Massachusetts — Sales & Use Tax

Massachusetts imposes an excise on sales at retail in the commonwealth, by any vendor, of tangible personal property or of services performed in the commonwealth, at the rate of 6.25% of the gross receipts of the vendor from all such sales.

Source: M.G.L. c. 64H, § 2

The tax is imposed on sales at retail — the statute defines this term through its definition of "sale," which includes "any transfer of title or possession, or both, exchange, barter, lease, rental, conditional or otherwise, of tangible personal property for a consideration, in any manner or by any means whatsoever."

Source: M.G.L. c. 64H, § 1

The 6.25% rate applies statewide; Massachusetts does not permit local jurisdictions to levy additional general sales taxes. Massachusetts is a destination-based state for sales tax sourcing — the tax rate is determined by the location of the buyer (the ship-to address), not the seller's location.

Source: Sales and Use Tax guide, Mass.gov

A parallel use tax is imposed at the same 6.25% rate on tangible personal property (including electronically transferred software) and certain telecommunications services purchased for use, storage, or consumption in Massachusetts when no Massachusetts sales tax was collected or a tax at a rate less than 6.25% was paid.

Source: Sales and Use Tax guide, Mass.gov

## Who must collect and remit

The excise is paid by the vendor to the commissioner at the time provided for filing the return required by M.G.L. c. 62C, § 16. Reimbursement for the tax is paid by the purchaser to the vendor, and each vendor in the commonwealth must add to the sales price and collect from the purchaser the full amount of the tax.

Source: M.G.L. c. 64H, §§ 2, 3

A "vendor" is defined as any person selling tangible personal property or services in the regular course of business. Remote sellers and marketplace facilitators whose direct and facilitated Massachusetts sales exceed $100,000 in a calendar year are required to register, collect, and remit Massachusetts sales tax.

Source: Sales and Use Tax guide, Mass.gov

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

Source: Sales and Use Tax guide, Mass.gov

Remote sellers without physical presence in Massachusetts must register and collect sales tax if their Massachusetts sales exceed $100,000 in the prior or current calendar year. For sellers who exceed the threshold before November 1, collection begins January 1 of the following year; if exceeded after November 1, collection begins the first day of the first month that is two months after the month the threshold was exceeded. Massachusetts sales include all retail sales delivered into Massachusetts, whether taxable or exempt, but exclude sales facilitated by a marketplace facilitator that collects tax on the seller's behalf.

Source: 830 CMR 64H.1.9(3)(a)

A remote marketplace facilitator (one without physical presence) must collect and remit Massachusetts sales tax on all sales through its marketplace—both direct sales and sales facilitated for marketplace sellers—when its total Massachusetts sales exceed $100,000 in the prior or current calendar year. A marketplace facilitator with physical presence in Massachusetts must collect tax on all its direct sales regardless of volume, and must collect on facilitated sales when combined Massachusetts sales (direct plus facilitated) exceed $100,000 in the prior or current calendar year. Effective October 1, 2019.

Source: M.G.L. c. 64H, § 34 and 830 CMR 64H.1.9

Filing frequency is assigned by the Massachusetts Department of Revenue based on a vendor's estimated annual sales and use tax liability, exclusive of the sales tax on meals. The regulation establishes three filing frequencies with specific liability thresholds and due dates.

Annual filers

Every vendor whose sales and use tax liability (exclusive of the sales tax on meals) is reasonably estimated to be $100 or less for the calendar year must file a sales and use tax return and pay the tax due on an annual basis. The sales and use tax return and payment for the period of January 1 to December 31, inclusive, is due on or before the following January 20.

Quarterly filers

Every vendor whose sales and use tax liability (exclusive of the sales tax on meals) is reasonably estimated to be more than $100 but not more than $1,200 for the calendar year must file a sales and use tax return and pay the tax due for each calendar quarter on or before the twentieth day of the month following the close of that calendar quarter. For example, the return for the quarter ending March 31 is due April 20.

Monthly filers

Every vendor whose sales and use tax liability (exclusive of the sales tax on meals) is reasonably estimated to be more than $1,200 for the calendar year must file a sales and use tax return and pay the tax due for each calendar month on or before the twentieth day of the month following the close of that calendar month. For example, the return for January is due February 20.

