Steps to Pay Your Massachusetts Small Business Taxes
Paying taxes is probably not on your top five list of things you love about running a business. Unfortunately, Massachusetts small business taxes come with the package and are an important part of staying compliant with state law. If you are feeling stressed about it, don’t worry, we can help. Let’s take a closer look at the types of Massachusetts state business taxes you might need to pay, when they are due, where to pay them, and which of our products and services can make life easier for you at tax time.
We can help keep you on track with our Worry-Free Compliance service which helps you understand what’s due and when without the guesswork.
One of the biggest complications with compliance is keeping track of transactions.
If you’re looking for information about federal taxes, head over to our page on federal taxes for small businesses to learn more.
Step 1: Establish your Massachusetts business’s corporate income tax obligations
The type of business entity you own or operate will determine your income tax obligations. Massachusetts corporations are responsible for paying the state corporate excise tax. This Massachusetts small business tax rate is 8% of the company income, and it pertains only to businesses registered as C-corporations.
Other pass-through business entities include S-corporations, limited liability companies, partnerships, limited liability partnerships, and sole proprietorships. The term “pass through” reflects the concept of income taxes passing through the business and onto individuals. Owners, partners, members, and shareholders pay state income taxes according to their percentage of interest in the business.
Massachusetts business tax rates are subject to change from time to time, so it’s important to stay on top of the most current information. You can check the state tax page on Massachusetts’s Department of Revenue (DOR) website. Corporate taxes are due annually by March 15.
Step 2: Determine your Massachusetts business’s employment taxes
If you’re an employer in Massachusetts, you need to withhold state income tax from your employees’ wages. You must register with the DOR to be able to withhold employee taxes, and you can make online payments though the MassConnect system. There are formulas you can use to help determine withholding amounts . Businesses need to submit quarterly reports of wages paid to employees, and employees must receive a wage statement from you by January 31 of each year.
Step 3: Establish your Massachusetts business’s additional state tax obligations
Income taxes and employment taxes may not be the only Massachusetts small business taxes your company needs to be aware of. Depending on the nature of your business, there are several other taxes that may apply. Here are a few that you may run across.
As of 2021, the Massachusetts sales tax rate is 6.25% of the sales price or rental charge on tangible personal property. This includes certain telecommunication services sold or rented in the state. Sales tax is generally collected by the seller and remitted to the state. Depending on the amount of sales tax you are paying, payments may be made monthly, quarterly, or annually. The Massachusetts Department of Revenue has online resources to determine how often and how to pay your business sales tax.
Massachusetts use tax is the same rate as sales tax. This tax is applicable when the sales tax was not payable upon purchase. This is common for items purchased out of state and transferred to Massachusetts. In most cases, the consumer is responsible for this tax.
Some states require all businesses to pay a privilege tax for the privilege to conduct business. This may be a percentage or a flat rate fee. Some states call this a franchise tax. Massachusetts doesn’t require a privilege tax for businesses.
Private, for-profit Massachusetts employers have the requirement to contribute to the unemployment insurance (UI) trust fund. You only need to have a minimum of one employee working one day a week for 13 weeks out of the year or pay wages of $1,500 or more each quarter. New employers pay a specific percentage for the first three years before an adjustment is made. Unemployment tax rates are subject to change, but the most current rates can be found through the Massachusetts Department of Unemployment Assistance.
Excise taxes are often imposed on goods that are deemed somewhat harmful, though this isn’t always the case. Massachusetts applies excise taxes on cigarettes and tobacco products, motor fuel, room occupancy (hotels), and marijuana retail sales.
Not sure how to stay compliant? Learn more about legal compliance for small business owners.
Step 4: Prepare to file and pay your Massachusetts business taxes
Filing your taxes online is the most efficient way to get it done and over with. Massachusetts small business taxes can be filed using MassTaxConnect.com which is the state’s online filing system. You will need to register your business in the system and provide your employer identification number (EIN) or social security number (if a sole proprietor), the date your business was formed, and your business mailing address. Corporations need to provide individual officer information.
Forms for business taxes in Massachusetts are available online in PDF format. Print these off and submit via postal mail to the Massachusetts Department of Revenue.
In preparation for filing your Massachusetts small business taxes, it’s important to gather all necessary information so you aren’t going on a scavenger hunt in the middle of the process. Identify all receipts, invoices, accounting records, legal documents, and other financials that may be applicable. One easy way to keep track of all your receipts and invoices in one place is to use our ZenBusiness Money App.
Do I need an accountant?
Preparing taxes isn’t easy. But there are people out there who enjoy it and thrive on figuring out all of the details that would cause others to run screaming into the night. Most small businesses do need professional accounting assistance to make sure their taxes are done correctly.
There are penalties and fees assessed for failure to pay your Massachusetts small business taxes. These will continue to accrue until full payment is made. There are also significant penalties for underpayment, misuse of tax shelters, and evasion. Hiring a professional can help you avoid these costly mistakes.
Not all tax preparers have the same qualifications. The Internal Revenue Service (IRS) has an online guide to Tax Return Preparer Credentials and Qualifications on its website to help you determine what kind of accounting professional is right for your business.
How we can help
There are a lot of moving parts to running a business and paying your taxes on time is just one piece of the puzzle. There are also annual reports, amendments, permits, licenses, and other incidental filings that are easy to forget. A successful business needs to properly account for profits and losses. Our ZenBusiness Money App allows you to track invoices, payments, and clients from a convenient dashboard. You can even input taxes as a separate line item. We know it can be a lot, and we are here to help.
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
- How much can a Massachusetts small business make before paying taxes?
All small businesses in Massachusetts are responsible for paying taxes on their income. Pass-through business entities pay the income tax rate on business income according to their interest percentage.
- What percentage does a Massachusetts small business pay in taxes?
Massachusetts corporations pay an 8% corporate excise tax, which is subject to change. Pass-through entities pay the standard income tax rate.
- How does a Massachusetts small business pay taxes?
Online filing is the most efficient way to file your business taxes. Massachusetts small business taxes can be filed using MassTaxConnect.com—which is the state’s online filing system. Submit via postal mail addressed to:
Massachusetts Department of Revenue
PO Box 419540
Boston, MA 02241-9540
- Do I have to file taxes for my small business in Massachusetts?
Whether you profited or not won’t change the fact that you do have to file small business taxes for your business that’s registered with the state of Massachusetts.