or using any part or all of its capital, plant or any other property in the commonwealth” (Mass. G.L. c. 63, § 39). The Massachusetts Department of Revenue asserts that the provision permits a corporation to be subject to tax to the fullest extent permissible under the Constitution. The Massachusetts Supreme Judicial Court has upheld assessments based on nexus against corporations with no physical presence in Massachusetts. 

Is affiliate nexus recognized in your state? If so, to what extent? Has there been any notable case law in this area?

Massachusetts does not have an affiliate nexus statute, but the Department of Revenue will assert nexus to the fullest extent permissible under the Constitution. 

Rates

What are the applicable corporate income tax rates?

One element of the Massachusetts Corporation Excise Tax is a net income tax component. The rate of tax for this component is currently 8% of net income.

Exemptions, deductions and credits

What exemptions, deductions, and credits are available?

Massachusetts generally conforms to federal taxable income as the starting point in computing state taxable income. Consequently, deductions available federally are generally available in Massachusetts—unless a specific statutory modification to federal taxable income exists. 

Typical statutory adjustments to federal taxable income include certain addbacks of royalties or interest paid to a related party and, in some cases, interest paid to third parties that is acquisition indebtedness. 

Also, Massachusetts generally permits a 95% dividends-received deduction with some exceptions.

Regarding net operating losses, Massachusetts guidance provides that Massachusetts allows a deduction only for:  

  • carrying over net operating loss in the first five years of a business, starting from the date the corporation was organized;
  • losses sustained in taxable year prior to January 1, 2010: net operating losses sustained in any taxable year can be carried forward for no more than five years and cannot be carried back; or
  • losses generated during a taxable year beginning January 1, 2010 or later: net operating losses sustained can be carried forward for no more than 20 years and cannot be carried back.

Other additions to tax include:

  • losses sustained in other taxable years, except for the net operating losses;
  • taxes on or measured by income, franchise taxes measured by net income, franchise taxes for the privilege of doing business and capital stock taxes imposed by any state; and
  • amounts related to accelerated depreciation under I.R.C. 168(k).

Important credits available in Massachusetts include the following:

  • Economic Development Incentive Program Credit – This program consists of an annual pool of funds available for distribution as credits on a competitive basis. A ‘but for’ test applies, meaning that the credit is generally awarded if the economic development would not occur ‘but for’ the credit awarded. Factors considered in awarding the credits include:
  • the number of jobs to be created;
  • the timing of the job creation;
  • the size of the capital investment;
  • the wages and categories of proposed jobs, including whether there are healthcare options available and/or some type of pension/401K/IRA;
  • the industry of the applicant;
  • the profile of the community where it will be located;
    • whether or not there is local municipal support;
    • the level of out-of-state sales;
    • the competitiveness of the situation;
    • whether the headquarters are in Massachusetts; and
    • any commitment to local procurement.
  • Investment Tax Credit – To qualify, a corporation must be defined under Massachusetts law as a manufacturing corporation, research and development corporation, or a corporation primarily engaged in agriculture or fishing. The credit relates to purchases or lease of qualifying tangible properties. The maximum amount of credits, otherwise allowable to a corporation in any taxable year, may not exceed 50% of its excise.
  • Life Sciences Credits – Five different credits are available for life sciences companies. 
  • Research Credit – This credit is generally available to business corporations subject to the corporate excise that incurred ‘Massachusetts qualified research expenses’ in Massachusetts.  The credit closely parallels the federal research credit and has been modified in recent years to be more accessible and efficient for companies.

Filing requirements

What filing requirements and procedures apply? Are there special filing requirements for groups of company?

Massachusetts provides for combined reporting of unitary groups. The default rule is water’s edge combined reporting. Taxpayers may make a worldwide election. They may also make an affiliated group election, which is “an election by a taxable member on behalf of itself and its affiliates to treat as its combined group all corporations that are members of its Massachusetts affiliated group.”

Corporate franchise tax

Does your state impose a corporate franchise tax? If so, is it imposed in lieu of or in addition to corporate income tax?

Yes, the Massachusetts Corporation Excise Tax, which is the general tax on corporations, consists of a net income and a franchise tax component.  

If your state imposes a corporate franchise tax, please stipulate:

(a) The applicable tax base.

If the corporation is a tangible property corporation, then the tax is imposed on the value of tangible property. If the corporation is an intangible property corporation, then the corporation is an intangible property corporation.

