Massachusetts Sales and Use Tax Guide 2025: Rates, Nexus Rules, Exemptions

Sales and Use Tax Basics in Massachusetts

Sales Tax

Sales tax in Massachusetts applies to the sales or rental price of tangible personal property, also known as tangible goods sold or rented to consumers in Massachusetts. The buyer of tangible goods and listed taxable services is responsible for paying sales tax, in addition to the price they pay for those goods or services. However, it is the seller's responsibility to collect sales tax and remit it to the Massachusetts Department of Revenue.

The only exception to these rules applies to motor vehicle and trailer sales, where the buyer is required to pay the sales tax directly to the Department of Revenue.

Use Tax

In situations where the sales tax was not paid to the seller and remitted to the Department of Revenue for tangible goods or listed taxable services intended to be used, stored, or consumed in Massachusetts, the buyer must pay the use tax directly to the Department of Revenue. 

Massachusetts State Sales and Use Tax Rates

In Massachusetts, there is only a statewide sales and use tax of 6.25%. In contrast to the general rules defined in most US states, where local rates are also applicable in addition to the state rate, Massachusetts does not have local sales and use taxes.

Tax-Exempt Transactions

Transactions relating to the sales of food for human consumption and clothing valued at USD 175 or less are exempt from sales and use tax. Furthermore, sales of newspapers, magazines, and other periodicals are also tax-exempt. However, newsletters are not considered newspapers, meaning that their sales are subject to sales and use tax.

Other tax-exempt transactions include the sale of admission tickets to sports and amusement events, as well as the sale of gas, steam, electricity, and heating fuel for residential use, certain industrial users, and small businesses with five or fewer employees and a gross income of less than USD 1 million.

Additionally, while some telecommunication services are subject to sales and use tax, cable television and Internet access services, as well as most other services, such as professional services, are exempt from the sales tax. 

Nexus Rules in Massachusetts

To become liable for sales tax, taxable persons must have a presence, that is, establish a nexus, in Massachusetts. There are three types of nexus crucial for determining an individual's or a business's sales tax responsibilities. Those three types of nexus are physical, economic, and marketplace.

Physical Nexus

If individuals or businesses have a store, office, warehouse, or other business location in Massachusetts, they are considered to have a physical presence in the state, which means they have established a physical nexus and are therefore liable for sales and use tax.

Other ways taxable persons can establish a physical nexus include regularly engaging in the delivery of goods or the provision of services, having one or more employees, and maintaining a stock of tangible goods for sale in the state of Massachusetts. Taxable persons that establish a physical nexus must register for, collect, and remit sales tax.

Economic Nexus

Individuals and businesses that make sales to consumers in Massachusetts without having a physical presence there may become liable for sales tax purposes if they exceed the economic nexus threshold. The economic nexus was initially set at USD 500,000 and 100 transactions. However, in 2019, the nexus was changed when the transaction threshold was removed and the amount threshold was lowered to the current USD 100,000.

Therefore, if in a calendar year remote or out-of-state sellers make sales to Massachusetts consumers that exceed USD 100,000, they must register for sales tax, collect and remit it to the Department of Revenue.

Marketplace Nexus

With the introduction of the USD 100,000 economic nexus, Massachusetts also introduced marketplace nexus rules with the same threshold. Thus, marketplace operators that sell and facilitate the sale of tangible goods by marketplace sellers must register for, collect, and remit sales tax if they directly sell or facilitate sales to consumers in Massachusetts in amounts that exceed USD 100,000.

Taxable Goods and Services in Massachusetts

Sales of tangible goods, meaning goods or products such as clothes, food, or beverages prepared for human consumption and provided by a restaurant or restaurant part of a store, household goods and appliances, reading materials and stationery, healthcare products, are taxable, unless strictly defined as tax-exempt. 

Additionally, transactions involving gas, electricity, and steam are classified as transactions involving tangible goods. Therefore, these transactions are also subject to taxation, except in the cases defined as exempt.

In contrast to tangible goods, services are generally not subject to sales tax, unless listed as taxable. Examples of taxable services include telecommunications services, such as beeper services, cellular telephone services, and telegram services. Additionally, a general rule for taxation of services states that a service transaction is subject to sales tax if a tangible good is transferred to the customer.

