Common Sales/Use Tax Questions

What is the sales tax in Massachusetts?

The Massachusetts sales tax is 6.25 percent of the sales price or rental charge of tangible personal property 1 or certain telecommunications services 2 sold or rented in the Commonwealth. (For a detailed definition of “sales price,” please see M.G.L. Ch. 64H sec. 1.) The sales tax generally is paid to the vendor as an addition to the purchase price. The buyer pays the sales tax to the vendor at the time of purchase; the vendor then remits the tax to the Commonwealth. For motor vehicle and trailer sales, however, the sales tax is paid directly to the Commonwealth by the purchaser.

For more detailed information on motor vehicle sales taxes, please call DOR’s Customer Service Bureau at 617-887-MDOR or toll-free in Massachusetts at 800-392-6089.

 

What is the use tax?

The Massachusetts use tax is 6.25 percent of the sales price or rental charge on tangible personal property 1 (including phone and mail order items or items purchased over the Internet) or certain telecommunications services 2 on which no sales tax, or a sales tax rate less than the 6.25 percent Massachusetts rate, was paid and which is to be used, stored or consumed in the Commonwealth. The use tax, unlike the sales tax, generally is paid directly to the Commonwealth by the purchaser.

Example: You purchase furniture for your Massachusetts business or residence from an out-of-state firm and pay no Massachusetts sales tax. You are required to pay the 6.25 percent Massachusetts use tax. The use tax applies because the furniture was not subject to a sales tax in the other state and because it is for use in the Commonwealth.

1. Tangible personal property includes electronically transferred software. For a detailed definition, see M.G.L. Ch. 64H, sec. 1 and TIR 05-15, Transfers of Prewritten Computer Software.

2. Telecommunications services include telephone and other transmissions of information (such as beeper services, cellular telephone services and telegram services). Cable television and Internet access are exempt from the sales tax. Generally, the tax on the sale or use of telecommunications services is a tax on the transmission of messages or information by various electronic means, but not on the sale or use of information itself. For a list of taxable telecommunications services, see TIR 05-8, Taxation of Internet Access, Electronic Commerce and Telecommunications Services: Recent Federal Legislation.

 

Who is a sales/use tax vendor in Massachusetts?

A sales/use tax vendor is a retailer or any other person who regularly sells, rents or leases tangible personal property or telecommunications services that are subject to the Massachusetts sales tax. A vendor is anyone who:

• Sells, rents or leases in Massachusetts generally;
• Purchases tangible personal property or telecommunications services for resale in Massachusetts;
• Acquires parts to manufacture goods for sale or resale in Massachusetts;
• Has a business location in Massachusetts;
• Has representatives soliciting orders for tangible personal property or telecommunications services within Massachusetts; or
• Sells to Massachusetts residents or businesses and delivers, repairs or installs goods or telecommunications services within the Commonwealth.

Please note: Tax-exempt organizations that sell tangible personal property or telecommunications services in the regular course of business are considered vendors and are required to collect sales/use tax.

 

What are the responsibilities of a sales/use tax vendor in Massachusetts?

Massachusetts sales/use tax vendors are responsible for:

• Registering with DOR to collect sales/use tax;
• Collecting the 6.25 percent sales/use tax on taxable sales or rentals of tangible personal property or telecommunications services. Please note: The tax must be separately stated and separately charged on all invoices, bills, displays or contracts; and
• Remitting all sales/use taxes to DOR with the appropriate Massachusetts sales/use tax return on time. (For a complete listing of forms, please see the Online Forms Index.)

 

Are out-of-state vendors’ responsibilities the same as in-state vendors’ responsibilities?

Yes. Out-of-state vendors who meet any of the vendor definitions listed previously generally have the same responsibilities as Massachusetts vendors.

 

How does a vendor register to collect sales/use tax in Massachusetts?

Vendors must register to collect Massachusetts sales/use tax online through DOR’s WebFile for Business application.

After registering with DOR, vendors will be issued a Sales and Use Tax Registration Certificate (Form ST-1) for each business location. Form ST-1 must be displayed in a conspicuous location on the business premises, so that it is easily visible to customers.

As a convenience to customers, those out-of-state retailers and mail order firms that are not required by law to register as Massachusetts vendors may register voluntarily to collect use tax.

 

Must a cigarette retailer be registered for sales tax in Massachusetts?