(b) Tax rates.

$2.60 per $1,000 value of either:

  • specified and allocated tangible personal property; or
  • specified and allocated net worth (depending on the applicable franchise tax base).

(c) Any exemptions or deductions.

Per the Massachusetts statute, ‘net worth’ is calculated as follows:

(a) the book value of its total assets on the last day of the taxable year shall be reduced by the sum of (1) its liabilities on said date, (2) the book value of its tangible property situated in the commonwealth on said date and subject to local taxation, less the interest of any mortgagee therein, and (3) the book value on said date of its investment in subsidiary business corporations which represent 80 per cent or more of the voting stock of said subsidiary business corporations or, in the case of a subsidiary business corporation which does not have voting stock, the book value of its investment in such business corporation which represents 80 per cent or more ownership interest; (b) the amount determined in (a) shall be multiplied by such corporation's income apportionment percentage….

(d) Filing formalities.

The tax return is combined with the Massachusetts corporate income tax return.

Personal income taxes

Taxable income

How is taxable personal income determined in your state?

Massachusetts has three categories of taxable income:

  • Part A taxable income;
  • Part B taxable income; and
  • Part C taxable income. 

Tax residence

Under what circumstances is an individual deemed resident in your state for personal income tax purposes?

A ‘resident’ is any natural person domiciled in Massachusetts or any natural person who is not domiciled in Massachusetts but who maintains a permanent place of abode in Massachusetts and spends, in the aggregate, more than 183 days of the taxable year in Massachusetts—including days spent partially in and out of Massachusetts.

Rates

What are the applicable personal income tax rates?

The personal income tax rate is 5.1%.

Exemptions, deductions and credits

What exemptions, deductions, and credits are available?

Massachusetts ‘gross income’ is ‘federal gross income’ with several modifications that either add or subtract from this figure. 

The following deductions are generally allowed:

  • alimony paid;
  • attorney fees and court costs involving certain unlawful discrimination claims;
  • certain business expenses of National Guard and Reserve members, certain business expenses of qualified performing artist, certain business expenses of state and local government officials, contributions by certain chaplains to I.R.C. § 403(b) Plans, deductible expenses related to income from renting personal property for profit, employee business expenses;
  • health savings account (HSA) deduction;
  • jury duty pay remittance;
  • medical savings account deduction;
  • moving expenses;
  • penalty on withdrawing savings early;
  • reforestation amortization and expenses; and
  • repayment of supplemental unemployment benefits, self-employed health insurance deduction, S Corporation Shareholder SEP, SIMPLE, and Qualified Plans allowed under I.R.C. § 404; and
  • federal student loan interest deduction.  

An important credit for many residents is the credit for taxpayer paid to other jurisdictions. 

Filing requirements

What filing requirements and procedures apply?

Personal income tax returns are typically due on April 15, unless an extension is granted. For fiscal year taxpayers, returns are due on the 15th day of the fourth month following the end of the taxable year.

Taxpayers required to make estimated payments must make payments by April 15, June 15, and September 15 of the taxable year and January 15 of the next taxable year. The amount of any required installment shall be 25% of the required annual payment. The term ‘required annual payment’ means the lesser of:

  • 80%, or 66.66% in the case of a farmer or fisherman as defined in subsection (h), of the tax shown on the return for the taxable year or, if no return is filed, 80% or 66.66%, as the case may be, of the tax for such year; or
  • 100% of the tax shown on the return of the taxpayer for the preceding taxable year, provided that the taxpayer filed a return for the preceding taxable year and such preceding year was a taxable year of 12 months.

Employer obligations

What obligations are imposed on the employer in relation to the collection and remittance of state personal income taxes (eg, withholding)?

Employers must withhold and pay taxes for residents and non-residents that earn Massachusetts source income. Withholding for non-residents may include withholding on amounts paid to a non-resident, even if that non-resident did not work in Massachusetts during the year of payment, if the wages paid relate to work previously performed in the state. 

Sales and use taxes

Taxable goods

What goods are subject to sales and use tax in your state (at both state and local level)?

Massachusetts does not have local-level sales taxes. 

At the state level, all tangible personal property (including gas, electricity, and steam) not specifically exempted from taxation is subject to sales tax. Notably, ‘tangible personal property’ is defined to include “standardized computer software.” Services are not generally subject to sales tax, except certain telecommunications services.