Revocation of filing frequency

The Commissioner may revoke a vendor's authority to file annually, quarterly, or monthly if: (1) the vendor is delinquent in filing a return or paying the tax due; (2) the vendor's tax liability exceeds the designated threshold amounts of $100 or $1,200 for any calendar year, as the case may be; or (3) the Commissioner determines that the assigned filing frequency unduly jeopardizes the proper administration of the tax law. Upon revocation, the vendor will be required to file returns and pay the tax due on such basis as the Commissioner determines.

The $100 threshold for annual filing and the $1,200 threshold dividing quarterly from monthly filing have been in effect since the regulation took effect in 1998, and remained unchanged through 2026.

Source: 830 CMR 62C.16.2: Sales and Use Tax Returns and Payments

Massachusetts imposes sales tax on sales of prewritten (also called "canned" or "standardized") computer software regardless of the method of delivery. This includes software delivered on physical media such as disks, downloaded electronically via the Internet, transferred by "load and leave" methods, or accessed remotely on a vendor's server. The effective date of this comprehensive treatment was April 1, 2006, pursuant to statutory changes in St. 2005, c. 163, §§ 34, 61.

Prewritten software and SaaS

Under 830 CMR 64H.1.3(3)(a), sales in Massachusetts of computer hardware, computer equipment, and prewritten computer software, regardless of the method of delivery, are generally subject to the 6.25% Massachusetts sales tax. The regulation explicitly provides that taxable transfers of prewritten software include "transfers of rights to use software installed on a remote server," which encompasses Software-as-a-Service (SaaS) offerings. The method of delivery does not affect taxability; thus, a sale of standardized software is taxable whether the software is delivered on a traditional tangible medium such as a disk, downloaded from the Internet, or accessed by the user over the Internet from a remote server.

Letter Ruling 12-8, issued November 8, 2013, addresses the taxability of cloud computing products and clarifies that "the sale, license, lease or other transfer of a right to use software on a server hosted by the taxpayer or a third party, as described in 830 CMR 64H.1.3(3)(a), is generally taxable under Massachusetts sales and use tax law." The ruling emphasizes that marketing descriptions such as "software-as-a-service" or "cloud computing" do not determine taxability; rather, the substance of the transaction controls. Access to software on a remote server is characterized as "a virtual download of prewritten software" because the customer acquires the same functionality as if the software was actually downloaded to the customer's hardware.

Custom software exemption

Sales of custom software are generally not subject to sales tax. Under 830 CMR 64H.1.3, custom software is defined as a software program prepared to the special order of the customer. The definition permits the incorporation of pre-existing routines, subroutines, or modules into custom software, provided the overall program is prepared to the special order of the customer. For the exemption to apply, the transaction must qualify as a professional service transaction in which the transfer of any tangible medium is an inconsequential element of the overall transaction.

The distinction between prewritten software and custom software turns on whether the software is "held for general or repeated sale or lease." Software developed for one customer to that customer's specifications, even if it incorporates pre-existing code components, is treated as custom software if it is not offered for general or repeated sale. However, if those pre-existing components themselves constitute prewritten software held for general sale, then the transaction may be characterized as a taxable modification to prewritten software rather than exempt custom software.

Bundled transactions and separately stated charges

When prewritten software is sold with services, the general rule is that services that are part of the sale are included in the taxable sales price, whether or not they are separately stated. Under M.G.L. c. 64H, § 1, the definition of "sales price" includes "any amount paid for any services that are a part of the sale." Mandatory charges for infrastructure, maintenance, or support services that are required to access and use the software are part of the taxable sales price of the prewritten software.

For charges to be excluded from the sales price, they must be for optional services that the customer may decline to purchase, and the charges must be separately stated on the invoice and in the vendor's books and records. 830 CMR 64H.1.3 provides that "separately stated charges must be clearly stated on the bill or invoice presented to the customer as well as on the vendor's books and records."

Cloud computing — infrastructure without vendor-provided software

Letter Ruling 12-8 addresses a specific scenario in which cloud computing services provide infrastructure, platform, and operating system resources, but the customer uses its own application software or free open-source software. The ruling concluded that sales of such cloud computing products that involve the customer's use of its own application software (not purchased from the vendor) and open-source or customer-owned operating system software do not involve taxable sales of prewritten software within the meaning of M.G.L. c. 64H, § 1 or 830 CMR 64H.1.3. The key distinction is that the vendor is not providing prewritten software to the customer; rather, the vendor is providing computing infrastructure and the customer is running its own software on that infrastructure.

