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Massachusetts Tax Law

Martha started her own flower delivery business in Boston and is getting ready to file her Massachusetts taxes. She’s kept the receipts to all of her expenses and is trying to determine which ones she could claim for her business.

Her business had her delivering orders across counties. Would she have to pay any special tax rates for the other counties or only the tax rates for the county where her business is headquartered? Is there a deduction for travel expenses for those orders? Massachusetts tax questions come up all the time for all different kinds of people.

Whether you live in Boston, Worcester or Lowell, you’ll need to account for the various state and federal taxes in your budget regardless of whether you own a business or you work for a company. It can be easy to get lost in all of the taxes you’ll owe, so use the information in LawInfo’s Massachusetts tax law articles to become familiar with them and to avoid penalties.

Massachusetts Personal Income Taxes

Income taxes are paid upon a specified percentage levied against an individual or a married couple’s non-exempt, earned income and unearned income. Unearned income includes capital gains, interest and dividends. Taxpayers may claim specific exemptions like dependents or old age (over 65 years old) which reduce their income tax by a specific dollar amount.

Massachusetts has a flat personal income tax rate of 5.1 percent as of January 2017. Certain capital gains (unearned income) are subject to a tax rate of 12 percent.

Massachusetts Sales and Use Taxes

Sales taxes are levied against all transactions for goods and services in Massachusetts. Use taxes are similar to sales taxes but are levied against the sale or rental of tangible goods and specific telecommunications services and their use within the state for which the seller or provider didn’t collect the Massachusetts sales tax. The sales and use tax rate in Massachusetts is 6.25 percent as of January 2017.

Local governments may levy additional sales taxes on products and services. For example, restaurants may charge an additional 0.75 percent for meals and beverages.

Massachusetts Property Taxes

Both real and personal properties are taxed in Massachusetts at the local government level. There is no state property tax rate.

Real property includes land, buildings and other residential or business structures. Personal property includes anything that isn’t permanently affixed to business real property, including machinery, tools, gear, furniture, etc.

Local property tax rates are calculated as a number of dollars per $1,000 of the property’s assessed true market value. For example, Boston’s personal property tax rate is $25.37 per $1,000 for fiscal year 2017.

To determine how much property tax you owe, you’ll need to have your property’s value assessed. Once the true market value in dollars is assessed, you multiply the value with your local property tax rate to determine the base amount you owe, barring any exemptions or deductions. As an example, if your Boston business’s personal property is assessed at a value of $4,890, multiply it by 0.02537 ($25.37 per $1,000) to get $124.06 as your personal property tax amount.

Massachusetts Sin Taxes

“Sin” taxes are levied on consumer products like alcohol and tobacco wherever these things are legalized. They act as additional sales taxes (a.k.a. excise taxes) for products or services that are culturally perceived as vices. Sin taxes are meant to dissuade consumers from purchasing or using the taxed products or services without making them illegal.

Massachusetts levies the following sin taxes on tobacco and alcoholic products:

  • $3.51/pack of 20 cigarettes.
  • $3.30/barrel (31 gallons) of malt beverages (beer).
  • $1.10/gallon of beverages with an alcoholic content of 15 percent or lower.
  • $4.05/gallon of beverages with an alcoholic content of 15 to 50 percent.
  • $4.05/proof gallon of beverages with an alcoholic content of 50 percent or higher.
  • 57 percent of gross receipts on club alcoholic beverages.
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