State rate

What is the state sales tax rate?

6.25%.

Local rates

What is the range of local sales tax rates levied in your state?

N/A.

Exemptions

What goods are exempt from sales and use tax?

Massachusetts law provides an extremely long list of items that may not be subject to tax because of the nature of either the item itself or its use. The following is a non-exhaustive list of the types of sales that are generally exempt:

  • casual and isolated sales by a vendor who is not regularly engaged in the business of making sales at retail;
  • sales to the United States, the commonwealth or any political subdivision thereof, or their respective agencies;
  • sales to certain entities exempt from tax under Section 501(c)(3) of the Federal Internal Revenue Code;
  • sales of building materials and supplies to be used in the construction, reconstruction, alteration, remodeling or repair of:
  • any building structure, public highway, bridge or other public works owned by or held in trust for the benefit of certain governmental bodies or agencies and used exclusively for public purposes;
  • any building or structure owned by or held in trust for the benefit of certain corporations, foundations, organizations or institutions and used exclusively in the conduct of its religious, scientific, charitable or educational purposes;
  • any building, structure, residence, school or other facility included under any written contract dated on or after January 1, 1985 arising out of or related to the Massachusetts Port Authority residential and school soundproofing programs, notwithstanding whether such building, structure, residence, school or other facility is owned by or held in trust for the benefit of the Massachusetts Port Authority or is used exclusively for public purposes,  provided, however, that such governmental body or agency or such corporation, foundation, organization or institution shall have first obtained a certificate from the commissioner stating that it is entitled to such exemption and the vendor keeps a record of the sales price of each such separate sale, the name of the purchaser, the date of each such separate sale and the number of such certificate; and
  • sales of tangible personal property includable in the measure of the excise taxes relating to gasoline and fuels;
  • sales of food products for human consumption;
  • sales, furnishing or service of:
  • water;
  • gas, steam or electricity used for residential purposes;
  • gas, steam or electricity that are consumed and used directly and exclusively in an industrial plant in the actual manufacture of tangible personal property to be sold or in the heating of such industrial plant; 
  • sales of fuel used for residential heating purposes and fuel used for heating purposes in an industrial plant; 
  • sales of articles of clothing, including footwear, intended to be worn or carried on or about the human body up to $175 of the sale price on any article of clothing (with certain exceptions for athletic wear); 
  • sales of:
  • medicine, insulin needles and insulin syringes on prescriptions of registered physicians and sales of insulin;
  • oxygen, blood or blood plasma;
  • artificial devices individually designed, constructed or altered solely for the use of a particular disabled person so as to become a brace, support, supplement, correction or substitute for the bodily structure including the extremities of the individual;
  • artificial limbs, artificial eyes, hearing aids, and other equipment worn as a correction or substitute for any functioning portion of the body;
  • artificial teeth by a dentist and the materials used by a dentist in dental treatment;
  • eyeglasses, when especially designed or prescribed by an ophthalmologist, oculist or optometrist for the personal use of the owner or purchaser;
  • crutches and wheelchairs for the use of disabled persons; and
  • baby oil; and
  • the rental, sales and repairs of kidney dialysis machines, enteral and parenteral feedings, and feeding devices, suction machines, physician-prescribed, medically necessary breast pumps, oxygen concentrators, oxygen regulators, oxygen humidifiers, oxygen masks, oxygen cannulas, ultrasonic nebulizers, life sustaining resuscitators, incubators, heart pacemakers, canes, all types of hospital bed for home use, tripod quad canes, breast prosthesis, alternating pressure pad units and patient lifts, when prescribed by a physician;
  • sales of newspapers, magazines, books required for instructional purposes in educational institutions, books used for religious worship, publications of non-profit organizations; 
  • sales of coffins, caskets, burial garments or other materials that are ordinarily sold by a funeral director as part of the business of funeral directing;
  • sales of vessels or barges of 50 tons burden or over when constructed in the commonwealth and sold by builders thereof;
  • sales of fuel or substitute therefor, supplies and repairs to vessels engaged in foreign and interstate commerce and sales of vessels used directly and exclusively in commercial fishing, machinery and equipment therefor and replacement parts for such vessels, machinery and equipment;
  • sales of:
  • livestock and poultry of a kind that ordinarily constitute food for human consumption;
  • feed, including the bags in which the feed is customarily contained, for livestock and poultry of a kind that ordinarily constitute food for human consumption or are to be sold in the regular course of business or for fur-bearing animals, the pelts of which are sold in the regular course of business or for animals produced for research, testing, or other purposes relating to the promotion or maintenance of the health, safety or wellbeing of human beings or animals; and
  • plants, including parts of plants, suitable for planting to produce food for human consumption or when such plants, including parts thereof or the produce thereof, are to be sold in the regular course of business, including such items as seed potatoes, onion sets, asparagus roots, berry plants or bushes, and fruit trees;
  • sales of:
  • both returnable and non-returnable containers when sold without the contents to persons who place the contents in the container and sell the contents together with the container;
  • containers when sold with the contents if the sale price of the contents is not required to be included in the measure of the sales tax;
  • returnable containers when sold with the contents or resold for refilling.

