What taxes apply to a new small business?

Taxes Applicable to a New Small Business in Massachusetts

Starting a small business in Massachusetts involves understanding and managing several state and local tax obligations. Efficient tax planning supports compliance and smooth operations.

Key Taxes for New Businesses

• Corporate Excise Tax: Applies to corporations and LLCs classified as corporations. This includes a tax on income and a tax on tangible property or net worth. Rates vary based on business type and income.
• Sales and Use Tax: Businesses selling tangible goods or certain services must collect a 6.25% sales tax from customers. Use tax applies to purchases made out-of-state for use in Massachusetts without sales tax paid.
• Employer Payroll Taxes: If hiring employees, businesses must withhold Massachusetts income tax from wages and pay state unemployment insurance (SUI) taxes. Register with the Massachusetts Department of Revenue (DOR) and the Department of Unemployment Assistance (DUA).
• Meals Tax: If the business sells prepared food or beverages, a 6.25% meals tax applies. Proper collection and reporting are necessary.
• Excise Taxes on Specific Industries: Certain sectors, such as telecommunications or transportation, may have additional excise taxes.

Operational Tips for Managing Taxes

• Register Early: Register your business with the Massachusetts Department of Revenue to obtain necessary tax accounts before starting operations.
• Automate Tax Collection and Reporting: Use accounting software to track sales tax collection, payroll tax withholdings, and filing deadlines to avoid penalties.
• Maintain Accurate Records: Keep detailed bookkeeping records of all taxable and non-taxable sales, payroll, and tax payments to support compliance and simplify reporting.
• Understand Filing Requirements: Sales tax returns are typically filed monthly or quarterly. Payroll tax reports may have different schedules. Stay informed on due dates to maintain good standing.
• Consult Updated Resources: As of 2026, tax rates and rules may change. Regularly check the Massachusetts DOR website or consult with a tax professional to stay current.