How to Register for a Sales Tax Permit in Massachusetts

Running your own business is often considered an arduous task and something that only the most skillful entrepreneurs can manage. However, more and more people are choosing to ditch the regular nine-to-five jobs and living from a paycheck to a paycheck and are instead going on their own. See, the majority of the people that do decide to start their own business have either aspirations to build a large company and have trained their whole life for this, or else simply want more freedom, the ability to work when they want, how long they want and with whomever they want. In the end, this is what running your own business can give you.

But it has to be said that things are not all fun and games. There is a lot of hard work and dedication involved in running your own business. Jumping into something just because you sort of think you can do it could put you in a lot of trouble. You have to make sure there are no doubts and that you are prepared to take this step.

For example, take the years you have spent at various positions within the company you have worked in, or the positions you have worked in for a number of companies in your career. What you have learned in these positions, all that experience is something you can use going forward. All of this can leverage your entrepreneurial career.

In essence, you already have an insight into the functioning of a business. You know how the market behaves, you know the projects that were successful and those that didn’t go so well. That is the experience you can use. And every job you do you should take as a lesson, as a course for the task ahead. And so you can use this for your own advantage, and instead of working your socks off for someone else, you will put in the hard work for your company.

And if you are passionate about something, that could be your best choice for a business venture. Doing something at your own pace, building it from scratch and watching it grow, will not only bring financial freedom and a lot more spare time but also a feeling of accomplishment and satisfaction because something you started has grown and succeeded.

But before you can enjoy all the benefits, there are steps you have to take to make sure you are well prepared for the tasks ahead and you are giving yourself the best chance of success.

Getting Ready to Register a Business in Massachusetts

For the purpose of this article, we are focusing on the state of Massachusetts. As of 2010, there were over 600,000 small businesses in the state, according to the state government statistics. To make sure you are not one of those that will close soon after a starting up, there are certain steps you need to take.

First, you should ask yourself a number of questions in order to determine your course of action. You are looking for answers to questions such as: what is the industry I like, what is it that I enjoy, do I have the skills needed for the task, if not, what can I do to get ready? If you answer unsatisfactorily to any of the questions, it is time to make sure you fix the issue. So, if you think you are not qualified for the job, make sure you get the right training, education and clear all doubts about your skills. Once you have positive answers to all these questions, it is time to move to the next phase.

This next phase is where your work starts focusing on the business, and the foundation that will allow you to achieve all the goals you’ve set. This will include a lot of research, planning, and preparing. One of the first things you will need is a business plan. First, you need to look at every aspect of the market and compile the results in this business plan. But a business plan is not just a compilation of the results, you also have to use these results to learn about the market conditions, whether your business would be sustainable in such an environment, and whether the costs of starting your own business exceed your available budget.

The business plan will also enable you to figure out whether your prefered market is saturated or undersupplied. Entering a competitive, saturated market is a mistake eager entrepreneurs tend to make, especially if they are entering it simply because they love the product or the industry. No matter how much you love the product, not being able to stay afloat or fend off competition will almost certainly end up badly for you. This is why it is often thought that finding undersupplied markets is a better option.

With proper preparation and sourcing, you are able to cover the market’s demand, build a name for yourself and gather valuable experience along the way. It would also allow you to earn some cash and save up in order to one day expand your business if that is what your target is. It will also enable you to branch into a new market, like the one you actually enjoy and would love to work in, gradually. In a niche market you can build your customer base, and with good services, a large portion of your returning customers would probably follow you in your new venture and buy your products no matter what market you are in.

A business plan also includes various scenarios on current market conditions, better or worse conditions. Putting your business in such scenarios will allow you to project the costs of running the business, revenue, profit, and a lot more. However, while you could develop a business plan on your own, it is advised that you seek assistance from an attorney, a business advisor in developing a quality business plan. This is very important because, in case you plan on raising additional funds to support your business, a business plan is an indispensable document. No bank, investor or any other financial institution will even consider funding your project unless you present them with a strong business plan.

These are all the preparatory steps you should take when starting your own business. And while this article will point you in the right direction, it is not an official document. So we strongly advise you to consult an attorney or a business advisor to help you in the process, because, setting a strong foundation for your business is the most important factor for future success.

Registering a New Business in Massachusetts

Registering your business with the relevant authorities within the state of Massachusetts is essential and the first step in that process will dictate many of the steps that follow, such as tax obligations. The first step is to select the appropriate business structure or entity type. Among the common types, you will find the sole proprietorship, which is essentially the easiest and the cheapest to set up as it is the most simple entity type. There is only one business owner, and the downside is the fact that there is no legal distinction between the business owner and the business itself, making the business owner liable for all the debts of the business.