As used in this paragraph, the term ‘returnable containers’ means containers of a kind customarily returned by the buyer of the contents for reuse. All other containers are ‘non-returnable’ containers. Nothing in this paragraph shall be construed so as to tax the sale of bags in which feed for livestock and poultry is contained;

  • sales of materials, tools and fuel, or any substitute therefor, that become an ingredient or component part of tangible personal property to be sold or that are consumed and used directly and exclusively in:
  • agricultural production;
  • commercial fishing;
  • an industrial plant in the actual manufacture of tangible personal property to be sold, including the publishing of a newspaper;
  • the operation of commercial radio broadcasting or television transmission;
  • the furnishing of power to an industrial manufacturing plant;
  • the furnishing of gas, water, steam or electricity, when delivered to consumers through mains, lines or pipes;
  • the production of animals for research, testing, or other purposes relating to the promotion or maintenance of the health, safety or well-being of human beings or animals or in research and development by a manufacturing corporation or a research and development corporation;
  • sales of machinery, or replacement parts thereof, used directly and exclusively in:
  • agricultural production;
  • commercial fishing;
  • an industrial plant in the actual manufacture of tangible personal property to be sold, including the publishing of a newspaper;
  • the operation of commercial radio broadcasting or television transmission;
  • the furnishing of power to an industrial manufacturing plant;
  • the furnishing of gas, water, steam or electricity when delivered to consumers through mains, lines or pipes;
  • the production of animals for research, testing, or other purposes relating to the promotion or maintenance of the health, safety or well-being of human beings or animals or in research and development by a manufacturing corporation or a research and development corporation; 
  • sale of a motor vehicle purchased by and for the use of a person who has suffered loss, or permanent loss of use of, both legs or both arms or one leg and one arm or by and for the use of a veteran who has been determined to be permanently disabled by the medical advisory board and has been issued a disabled veteran number plate under Section 2 of said Chapter 90. This exemption shall apply to one motor vehicle only owned and registered for the personal, non-commercial use of such person;
  • sales of wearing materials or any cloth made up of natural or synthetic fibers and used for clothing purpose;
  • sales of the flag of the United States;
  • sales of fire trucks to any volunteer, non-profit fire company or similar organization furnishing public fire protection, and sales of ambulances to any volunteer, non-profit organization furnishing a public ambulance service, provided that such company or organization has first obtained certain certifications;
  • sales of concrete mixing units or replacement parts thereof, to be mounted on truck chassis, provided, however, that sales of truck chassis shall not be exempt under this paragraph;
  • all medical implements, pads, pouches and solutions purchased by a person who has undergone a colostomy or an ileostomy and which are used entirely as the result of such operation;
  • sales of new and used motor buses used to provide scheduled, intracity local service (as defined by the department of telecommunications and energy), and repair or replacement parts therefor, and materials and tools used in and for the maintenance and repair thereof, and for the use of common carriers of passengers by motor vehicle for hire, which hold at least one certificate, issued by the Department of Telecommunications and Energy pursuant to certain sections of Massachusetts law;  
  • sales of equipment directly relating to any solar, wind-powered, or heat pump system, that is being utilized as a primary or auxiliary power system for the purpose of heating or otherwise supplying the energy needs of an individual's principal residence in the commonwealth;
  • sales of patterns, molds, dies, tools, sand-handling equipment and machinery, and replacement parts thereof, used exclusively in the manufacture of cast metal products to be sold in the regular course of business;
  • sales of printed material that is manufactured in the commonwealth to the special order of a purchaser, to the extent that such material is delivered to an interstate carrier, a mailing house or a US post office for delivery or mailing to a purchaser located outside the commonwealth or a purchasers designee located outside the commonwealth, including sales of direct and cooperative direct mail promotional advertising materials that are manufactured both inside and outside the commonwealth and distributed to residents of the commonwealth from locations both inside and outside the commonwealth. For the purpose of this paragraph, ‘direct and cooperative direct mail promotional advertising materials’ shall mean individual discount coupons, or advertising leaflets incorporating such coupons within the promotional advertising materials no greater than six pages in total length, and including any accompanying envelopes and labels. In order to be exempt hereunder, such promotional advertising materials will be distributed as a part of a package of materials promoting one or more than one business, each operated at separate and distinct locations, and directed in a single package to potential customers, at no charge to the potential customer, of the businesses paying for the delivery of such material. For the purpose of this paragraph, ‘direct and cooperative direct mail promotional advertising materials’ shall not include mail order catalogs, department store catalogs, telephone directories, or similar printed advertising books, booklets or circulars greater than six pages in total length;
  • sales by a typographer, compositor or color separator of composed type, film positives, film negatives, or reproduction proofs thereof, for use in the preparation of printed matter or folding boxes to be sold, or the fabrication or transfer of such film positives, film negatives, reproduction proofs or impressed matters where the fabrication is for and the transfer is to a printer, publisher, or manufacturer of folding boxes, for use in printing;
  • rental receipts or charges in connection with service contracts by and between waste service firms and customers for the use, maintenance and repair of refuse containers or bins placed on customers' premises by waste service firms;
  • sales of ‘scientific equipment or apparatus’ within the meaning of Section 170(e)(4)(B)(v) of the Federal Internal Revenue Code as amended on January 1, 1983, by the manufacturer when such scientific equipment or apparatus is donated by said manufacturer at no charge to a public or private nonprofit educational institution located in the commonwealth or to the Massachusetts Technology Park Corporation for the purposes of Section 6(b)(4) of Chapter 40J, or to the Bay State Skills Corporation;
  • sales of tangible personal property purchased with federal food stamps and not otherwise exempt under this chapter;
  • sales of $100 or more of:
  • rare coins of numismatic value;
  • gold or silver bullion or coins; or
  • gold or silver tender of any nation traded and sold according to its value as precious metal.

