Key figures
Massachusetts payables
2026, with sources
1099s and the ABC test
Massachusetts participates in the IRS Combined Federal/State Filing program, but DOR still requires annual information reports to be filed directly with it, through MassTaxConnect once you have more than 50 payees, on paper below that. Form 1099-NEC is due January 31.
The contractor rule is the more consequential one. Massachusetts presumes a worker is an employee unless all three parts of the ABC test are met: freedom from control, work outside the usual course of the business, and an independently established trade. A startup that pays a full-time engineer, a head of growth or a customer success lead as a contractor fails the second part, and the exposure includes unpaid overtime, sick time and treble damages under the wage law, not just payroll taxes.
Use tax on software
Because Massachusetts taxes prewritten software however it is delivered, including software as a service, a startup’s own SaaS subscriptions are taxable at 6.25%. When an out-of-state vendor doesn’t collect Massachusetts tax, the company owes use tax and reports it to DOR.
For a 15-person company spending $180,000 a year on tools, that is $11,250 of tax if none of the vendors collect it. Flagging untaxed software invoices at the AP step is cheaper than reconstructing three years of them in an audit.
Uncashed checks
Vendor checks that go uncashed are reportable to the Treasurer after three years of inactivity, in the November 1 report covering the year to June 30. Writing them back to income during a bank reconciliation creates a liability rather than removing one.
Deadlines
- Jan 31State copies through MassTaxConnect (required above 50 payees)Forms 1099
The federal baseline
This page covers what Massachusetts adds. The federal rules underneath it apply here too.
Common questions
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.
Can we keep a full-time developer on a 1099 in Massachusetts?
Probably not. Under Massachusetts’s ABC test the worker must, among other things, perform services outside the usual course of the company’s business. A developer writing the company’s product is inside it, whatever the contract says.
Payables next door
- CTConnecticut payablesConnecticut wants its own copy of every 1099-NEC for Connecticut work by January 31. Software bought for business use owes 1% use tax when the vendor doesn’t charge it.
- NHNew Hampshire payablesNew Hampshire has no sales or use tax and doesn’t tax wages or contractor income, so there is no state 1099 copy and no use tax on software. Classification still matters for unemployment.
- NYNew York payablesNew York wants a written contract for freelancers and a new-hire report for contractors over $2,500. Untaxed software purchases owe use tax, and stale vendor checks escheat after three years.
- RIRhode Island payablesFrom tax year 2025, Rhode Island requires every 1099 over $100 to be filed with the Division of Taxation, withholding or not. SaaS bought from vendors that don’t collect owes 7% use tax.
- VTVermont payablesVermont takes 1099s with Form WHT-434 by January 31, outside the IRS combined program. Since July 2024 the software a startup buys is taxable, so untaxed SaaS owes use tax.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- The closeWhy startups should close their books every monthA monthly close turns a bank balance into numbers an investor, an auditor or a 409A firm will accept. What it is, and why it gets expensive to skip.
More of the Massachusetts guide
- AccountingAccounting and state tax in MassachusettsCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in MassachusettsSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayrollPayroll taxes and employer rules in MassachusettsWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in MassachusettsRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in MassachusettsCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
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.