E-Commerce Framework

Economic nexus was primarily introduced to expand the tax base to taxable persons making sales in Massachusetts without having a physical presence in the state. Therefore, following the Wayfair ruling, the state government introduced a set of rules for remote or out-of-state sellers, essential for all engaged in e-commerce sales.

Therefore, remote sellers that exceed the economic nexus threshold of USD 100,000 must collect state sales tax on sales of tangible goods or services to consumers in Massachusetts. In addition to remote sellers making sales through their website or other channels, some remote or out-of-state sellers use online marketplaces to offer and sell their products and services.

Marketplace Rules

Marketplace sellers can be both remote and in-state sellers. However, while the rules for in-state sellers are straightforward, those who are remote or out-of-state must pay close attention to economic and marketplace nexus rules. More specifically, if marketplace sellers offer and sell their goods and services through a marketplace that exceeds the marketplace nexus threshold, it is the marketplace facilitator or operator, not the seller, who is responsible for collecting and remitting sales tax.

The only exception to this rule is provided for marketplace sellers engaged in the sale of telecommunications services, who may request a waiver. In that situation, the seller, not the marketplace facilitators, is responsible for remitting the tax.

It is crucial for marketplace sellers that sell both on and off the marketplace to understand that when a marketplace facilitator collects and remits sales tax on their behalf, those taxes are not counted towards the seller threshold. In those cases, only sales made outside the marketplace are counted towards the threshold.

Digital Goods and Services

Sales of prewritten computer software, also known as canned or off-the-shelf software, regardless of the method of delivery, and reports of standard information in tangible form, are generally subject to the sales tax. 

Therefore, irrespective of whether the prewritten software is delivered electronically, downloaded, licensed, leased, or accessed by the consumer on a remote server, the related transaction is taxable. Notably, the sale of video games downloaded by the buyer is considered a taxable sale of prewritten software.

In contrast, sales of customs software are exempt from sales tax as professional services.

Digital Marketplace

Marketplaces, also known as marketplace facilitators, are individuals or businesses that provide digital or online platforms, such as shops, stores, websites, or dedicated applications, where tangible goods and services are sold. To be regarded as marketplace facilitators, these platforms must have a concluded agreement with marketplace sellers to facilitate sales, enable the transfer or communication of offers and acceptance between buyers and sellers, and conclude an agreement with third-party entities that collect payments from buyers and transmit them to the sellers.

Digital Platform Operator

If a marketplace facilitator does not have a physical presence in Massachusetts, it must register for sales and use tax purposes if the total facilitated sales or direct sales to consumers in Massachusetts exceed USD 100,000 in a calendar year. Besides marketplaces that facilitate and sell tangible goods, those involved in the sales of desktop or mobile apps are subject to sales tax.

A registered marketplace must collect and remit sales tax on behalf of marketplace sellers. Additionally, it must notify marketplace sellers of this obligation before commencing tax collection. The notification can be provided in the form of a certificate, which must include the date when the marketplace begins collecting and remitting sales tax.

Filing and Payment Requirements in Massachusetts

Sales and use tax return filing and payment frequency depend on the amount of sales and use tax collected in a year. Therefore, if the amount is USD 100 or less, an annual tax return is required. Those whose annual collected tax exceeds USD 101 but is below USD 1,200 must file tax returns and pay due taxes quarterly. Monthly tax returns are required if a taxable person's annual tax liability exceeds USD 1,201.

In cases where, during a reporting period, the taxable person did not collect any taxes, they must still electronically file a zero tax return.

Penalties for Non-Compliance with Sales and Use Tax Requirements

Late filing or missing payment deadlines will lead to penalties of 1% of the owed for each month or part of the month, up to a maximum of 25%, and 1% of the unpaid tax reported on the return calculated monhtly, or refer to part of the month, up to a maximum of 25%, respectively.

In addition to these penalties, taxable persons may also face interest at the short-term rate, which is updated quarterly, plus 4%, compounded daily.

When taxable persons make an underpayment of due sales and use taxes due to negligence or significantly understate tax liability, a penalty of 20% of the underpayment is imposed if the underpayment exceeds 10% of the tax required to be reported on the return or USD 1,000, whichever amount is higher.

Deliberate tax evasion is considered a felony, punishable by a fine of up to USD 100,000 for individuals or USD 500,000 for businesses, with a possible prison sentence of up to 5 years. Additionally, deliberate failure to collect and pay taxes is punishable by a fine of USD 10,000 and a maximum prison sentence of 5 years.