Additionally, Letter Ruling 12-8 concluded that sales of cloud computing products that include the use of third-party operating system software licensed by the vendor, where there is no contractual sub-licensing from the vendor to the customer and no separately stated charge for the operating system, are not taxable under the facts presented in that ruling. This narrow exception does not extend to SaaS products where the vendor is providing access to prewritten application software.

No B2B exemption

Massachusetts does not provide an exemption for prewritten software or SaaS sold for business use. Both business-to-business (B2B) and business-to-consumer (B2C) transactions involving prewritten software are subject to the 6.25% sales tax. Unlike some states that exempt software purchased exclusively for business purposes, Massachusetts treats all sales of prewritten software as taxable, regardless of the purchaser's intended use.

Multiple points of use

When prewritten software is purchased for concurrent use in multiple states, Massachusetts regulations permit apportionment of the sales or use tax. Under 830 CMR 64H.1.3(15), a purchaser may present a Multiple Points of Use (MPU) certificate to the vendor at the time of sale, certifying that the software will be used in more than one state and that the purchaser will remit apportioned tax to Massachusetts and the other relevant states. The apportionment must be based on a reasonable and consistent method supported by the purchaser's business records, such as the number of licensed users in Massachusetts relative to total users. Alternatively, if an MPU certificate was not provided at the time of sale, a purchaser may apply for an abatement of sales or use tax based on multi-state apportionment under M.G.L. c. 62C, § 37.

Source: 830 CMR 64H.1.3: Computer Industry Services and Products

Source: Letter Ruling 12-8: Cloud Computing

Source: TIR 05-15: Transfers of Prewritten Computer Software

Source: M.G.L. c. 64H, § 1

Massachusetts requires vendors to collect sales tax on all sales of tangible personal property and taxable services unless the vendor accepts a valid resale certificate. A properly accepted resale certificate shifts the burden of proving a sale is not subject to tax from the vendor to the purchaser, providing critical audit protection.

Form and registration requirements

The prescribed form is the Massachusetts Sales Tax Resale Certificate, Form ST-4. A resale certificate relieves a vendor from the burden of proving that a sale is not a retail sale only if the vendor accepts the certificate in good faith from a purchaser who (1) is engaged in the business of selling tangible personal property or taxable services, and (2) holds a valid Massachusetts vendor registration issued under M.G.L. c. 64H, § 7. The purchaser must, at the time of purchase, intend to sell the property or service in a retail sale in the regular course of business, or be unable to ascertain at the time of purchase whether the property will be sold or used for another purpose.

Form ST-4 must contain the purchaser's name, address, Massachusetts Account ID number or Federal Identification Number, and a description of the type of tangible personal property or services the purchaser buys and resells. The certificate must be signed by the purchaser under the pains and penalties of perjury. The vendor must retain the certificate as part of its permanent tax records.

Massachusetts-only certificates

Massachusetts does not accept out-of-state resale certificates. A vendor in Massachusetts may accept a resale certificate only if it is a Massachusetts-issued Form ST-4 from a purchaser holding a valid Massachusetts vendor registration. However, if a purchaser without Massachusetts nexus wishes to buy for resale, the vendor may instead accept a statement on the customer's letterhead (or with the customer's business card attached), signed under the pains and penalties of perjury, certifying the resale purpose. This alternative applies only to purchasers without nexus in Massachusetts; vendors must not accept out-of-state resale certificates from purchasers who are required to be registered in Massachusetts.

Good faith and verification

The good faith of the vendor will be questioned if the vendor has knowledge of facts that give rise to a reasonable inference that the purchaser does not intend to resell the property or services. Vendors can confirm the validity of a customer's sales and use tax registration and resale certificate online through MassTaxConnect, the Department of Revenue's online portal. Verification through MassTaxConnect creates a presumption of good faith.