Yes. A cigarette retailer must be registered for sales tax, as sales of cigarettes are subject to the sales tax. In addition, a cigarette retailer must have a Massachusetts cigarette retailer’s license. The Application for Cigarette Retailer’s License (Form CT-2E ) is available on the DOR website, or by calling the Excises Unit at 617-887-5090. A cigarette retailer also should check with its local Board of Health if a local tobacco sales permit is required.

Retailers of tobacco products (cigarettes, cigars, smoking tobacco, and smokeless tobacco) must prepay sales tax on such products to their suppliers. Tobacco retailers must continue to collect and remit sales tax on their sales of tobacco products and may take credit on their sales tax return in the amount of the prepaid sales tax paid to their suppliers. Wholesalers of tobacco products must collect and remit sales tax on their sales to retailers and report these sales as taxable sales on their sales tax return. See TIR 08-9 for more information. 

 

Must an individual or business register to pay sales/use tax on occasional out-of-state purchases?

No. People who are not registered to collect sales/use tax in Massachusetts, and who make an occasional out-of-state purchase for business or personal use, do not need to register. They instead must pay their use taxes by filing either a Business Use Tax Return (Form ST-10) or an Individual Use Tax Return (Form ST-11). For their convenience, individuals may report and pay any Massachusetts use tax due on their personal income tax return, Massachusetts Resident Tax Return (Form 1), (Form 1-NR/PY for part-year residents) or WebFile for Income. Taxpayers have the option of using a schedule to self-report an estimated, or “safe harbor,” amount of use tax based on their Massachusetts adjusted gross income. Purchases of items having a sales price of $1,000 or more are excluded from the “safe harbor.” For more information, please see TIR 04-26, Sales/Use Tax Changes Contained in Chapter 262 of the Acts of 2004.

Generally, anyone who pays a sales or use tax (which is legally due without any right to a refund or credit) to another state on merchandise or telecommunications services to be used in the Commonwealth is entitled to a credit against the Massachusetts use tax — up to the 6.25 percent Massachusetts sales/use tax rate. This credit is granted for sales tax paid to another state only if that state has a reciprocal agreement with Massachusetts; each state gives credit to purchasers for sales tax paid to the other state. If a sales tax rate of less than 6.25 percent is paid to the other state, the Massachusetts use tax is the difference between the two states’ sales tax rates. If a sales or use tax is paid to a state that does not have a reciprocal agreement with Massachusetts, then the sales/use tax credit does not apply.

Massachusetts has sales tax exemption agreements with most states. Some states, however, have only limited agreements with the Commonwealth. If you need more detailed information about a specific state, see TIR 03-1, Exemption from Massachusetts Use Tax for Taxes Paid Under Laws of Another State, or call DOR’s Customer Service Bureau at 617-887-MDOR or toll-free in Massachusetts at 800-392-6089.

Example: State X imposes a sales/use tax of 4 percent and has a reciprocal sales/use tax agreement with Massachusetts. You purchase a camera in State X for use in your Massachusetts business. You pay $1400 plus $56 tax for the camera. Since State X has a sales tax rate less than the 6.25 percent Massachusetts rate, you owe a use tax in Massachusetts of $31.50 — $87.50 (6.25 percent Massachusetts sales tax obligation) minus $56 (4 percent State X sales tax payment).

 

How is the sales/use tax paid on boats or motor vehicles in Massachusetts?

The sales tax on boats and recreational vehicles purchased from a Massachusetts dealer is collected by the dealer at the time of sale. For casual sales, the sales/use tax is due prior to registration or by the twentieth day of the following month, whichever occurs earlier. The sales/use tax on boats and other recreational vehicles must be filed and paid electronically via DOR’s online ST-6 application.

The confirmation page received after the tax has been filed and paid is required in order to register the boat or recreational vehicle. The purchaser of a motor vehicle or trailer that is required to be registered or titled in Massachusetts must file Form RMV-1, Application for Title and Registration, and pay the sales/use tax in full with the Registry of Motor Vehicles within 10 days of the date of purchase, transfer or first use of the motor vehicle or trailer. The purchaser of a motor vehicle or trailer that is not required to be registered in Massachusetts, including motor vehicles and trailers that are purchased in Massachusetts by nonresidents who will register or title the motor vehicle or trailer outside of Massachusetts, must file Form ST-7R, Certificate of Payment of Sales or Use Tax, and pay the sales tax in full with DOR or the Registry of Motor Vehicles on or before the twentieth day of the month following the month of purchase, transfer or first use of the motor vehicle or trailer.

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Information provided by The Massachusetts Department of Revenue.