At a glance
- Corporate tax
- 8% + $2.60/$1,000; $456 minimum
- Tax on wages
- 5% flat + 4% over $1,107,750
- Sales tax
- 6.25%
- Economic nexus
- $100,000 in sales
- Minimum wage
- $15.00/hr
- UI wage base
- $15,000
- New-employer UI rate
- 2.42%
- Paid leave program
- PFML 0.88% (0.46% under 25 employees)
- Annual report
- $125 ($100 online), 2½ months after year end
2026 figures, each explained with its source on the area’s page. On top of the federal baseline.
Setup, in order
Register the corporation
Before doing business in MassachusettsRegister as a foreign corporation with the Secretary of the Commonwealth’s Corporations Division ($400).
Open DOR accounts
Before the first payroll or taxable saleRegister with DOR on MassTaxConnect for withholding, and for sales and use tax if you have nexus.
Register for unemployment insurance
Before the first payrollRegister with the Department of Unemployment Assistance for UI and EMAC contributions.
Set up PFML
With the first Massachusetts employeeRegister with the Department of Family and Medical Leave and start PFML contributions (0.46% under 25 covered individuals, 0.88% at 25+), and give employees the PFML notice.
Report new hires
At hire, on DOR’s scheduleReport each new hire to DOR’s new hire reporting program.
Insurance, paydays and sick time
Before the first hireCarry workers’ compensation insurance, set paydays (weekly or biweekly for hourly staff), and adopt an earned sick time policy.
Check contractor classification
Before engaging contractorsReview every contractor against the ABC test before they start.
The six areas
- AccountingAccounting and state tax in MassachusettsMassachusetts taxes corporations at 8% of apportioned income plus $2.60 per $1,000 of property or net worth, with a $456 minimum. From 2025 apportionment is by sales only.Income measure8.0% of net income
- ReceivablesReceivables and sales tax in MassachusettsMassachusetts taxes most SaaS as prewritten software at 6.25%, with no local rates. Remote sellers register once Massachusetts sales exceed $100,000; there is no transaction count.Sales tax rate6.25%
- PayablesPayables and contractors in MassachusettsMassachusetts wants 1099s filed directly with DOR, applies a strict ABC test to contractors, and taxes the SaaS a startup buys at 6.25% when the vendor doesn’t collect.State 1099 filingRequired
- PayrollPayroll taxes and employer rules in MassachusettsMassachusetts payroll runs through DOR, DUA and DFML: 5% withholding, a $15,000 UI wage base at 2.42% for new employers, PFML at 0.88% (0.46% under 25), and final pay on the last day.SUI wage base$15,000
- ComplianceCompliance and filings in MassachusettsRegistering costs $400; the annual report is $125 ($100 online) and due 2½ months after year end, not on an anniversary. The excise return is due April 15 and unclaimed property November 1.Foreign corporation registration$400
- AdvisoryAdvisory: credits and decisions in MassachusettsMassachusetts offers a research credit with a long carryover, a 4% surtax on income over $1,107,750 that a share sale can trigger, and a strict ABC test for contractors.Research credit carryover15 years
Who you register with
- Massachusetts Department of Revenue (DOR)Corporate excise, sales and use tax, withholding, 1099s (MassTaxConnect)
- Department of Unemployment Assistance (DUA)Unemployment insurance and EMAC contributions
- Department of Family and Medical Leave (DFML)Paid Family and Medical Leave contributions
- Secretary of the Commonwealth, Corporations DivisionForeign corporation registration and annual reports
- Office of the Attorney General, Fair Labor DivisionWage-and-hour, earned sick time, independent contractor law
- Office of the State Treasurer, Unclaimed Property DivisionUnclaimed property holder reports
Hiring across the border
An employee who lives in one state and works in another is the most common way a startup ends up registered in two. These are Massachusetts’s neighbors.
- CTConnecticut1% tax on business SaaS, weekly paydays, and a surtax that reaches every combined group
- NHNew HampshireNo sales tax, no wage tax, but a 7.5% profits tax plus a 0.55% tax on payroll
- NYNew YorkState, MTA district and New York City: three tax layers, plus insured disability and PFL
- RIRhode IslandSaaS taxed at 7%, five-year NOLs, employee-paid TDI, and every 1099 over $100
- VTVermontSaaS taxable since 2024, a 0.44% child care payroll tax, and a receipts-based minimum tax
Common questions
Does Massachusetts tax more than income?
Yes, two measures added together: 8% of income apportioned to Massachusetts, plus $2.60 per $1,000 of either tangible property or net worth, depending on how the corporation is classified. A loss-making startup still pays the non-income measure, and never less than $456.
Is our SaaS taxable in Massachusetts?
Generally, yes. DOR treats charges for prewritten software as taxable whether the software is downloaded or used on the seller’s servers, which covers most SaaS. The exceptions are where the real object of the sale is a non-taxable service and software access is incidental, or where no separate charge is made for the software.
Does the IRS forward our 1099s to Massachusetts?
Yes. Massachusetts is in the IRS Combined Federal/State Filing program, but DOR says annual information reports must still be filed directly with it. Filers with more than 50 payees must use MassTaxConnect; fewer can file on paper.
Do we pay into PFML with only five employees?
Yes. With fewer than 25 covered individuals you are not required to pay the employer share of the medical leave contribution, so the effective rate is 0.46% of eligible wages, which can be withheld from employees. At 25 or more the rate is 0.88%, and the employer pays at least 60% of the medical portion.
When is the Massachusetts annual report due?
Within two and a half months after the end of the fiscal year, so March 15 for a calendar-year company, not on the anniversary of registration as in many states. It costs $125, or $100 filed electronically, and $150 if late.
Will the millionaire’s surtax hit a founder’s share sale?
Possibly. The 4% surtax applies to taxable income above $1,107,750 for 2026, and long-term capital gains count toward it. A founder who sells shares in a year when other income is modest can still cross the threshold on the gain alone, so the timing of a secondary sale matters.
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- Massachusetts DOR — Tax rates
- Massachusetts DOR — 2025 Form 355 instructions
- Massachusetts DOR — 2025 Form 355U (combined report) instructions
- Massachusetts DOR — Tax due dates and extensions
- 830 CMR 63.30.2 — Net operating loss deductions and carry forward
- Massachusetts DOR — Working draft TIR, tax provisions in the FY2026 supplemental appropriation bill
- Massachusetts DOR — 4% surtax on taxable income
- Massachusetts DOR — Sales and use tax guide
- 830 CMR 64H.1.9 — Remote retailers and marketplace facilitators
- Massachusetts DOR — Criteria for taxable pre-written software vs. non-taxable services
- Massachusetts DOR — Form 1099 filing requirements
- Department of Family and Medical Leave — Employer contribution rates
- Massachusetts DFML — Guidance on 1099-NEC and Paid Family and Medical Leave
- Department of Unemployment Assistance — Employer contributions to unemployment
- Department of Unemployment Assistance — Learn about UI contribution rates
- Department of Unemployment Assistance — Employer medical assistance contribution (EMAC)
- Massachusetts law about minimum wage
- Attorney General — Pay and recordkeeping
- Mass.gov — Starting a corporation in Massachusetts
- Secretary of the Commonwealth — Corporations Division filing fees
- Massachusetts Treasury — Report unclaimed property
- Massachusetts DOR — Research credit
- IRS Publication 1220 — Combined Federal/State Filing participating states
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.