60-day production and correction rule

Upon written notice from the Commissioner, a vendor must produce resale certificates accepted during any period for which a tax return has been filed or is due. The vendor must make the certificates available for inspection within 60 days of the date of the Commissioner's request. If the vendor does not produce the requested certificates within the 60-day period, the vendor bears the burden of proving by other evidence that the sale was not a retail sale. The regulation also provides a 60-day correction period: if a certificate is incomplete or defective at the time of sale, the vendor may obtain a corrected certificate from the purchaser within 60 days of the Commissioner's request and still receive the benefit of the safe harbor, provided the vendor accepted the original certificate in good faith.

Misuse and subsequent inconsistent use

If a purchaser presents a resale certificate but subsequently makes any use of the property or service other than retention, demonstration, or display while holding it for sale in the regular course of business, the use is deemed a retail sale by the purchaser as of the time the property or service is first used. The cost of the property or service to the purchaser must be included in the purchaser's gross receipts, and the purchaser owes sales or use tax. The vendor is not liable if it accepted a valid certificate in good faith at the time of sale.

Prohibition on tobacco resale certificates

Sales Tax Resale Certificates (Form ST-4) are invalid for the sale or purchase of tobacco products. Vendors must collect sales tax on all sales of tobacco products, even from purchasers who hold valid resale certificates for other transactions.

Source: 830 CMR 64H.8.1: Resale and Exempt Use Certificates

Source: M.G.L. c. 64H, § 7

Source: Sales and Use Tax guide, Mass.gov

Source: Form ST-4 Sales Tax Resale Certificate

Massachusetts sales and use tax law provides numerous categorical exemptions for tangible personal property. The major exemptions a vendor would commonly encounter include clothing, food products, prescription drugs, and manufacturing/industrial equipment.

Clothing and footwear exemption

Sales of articles of clothing and footwear intended to be worn or carried on or about the human body are exempt up to $175 of the sales price per article. When an article's sales price exceeds $175, only the amount over $175 is subject to tax. For example, a coat priced at $200 is subject to sales tax on $25 ($200 - $175). The $175 threshold applies per item, not per transaction; if a customer buys three shirts each priced at $100, all three are fully exempt even though the total purchase is $300.

The exemption does not apply to "special clothing or footwear primarily designed for athletic activity or protective use and which is not normally worn except when so used." Massachusetts interprets "protective use" narrowly to refer only to items designed to protect the wearer from physical injury, such as bullet-proof vests, insulated gloves for frozen-food workers, or items meeting OSHA personal protective equipment standards under 29 CFR 1910.132 et seq. Shop aprons, chef coats, lab coats, and similar workplace garments that protect clothing from soil and stain are treated as exempt clothing, not excluded protective wear. Directive 99-3 provides that athletic shoes are subject to tax only if they are primarily designed for athletic activity (such as golf shoes, track spikes, or ski boots) and are not normally worn except for that activity; general-purpose sneakers and running shoes worn for everyday use remain exempt under the clothing exemption.

Source: M.G.L. c. 64H, § 6(k)

Source: Directive 99-3: Sales and Use Tax Treatment of Protective Clothing

Food products exemption

Sales of food products for human consumption are generally exempt from sales tax under M.G.L. c. 64H, § 6(h). The statute defines "food products" to include cereals and cereal products, flour and flour products, milk and milk products (including ice cream), oleomargarine, meat and meat products, fish and fish products, eggs and egg products, vegetables and vegetable products, fruit and fruit products, soft drinks, herbs, spices and salt, sugar and sugar products, candy and confectionery, coffee and coffee substitutes, tea, cocoa and cocoa products, and ice when used for household consumption.

Under 830 CMR 64H.6.5, the sale of food products for human consumption—including candy—is exempt from sales tax when sold by grocery stores, markets, and similar establishments that do not primarily sell prepared meals. The regulation defines candy as "food products with a sugar or confection base, including breath fresheners, gum, mints, and health foods which consist primarily of sugars," and Example 2 in the regulation explicitly states that "The energy bar is candy exempt from sales tax unless it is sold by a restaurant." Prepackaged candy, chips, popcorn, ice cream novelties, and similar snacks sold by a store for off-premises consumption are not taxable.

Restaurant meals taxable

The food products exemption does not apply to meals consisting of food products prepared for human consumption and provided by a restaurant. Under 830 CMR 64H.6.5, a "restaurant" includes any establishment where food or beverages are provided for immediate consumption, and "meals" include any food or beverage, or both, prepared for human consumption and provided by a restaurant, whether intended for consumption on or off the restaurant premises (including take-out and to-go sales). Grocery stores, markets, and similar establishments selling unprepared food products are not considered restaurants; however, these establishments become restaurants to the extent they sell prepared meals.