The word ‘bullion’ shall not include fabricated precious metal that has been processed or manufactured for industrial, professional or artistic uses;

  • sales of vessels used exclusively to provide scheduled commuter passenger service, repair or replacement parts therefor, and materials and tools used in and for the maintenance and repair thereof;
  • sales of gas, steam, electricity or heating fuel for use by any business that has five or fewer employees, that had gross income of less than $1 million for the preceding calendar year, and that reasonably expects gross income of less than $1 million for the current calendar year. For purposes of this paragraph, ‘employees’ shall include partners, owners, officers and any other individuals who work for the business, but shall not include any employee who normally works for fewer than 30 hours per week or who is hired for a period of less than five months. For purposes of this paragraph, a ‘business’ shall include all members of an affiliated group, as defined by Section 1504 of the Internal Revenue Code, and any other combination of related parties as the state taxing agency may define by regulation, provided, however, that:
  • the state taxing agency commissioner may, by regulation, require that such business have first obtained a certification from the commissioner stating that it is entitled to such exemption and maintain such employment and other records indicating its continuing eligibility for such exemption;
  • the vendor keeps a record of the sales price of each such separate sale, and the number of such certificate; and
  • any other conditions and requirements under which a business may qualify for this exemption, provided, further, that the burden of proving that such business qualifies shall be upon the vendor, unless it takes in good faith from the purchaser such certificate to the effect that the business qualifies for this exemption and such certificate is received and made available to the commissioner not later than 60 days from the date of the notice from the commissioner to produce such certificate;
  • sales of commercial gun safes and trigger lock devices;
  • sales of:
  • machinery and equipment if its operation, function or purpose is an integral or essential part of a continuous production flow or process of manufacturing printed material to be sold and such machinery and equipment is used exclusively for that purpose; and
  • prepress items that are used exclusively as part of a continuous production flow or process of manufacturing printed material to be sold;
  • sales of tangible personal property purchased by a consultant contractor or subcontractor, or operating contractor or subcontractor, of certain governmental bodies or agencies, for use in fulfilling a consulting or operating contract to provide qualified services in a public project, provided that the consultant contractor or subcontractor or operating contractor or subcontractor is required both to acquire such property and to be reimbursed for the cost of such property pursuant to such contract;
  • sales of repair or replacement parts exclusively for use in aircraft or in the significant overhauling or rebuilding of aircraft or aircraft parts or components on a factory basis;
  • sales of aircraft; and
  • sales of tangible personal property to a qualifying motion picture production company or to an accredited film school student for the production expenses related to a school film project.

