Massachusetts is named after the Massachusett tribe, which once inhabited the eastern part of the state, and is one of the original 13 colonies. It is the 7th smallest state in the United States. Despite its small size, Massachusetts features numerous topographically distinctive regions. The large coastal plain of the Atlantic Ocean in the eastern section of the state contains Greater Boston, along with most of the state’s population, as well as the distinctive Cape Cod peninsula. To the west lies the hilly, rural region of Central Massachusetts, and beyond that, the Connecticut River Valley. Along the western border of Massachusetts lies the highest elevated part of the state, the Berkshires.
The entire Commonwealth of Massachusetts has played a powerful commercial and cultural role in the history of the United States. Before the American Civil War, Massachusetts was a center for the abolitionist, temperance, and transcendentalist movements. Massachusetts is home to numerous museums and historical sites. Historically themes museums and sites such as the Springfield armory National Historic Site in Springfield, Boston’s Freedom Trail and nearby Minute Man National Historical Park, both which preserve a number of sites important during the American Revolution, the Lowell National Historical Park, which focuses on some of the earliest mills and canals of the industrial revolution in the U.S., the Black Heritage Trail in Boston, which includes important African-American and abolitionist sites in Boston, and the New Bedford Whaling National Historical Park, all showcase various periods of Massachusetts’ history.
Business Climate
Originally dependent on agriculture, fishing and trade, Massachusetts was transformed into a manufacturing center during the Industrial Revolution. During the 20th century, the Massachusetts economy shifted from manufacturing to services. Modern Massachusetts is a global leader in biotechnology, engineering, higher education, finance, and maritime trade.
Presently, sectors vital to the Massachusetts economy include higher education, biotechnology, information technology, finance, health care, tourism, manufacturing, and defense. The Route 128 corridor and Greater Boston continue to be a major center for venture capital investment, and high technology remains an important sector. In recent years, tourism has played an important role in the state’s economy, with Boston and Cape Cod being the leading destinations. Other popular destinations include Salem, Plymouth, and the Berkshires.
Agriculture is also important in the state. Particular agricultural products of note include green house products making up more than one third of the state’s agricultural output, cranberries, sweet corn and apples are also large sectors of production. The state is the second-largest cranberry producing state in the union after Wisconsin.
Tax Climate
Massachusetts has a flat individual income tax rate of 5.1%- all earnings are taxed at the same rate, regardless of total income level. This flat rate applies to both single and joint filers. The top corporate income tax rate is also a flat 8%.
Massachusetts uses the sales factor for the apportionment of corporate income. Massachusetts uses the market-based method for the sourcing of services and intangible property.
Sales Tax Structure
The state sales tax has a base rate of 6.25%, on retail sales of tangible personal property, except for groceries, clothing (up to $175) and periodicals.
Massachusetts has enacted economic nexus legislation. Remote sellers are required to register, collect and remit MA sales tax if the company’s gross receipts is more than $100,000 in the previous or current calendar year. The state does not have a transaction threshold. This legislation was amended on October 1, 2019. Previously MA had a cookie nexus law which is now being replaced.
Massachusetts is fairly aggressive in its approach to the taxation of technology products for sales tax purposes. Prewritten computer software that is electronically downloaded is taxable, while custom computer software that is electronically downloaded is exempt from taxation. Lastly, Software as a Service (SaaS) is taxable. All digital content is exempt from taxation. How products are produced, sold and delivered is critical to determining their tax status.
Some states have annual sales tax holidays, during which certain items the state wants to promote the purchase of (like school supplies, emergency preparedness supplies, or energy efficient appliances) can be purchased sales tax free. However, Massachusetts does not have any scheduled sales tax holidays.
Random Facts
- Boston built the first subway in the United States in 1897.
- The Fig Newton was named after Newton, Massachusetts.
- The American Industrial Revolution began in Lowell. Lowell was America’s first planned industrial city.
- The first Thanksgiving Day was celebrated in Plymouth in 1621.
- Acushnet is the hometown of the Titleist golf ball company.
- Harvard was the first college established in North America and was founded in 1636. Because of Harvard’s size there is no universal mailing address that will work for every office at the University.
- Glaciers formed the islands of Nantucket and Martha’s Vineyard during the ice age.
- The Basketball Hall of Fame is located in Springfield.
- Norfolk County is the birthplace of four U.S. presidents: John Adams, John Quincy Adams, John Fitzgerald Kennedy and George Herbert Walker Bush.
Our team at Miles Consulting Group is available to discuss the specifics of your state tax situation, whether in Massachusetts or other states, we can help you navigate the complex tax structures arising from your multistate operations. Call us to help you achieve the best tax efficiencies.