The regulation provides that the sale by a store of any prepared food item that is heated is taxable as a meal, as is the sale of poured beverages (such as a cup of coffee or a fountain soda), unpackaged baked goods sold in units of five or fewer, and sandwiches (whether or not prepackaged or heated). Quick meals such as hot dogs, hamburgers, pizza slices, or soup are taxable if heated by the seller or if the store provides heating units (typically microwaves) in which customers may heat the quick meal. Quick meals sold frozen are not taxable. Beverages sold by a store in unopened original containers for off-premises consumption are not taxable, and prepackaged baked goods or snacks (including candy) sold by a store for off-premises consumption are not taxable.

Exclusions from the food products definition

The statutory definition of "food products" does not include:

• Alcoholic beverages containing 1/2 of 1% or more of alcohol by volume at 60°F
• Marijuana products intended for consumption
• Medicines, tonics, and dietary supplements in liquid, powdered, granular, tablet, capsule, lozenge, and pill form sold as dietary supplements or adjuncts (vitamins, minerals, fiber wafers, powdered proteins, etc.)

Medicines prescribed by a registered physician are exempt under a separate exemption.

Items purchased with federal food stamps

Sales of tangible personal property purchased with federal food stamps (now SNAP benefits) are exempt from sales tax under M.G.L. c. 64H, § 6(kk), even if the item would otherwise be taxable.

Source: M.G.L. c. 64H, § 6(h)

Source: 830 CMR 64H.6.5: Sales Tax on Meals

Prescription medicines and medical devices

Medicines prescribed by a registered physician are exempt under M.G.L. c. 64H, § 6(l). The same subsection exempts prosthetic devices, orthopedic appliances, crutches, wheelchairs, and equipment worn as a correction or substitute for any functioning portion of the body, for the use of invalids and persons with disabilities.

Source: M.G.L. c. 64H, § 6(l)

Manufacturing and industrial exemptions

M.G.L. c. 64H, § 6(r) exempts sales of materials, tools, and fuel (or any substitute) that become an ingredient or component part of tangible personal property to be sold, or that are consumed and used directly and exclusively in:

• Agricultural production
• Commercial fishing
• An industrial plant in the actual manufacture of tangible personal property to be sold
• The operation of commercial radio broadcasting or television transmission
• The furnishing of power to an industrial manufacturing plant
• The furnishing of gas, water, steam, or electricity when delivered to consumers through mains, lines, or pipes
• Research and development by a manufacturing corporation or a research and development corporation within the meaning of M.G.L. c. 63, § 42B

The statute defines "consumed and used" to mean items with a normal useful life of less than one year, or items whose cost is allowable as an ordinary and necessary business expense for federal income tax purposes, or nuclear fuel or fuel assemblies. "Industrial plant" means a factory at a fixed location primarily engaged in the manufacture, conversion, or processing of tangible personal property to be sold in the regular course of business.

M.G.L. c. 64H, § 6(s) similarly exempts machinery and replacement parts when used directly and exclusively in the actual manufacture of tangible personal property to be sold or in research and development by a manufacturing or R&D corporation.

Source: M.G.L. c. 64H, § 6(r), (s)

Casual and isolated sales

Casual and isolated sales by a vendor who is not regularly engaged in the business of making sales at retail are exempt under M.G.L. c. 64H, § 6(c). This exemption applies to infrequent and nonrecurring transactions such as sales of used appliances by a homeowner or sales at infrequent yard sales. The exemption does not apply to sales of motor vehicles or trailers as defined in M.G.L. c. 90, § 1, or to sales of boats or airplanes, which remain subject to use tax under M.G.L. c. 64I.

Source: M.G.L. c. 64H, § 6(c)

Sales to exempt organizations

Sales to corporations, foundations, organizations, or institutions exempt under Internal Revenue Code § 501(c)(3) are exempt under M.G.L. c. 64H, § 6(e), provided: (1) the property or services are used in the conduct of the organization's religious, charitable, educational, or scientific enterprise; (2) the organization has obtained a certificate of exemption from the Commissioner; and (3) the vendor keeps a record of the sales price, purchaser name, date, and certificate number. The certificate is effective for a period of 10 years from the date of issuance or until January 1 following expiration, whichever is later, and must be renewed to continue the exemption.