There are also forms of partnerships to choose from. A general partnership is similar to a sole proprietorship in terms of liabilities. It is formed when two or more individuals join to conduct business and each has their own responsibilities and shares the business’ profits according to a partnership agreement or depending on their share in the business. There are, however, other forms of partnership like the Limited Liability Partnership. In this business structure, general partners have management responsibilities while limited partners are protected from liabilities of the business, although they are not involved in the business management.

You can also look into the option of building a corporation. This is a business entity that exists separate from its owners or shareholders. While this is the most complex and most expensive structure to run, it provides the highest level of liability protection to its shareholders. It is also subject to double taxation, as the business profits are taxed separately, while the shareholders have to pay tax on dividend/profit. To avoid the double taxation but keep the liability protection you might look into a Limited Liability Company, which is a hybrid between partnerships and corporations.

Whichever option you choose, you have to make sure you know your obligations. The registration process is completed through the Office of the Secretary of the Commonwealth of Massachusetts, and you can find the required documents here.

Before we move on to the most complex part of the registration process, the taxes, you have to determine whether you require any specific permits or licenses. For this, it is better to contact your local authorities and ask whether you require any specific federal, state or local permits.

With all that completed, it is time to move on to figuring out your tax requirements, learn what a sales tax is and whether your business should apply for a sales tax permit.

Massachusetts Sales Tax Permit

When talking about sales tax permit requirements, especially if you plan on engaging in some sort of retail business, there are certain boxes you need to tick before applying. You have to determine whether your business requires a sales tax permit. To start, you have to determine whether you have a ‘significant presence’ in the state or what is known as a sales tax nexus. This means having an office in the state, an employee, merchandise stored in a warehouse, owning a real or personal property or the delivery of merchandise in the Commonwealth of Massachusetts, among others.

Once you have determined that you do have a sales tax nexus, your next step is to determine whether the products you intend to sell are taxable. In general, if you are dealing with tangible property, this is taxable. However, there are exceptions to this. Services, on the other hand, are not taxable for the most part. However, there are exceptions here also, especially if the service you provide includes manufacturing a product.

With all that checked, you have to register for a sales tax permit. Before that, you should know that the sales tax in Massachusetts is 6.25 percent of the sales price or rental charge of tangible personal property. This means that anyone leasing, selling or renting tangible property is required to obtain a sales tax permit. The process, however, is streamlined and can be completed online through MassTaxConnect, the Department of Revenue’s web-based application for filing and paying taxes.

When registering, you will have to provide your social security number (SSN) if you are a sole proprietor. But you also have the option of using your employer identification number (EIN), which is advised in order to avoid potential identity theft issues. To apply for a Federal employer identification number, contact the Internal Revenue Service (IRS) or apply online. Additionally, you will have to provide your legal name, business mailing address and the date you started doing business. If you are running a corporation, you will have to provide contact information for all business officers, including titles and social security numbers.

When registering online through the MassTaxConnect you will immediately receive an email confirming your registration request has been received. Once approved, you will receive an authentication code allowing you to log in. You will be issued a temporary permit upon registration, while a final permit will be issued within seven to 10 business days. Once you complete the registration and receive your permit, you are not required to renew it.

Sales Tax Exemptions in Massachusetts

According to the Massachusetts Department of Revenue, some categories of sales or types of transactions are generally exempted from the sales tax such as food (this does not include meals sold in restaurants) or clothing sales below $175. Newspapers and magazines are also tax exempt.

If you are among those engaged in purchasing cheap wholesale merchandise to resell online or in another form of retail, you can also make tax-exempt purchases. According to the Department of Revenue, sales, where the buyer intends to resell the item purchased, can be tax exempt if the buyer provides the seller with a Sales Tax Resale Certificate (Form ST-4). The seller has to retain the certificate as part of his/her permanent tax records.

Similar to being able to purchase tax exempt with a Sales Tax Resale Certificate, you may find yourself in the vendor’s position when you attempt to resell the merchandise. In case you are presented with the certificate, make sure it is filled out properly and signed by the buyer. You may also use the MassTaxConnect to verify the validity of the buyer’s sales tax registration and resale certificate.

It has to be stressed once again that this article is not an official document and only serves as a guide to registering your business and applying for a sales tax permit in the Commonwealth of Massachusetts. If you have any doubts, contact your local authorities or consult with an authority or a business advisor.

Contact Details

Secretary of the Commonwealth of Massachusetts

Corporations Division
McCormack Building
One Ashburton Place, 17th floor
Boston, MA 02108

Toll-Free: 1-800-392-6090 (within Massachusetts only)
Telephone: 617-727-7030
TTY: 617-878-3889
Fax: 617-742-4528
E-mail: [email protected]

Massachusetts Department of Revenue (DOR)

100 Cambridge Street, 2nd Floor
Boston, MA 02114
Phone: 617-887-6367

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