Massachusetts Sales Tax Guide
Chapter 3: Getting registered to collect Massachusetts sales tax
The first step toward proper management of Massachusetts sales tax involves getting registered with the Massachusetts Department of Revenue. We get a lot of questions regarding this and recognize it may be the most difficult hurdle for small businesses to overcome. Registering to collect sales tax in Massachusetts means you've acknowledged your legal responsibility to collect and consequently file and remit sales tax to the state.When do I need to register to collect sales tax in Massachusetts?
There are two ways to think about this question. The first involves a topic called "nexus". Nexus, in the tax world refers to a company's connection to a state. While this connection is typically that of a physical nature (warehouse in the Massachusetts, inventory in Massachusetts, etc.), nexus is not limited to a physical presence. There are many nexus triggers we won't delve into here and, more importantly, nexus is often determined by a combination of events rather than a single event.
If it is determined you have nexus in Massachusetts, the Massachusetts Department of Revenue has the legal right to require you to collect, file, and pay sales tax.
If you've determined you have nexus in Massachusetts, the second question involves a topic we call "materiality". In short, you'll want to ask yourself whether the amount of sales tax you are required to collect and remit to the Massachusetts Department of Revenue is enough to put you at an unacceptable level of penalty and interest risk. As everyone's level of risk tolerance is different, this is a question that can only be answered by you, the business owner.
Prior to selling taxable goods or offering taxable services in Massachusetts, a business that has established nexus within the state is required to register for an Sales and Use Tax Registration Certificate.What triggers nexus in Massachusetts?
Nexus is a complex topic that, depending on your situation, may require the in-depth knowledge of a qualified tax professional. That being said, there are a few common business events and situations that are known to trigger nexus in Massachusetts. The most common include the following:
- Opening an office in Massachusetts
- Storing inventory in a warehouse in Massachusetts
- Having remote employees located in Massachusetts
Businesses may register for an Massachusetts Sales and Use Tax Registration Certificate online by visiting the Massachusetts Department of Revenue and following the instructions provided.
At this time, Massachusetts does not allow businesses to register for a Sales and Use Tax Registration Certificate via paper application. You'll need to visit the Massachusetts Department of Revenue and complete your registration online.What information is required to register for a Massachusetts Sales and Use Tax Registration Certificate ?
When applying for a Massachusetts Sales and Use Tax Registration Certificate, there are a number of pieces of information that may be required. These include, but are likely not limited to:
- Business name
- Business entity type
- Description of business activities
- Date business activities began or will begin
- Business address and mailing address
- Business contact information
- The North American Industry Classification System (NAICS) code that best matches your business
- Federal Employer Identification Number (FEIN)
- Your name, Social Security Number (SSN), driver license number, personal address, and personal contact information of owner/sole proprietor
- List of business officers, partners, managing members, and/or trustees
- Employment information (date of hire, number of employees, payroll amounts, payroll agent’s PTIN, if applicable)
The cost to register for a Massachusetts Sales and Use Tax Registration Certificate is currently $0.Do I need a Federal EIN in order to register in Massachusetts?
The Massachusetts Department of Revenue requires businesses requesting a new Sales and Use Tax Registration Certificate to supply a valid Federal EIN number during the initial registration process. You can apply for an EIN number online by visiting the IRS website.Which Massachusetts governement agencies do I need to register with in order to get a new Sales and Use Tax Registration Certificate?
We recommend you contact the Massachusetts Department of Revenue to verify which government agencies you will be required to register with. Potential agencies include the following:
- Massachusetts Department of Revenue
- Massachusetts State Employment Agency
- Massachusetts State Department of Labor
- Massachusetts Local Tax Jurisdictions
Yes! Massachusetts Sales and Use Tax Registration Certificate registration is unique to the state of a business. The Massachusetts Department of Revenue requires all registered businesses to have current business owner name and contact information on file.