Source: M.G.L. c. 64H, § 6(e)

Sales to governmental bodies

Sales to the United States or the Commonwealth of Massachusetts or any of its political subdivisions are exempt under M.G.L. c. 64H, § 6(d).

Source: M.G.L. c. 64H, § 6(d)

Massachusetts excludes separately stated transportation charges from the taxable sales price, but handling-only charges remain taxable. The current controlling authority is Department of Revenue Directive 04-5, effective September 1, 2004, which liberalized the prior policy (Directive 98-5) by eliminating the title-passage timing test.

General rule for transportation charges

Under M.G.L. c. 64H, § 1, the definition of "sales price" includes "any amount paid for any services that are a part of the sale," but the Commissioner has exercised administrative authority to exclude separately stated transportation charges that meet specified conditions. Directive 04-5 provides that the Commissioner will not assess sales tax on separately stated transportation charges, provided that: (1) the charge is separately stated on the invoice as a distinct component of the total amount charged to the customer, (2) the charge reflects a cost of preparing and moving the goods from the vendor to the customer, and (3) the charge reasonably reflects the actual costs of transportation without a substantial profit component.

The separate statement requirement is satisfied if the charge—however designated—is stated as a distinct component and reflects a cost of preparing and delivering the goods from the retail vendor to the customer. Separately stated charges may include amounts designated as "postage," "freight," "shipping," "handling," "transportation," "shipping and handling," "crating," "packing," or the like, so long as the charges reflect a cost of preparing and delivering the goods.

Handling-only charges

Directive 04-5 incorporates by footnote the rule from Directive 98-5 that separately stated charges for "handling" alone—as opposed to charges for both "handling and shipping"—are generally not treated as transportation charges and remain taxable as part of the sales price. Combined "shipping and handling" charges are eligible for exclusion if they meet the reasonableness test.

Reasonableness test

Letter Ruling 00-15, issued November 17, 2000, addressed the meaning of "reasonable transportation charges." A charge is reasonable if it reflects the vendor's actual costs of transportation, including common carrier charges, handling costs incidental to transportation (such as packing materials, labor to prepare items for shipment, and insurance), and overhead allocable to the shipping function. A lump sum shipping and handling charge that contains a substantial profit component is not reasonable and does not qualify for exclusion from the sales price.

Title passage timing no longer determinative

Under Directive 98-5 (the prior policy), transportation charges were excluded from the sales price only if transportation occurred after the retail sale—that is, after title passed to the purchaser. If the sales agreement specified that title would transfer on delivery (a "destination contract"), then transportation occurred before the sale, and the charge was taxable. Directive 04-5 eliminated this title-passage test effective September 1, 2004. The directive states: "The time or place of the sale, or the manner of delivery of the property, whether by common carrier or in the vendor's own truck, and passage of title will no longer be considered determinative of whether the transportation charges are subject to sales tax."

Title passage and the time or place of sale remain relevant for other purposes, including determining when and where a sale takes place under the Out of State Sales and Deliveries regulation, 830 CMR 64H.6.7, and Technical Information Release 01-14. However, for purposes of determining whether separately stated transportation charges are taxable, the Commissioner applies the requirements of Directive 04-5 without regard to when or where title passes.

Drop shipments

Directive 04-5 addresses drop shipments, in which a retailer sells property to a customer but arranges for a third party (often a manufacturer or wholesaler with nexus in Massachusetts) to deliver the property directly to the customer in Massachusetts. M.G.L. c. 64H, § 1 provides that delivery in Massachusetts of tangible personal property by an owner or factor, when made to a consumer pursuant to a retail sale by a retailer not engaged in business in Massachusetts, is a retail sale by the person making the delivery. The Commissioner treats the cost of transporting the property to a location designated by the retail customer as a nontaxable transportation charge, provided the requirements of Directive 04-5 are otherwise met.

Charges included in the price

If shipping, handling, or transportation charges are not separately stated on the invoice but are instead included in the total price of the goods, the entire amount—including the embedded transportation cost—is subject to sales tax. The exclusion applies only to charges that are separately stated.

