What Is the Massachusetts Sales Tax Nexus Threshold?

A business’s responsibility to collect and remit sales tax is determined by nexus, a connection between the business and a state. When a company establishes this connection, it is required to register with the state’s tax authority and handle sales tax on its taxable transactions. This article will detail the sales tax nexus requirements in Massachusetts, focusing on how nexus is established and the subsequent steps for registration and compliance.

Understanding Massachusetts Nexus Triggers

A business can establish a sales tax collection obligation in Massachusetts through two pathways: a physical presence or by meeting a specific economic threshold. Physical presence nexus is created when a business has tangible connections to the state. This can include owning or leasing real estate like an office or warehouse, having employees who perform duties within the state, or sending sales representatives to solicit business. Storing inventory in Massachusetts, even in a third-party fulfillment center, also creates this type of nexus.

Following the Supreme Court’s decision in South Dakota v. Wayfair, Massachusetts established an economic nexus standard. A remote seller, one without a physical presence, is required to register and collect Massachusetts sales tax if it has more than $100,000 in sales of tangible personal property or services delivered into the state. This threshold is evaluated based on sales during the prior or current calendar year.

The calculation to determine if the $100,000 threshold has been met is based on a business’s gross sales, including sales that may be exempt from tax. However, a remote seller should exclude sales made through a marketplace facilitator from this calculation, provided the marketplace is responsible for collecting the tax. Once a remote seller’s direct sales cross the threshold, the seller must register and begin collecting tax.

Information Required for Sales Tax Registration

Before registering, a business should gather several pieces of information. The primary identifier needed is the Federal Employer Identification Number (EIN) for corporations and partnerships, or a Social Security Number (SSN) for sole proprietors. You will also need to provide the legal business name and any “Doing Business As” (DBA) name used. The business’s physical address, mailing address, and contact information are also required.

The names, addresses, and identification numbers for corporate officers, partners, or individual owners must be supplied. A description of the business’s activities is necessary, which involves selecting the appropriate North American Industry Classification System (NAICS) code. Finally, the business must identify the date it first established nexus in Massachusetts, as this determines when the obligation to collect sales tax began.

The Registration and Filing Process

Once a business confirms it has nexus, the next step is to register with the Massachusetts Department of Revenue. This process is completed electronically through the state’s online tax portal, MassTaxConnect, and there is no fee to apply for a sales tax permit. After submitting the registration, the business will receive its Massachusetts Sales and Use Tax Registration Certificate, often referred to as Form ST-1. While a temporary certificate may be available immediately online, the official paper copy typically arrives by mail within 7 to 10 business days.

This certificate must be displayed at the business’s location. The registration is permanent and does not require renewal, but it must be updated if business details change.

The Massachusetts Department of Revenue assigns a filing frequency—either monthly, quarterly, or annually—based on the business’s anticipated tax liability. For example, businesses with an estimated annual liability over $1,200 are required to file monthly, while those with a liability under $100 may file annually. All returns and payments must be submitted electronically through the MassTaxConnect portal by the 20th day of the month following the end of the reporting period.