Services

Are any services taxed?

No, except certain telecommunications taxes.

Filing requirements

What filing requirements and procedures apply?

Vendors with annual sales tax collections of $1,201 or more must remit monthly tax returns that are due 20 days after the end of the filing period—that is, February 20 for a January filing period. The forms to use are Form ST-9 for goods and Form STS for services.

Property taxes

Taxable value

How is the value of property assessed for tax purposes in your state? Which types of property are subject to tax?

Local assessors determine the value of real property to be assessed and issue bills to taxpayers.  Property classes are generally broken down into residential, industrial, commercial, and open space.  Personal property is also locally assessed.

State rate

What is the state property tax rate?

N/A.

Local rates

What is the range of local property tax rates levied in your state?

Rates vary widely for real property taxes, but the typical mileage rates are within the range of 15 to 35 points per mile. 

Exemptions and deductions

What exemptions and deductions are available?

The following types of property are generally exempt:

  • property owned by the United States or the Commonwealth of Massachusetts;
  • real and personal property owned by charitable organizations;
  • real and personal estate of incorporated agricultural societies;
  • real and personal estate belonging to or held in trust for the benefit of incorporated organizations of veterans of any war;
  • personal property of a fraternal society, order or association;
  • personal property of any exempt retirement association;
  • personal property owned by or held in trust within the commonwealth for religious organizations, houses of religious worship owned by, or held in trust for the use of, any religious organization; and
  • cemeteries, tombs and rights of burial.

Filing requirements

What filing requirements and procedures apply?

Taxpayers remit a schedule of personal property owned and are issued a bill by local assessors. Real property tax is billed by a local assessor and payments are generally due in two installments. 

Real estate transfer tax

How is the transfer of real estate taxed in your state (including tax base, rates, exemptions, and filing formalities)?

Sales of real estate are generally subject to the Massachusetts deeds excise tax at a rate of $2.28 per $500. Sales of entities owning real estate do not generally result in the imposition of a sales tax. 

Unclaimed and abandoned property

Reporting and remittance

Describe your state’s regime for reporting and remitting unclaimed and abandoned property. How is the value of such property calculated? How assertive is your state in enforcing its rights to unclaimed property?

The Massachusetts Unclaimed Property Division handles administration of unclaimed property. The division uses audits to determine the value of unclaimed property. The state is aggressive in unclaimed property enforcement. 

Excise and other indirect taxes

Excise taxes

What excise taxes are levied in your state, including applicable goods, rates, and filing formalities?

 Massachusetts has a number of fuel excise taxes, cigarette taxes, marijuana taxes, and alcohol taxes. Massachusetts also imposes a motor vehicles excise tax.

Other indirect taxes

Are any other indirect taxes levied in your state?

N/A.

Other taxes

Other taxes

Do any other taxes apply to businesses in your state? If so, please include applicable tax bases, rates, exemptions/deductions, and filing formalities.

N/A.

Incentives

Incentive schemes

Does your state offer any tax incentive schemes to attract businesses and promote investment?

See “Corporate income and franchise taxes”.

Planning considerations

Compliance

What tax compliance procedures and best practices should businesses operating in your state be aware of?

Taxpayers seeking exemption from any tax or amount of tax should ensure that all exemption certificates are in place. Massachusetts has many different procedures for the different taxes that are used for taxpayers to claim an exemption, and failure to comply with such procedures can lead to difficulty in supporting the exemption. 

Strategic planning

What strategic planning considerations should businesses operating in your state bear in mind to optimize tax efficiency?

The most significant issue currently is whether an entity is considered to be engaged in manufacturing. Being engaged in manufacturing can present significant opportunities to benefit from local property tax exemptions and achieve certain sales tax benefits. Some companies also find that single-sales factor apportionment is beneficial, while other taxpayers may find it detrimental.