Taxable underlying sale required

The treatment of shipping and handling charges follows the taxability of the underlying sale. If the tangible personal property being shipped is exempt from sales tax (for example, clothing under the $175 threshold or exempt food products), the shipping charge is also not subject to tax, whether or not separately stated. If the underlying property is taxable, then shipping charges that are not separately stated or that fail the reasonableness test are included in the taxable sales price.

Source: Directive 04-5: Transportation Charges

Source: M.G.L. c. 64H, § 1

Source: Letter Ruling 00-15: The Meaning of "Reasonable Transportation Charges"

Massachusetts cities and towns may impose a local option meals excise in addition to the 6.25% state sales tax on restaurant meals. The local meals tax is authorized under M.G.L. c. 64L, § 2, which permits a municipality that accepts the statute through its local legislative process to impose a local sales tax on the sale of restaurant meals originating within the city or town at a rate of 0.75% of the vendor's gross receipts from restaurant meal sales. The combined effective tax rate on meals in a municipality that has adopted the local option is 7% (6.25% state + 0.75% local).

Adoption and effective date

A city or town adopts the local meals tax by accepting the provisions of M.G.L. c. 64L, § 2 in the manner provided by M.G.L. c. 4, § 4, which requires a vote of the city council (with mayoral approval where applicable) or town meeting. The municipality must file a Notification of Acceptance form with the Department of Revenue's Division of Local Services. The local meals tax takes effect on the first day of the calendar quarter following 30 days after acceptance by the municipality, or on the first day of a later calendar quarter designated by the municipality. The earliest possible effective date was October 1, 2009, when the authorizing legislation became effective under St. 2009, c. 27, § 60.

Geographic scope and sourcing

The local meals excise applies only to restaurant meals originating within the city or town that has adopted the tax. Under M.G.L. c. 64L, § 2(a), the tax is imposed on "the sale of restaurant meals originating within the city or town by a vendor." For purposes of the local option meals excise, the Sales Tax on Meals guide published by the Department of Revenue provides that "the location of the consumer will determine whether and where the local option meals excise will be imposed." This sourcing rule is relevant when restaurant meal delivery companies purchase meals from restaurants for resale and delivery to consumers: the delivery company must collect the local meals tax based on the consumer's location.

Scope of tax—same as state meals tax

The local meals tax applies to the same base as the state sales tax on meals. Under M.G.L. c. 64L, § 2(a), no local excise is imposed if the sale is exempt under M.G.L. c. 64H, § 6. The term "restaurant meals" has the same meaning as "meals" under the state sales tax: food or beverages (or both) prepared for human consumption and provided by a restaurant, whether for consumption on or off the premises. The local meals tax does not apply to sales of unprepared food products sold by grocery stores, markets, and similar establishments that are not considered restaurants under 830 CMR 64H.6.5.

Collection and remittance

Vendors collect the local meals tax at the same time and in the same manner as the state sales tax on meals. The vendor pays both the state and local portions to the Massachusetts Department of Revenue. Under M.G.L. c. 64L, § 2(b), all sums received by the Commissioner from the local meals tax are distributed at least quarterly by the State Treasurer to each city or town in proportion to the amounts received from restaurant meal sales in that municipality. TIR 09-13 clarifies that on and after October 1, 2009, vendors with multiple locations in Massachusetts that previously filed sales tax on meals returns on a consolidated basis are required to break out their sales by each location to ensure proper distribution of local meals tax proceeds.

Which municipalities have adopted the local meals tax

The Massachusetts Division of Local Services maintains an official searchable database of all municipalities that have adopted local option excise taxes, including the meals tax, with effective dates and current status. The database—Local Tax Option Effective Dates & Rates—is updated regularly and lists each adopting municipality. Major cities that have adopted the 0.75% local meals tax include Boston, Cambridge, Springfield, Worcester, Braintree, and Quincy. The local meals tax has been available for municipal adoption since October 1, 2009.

Vendors selling meals in Massachusetts must determine whether the location where the meal is consumed (or delivered to) has adopted the local meals tax by consulting the DLS database or verifying with the municipality.

Source: M.G.L. c. 64L, § 2

Source: TIR 09-13: Local Option Sales Tax on Meals

Source: Sales Tax on Meals guide, Mass.gov

Source: Local Tax Option Effective Dates & Rates, DLS