Key Takeaways

  • The Massachusetts corporate excise tax applies to both domestic and foreign corporations doing business in the state.
  • The MA corp tax rate is 8.0% on net income, plus a $2.60 per $1,000 tax on either tangible property or net worth, whichever is greater.
  • The minimum corporate excise tax is $456, regardless of income or size.
  • Multi-state corporations must apportion income and property based on Massachusetts business activity.
  • S corporations, LLCs, and other pass-through entities have unique filing and taxation rules depending on income levels and structure.
  • Tax filing deadlines align with federal due dates: March 15 for S corporations and April 15 for C corporations.
  • Corporations are encouraged—and in some cases required—to e-file if gross receipts exceed $100,000.

The Massachusetts corporate tax return is a document used to report the earnings of a corporation in order to pay the proper taxes.

Introduction to Massachusetts Corporate Excise Tax

Both domestic and foreign corporations in Massachusetts are typically required to pay a corporate excise tax. This tax is based on both the net worth and the income of the business. Traditional corporations are subject to the corporate excise tax, and this tax also applies to S corporations to some extent. There is no similar tax that applies to entities such as partnerships or LLCs. Almost every state will levy some tax against business income earned in the state.

A Technical Information Release (TIR) issued by the Massachusetts Department of Revenue explains legislation that has altered the date when corporate income tax returns must be filed. The filing date is now more in line with the federal due date. Tax returns for S corporations are due on the fifteenth of the third month after the end of the taxable year. C corporations will file their tax return on the fifteenth day of the fourth month after the end of the tax year.

The filing date for partnership tax returns has also been changed. Like S corporations, partnerships now must file their returns on the fifteenth day of the third month after the tax year has ended. If the partnership is filing on a yearly calendar basis, this means their returns would be due March 15th.

Massachusetts encourages all companies in the state to file their tax returns online. However, certain businesses are required to file electronically, including:

  • Companies whose annual sales and gross receipts are more than $100,000
  • Companies whose net taxable income is generated entirely in Massachusetts

Components of the Massachusetts Corporate Excise Tax

Massachusetts imposes a dual-component excise tax on corporations, combining an income-based tax and a non-income-based measure.

  • Income measure: A tax of 8.0% on net income attributable to Massachusetts.
  • Property or net worth measure: An additional $2.60 per $1,000 of the greater of the corporation’s taxable tangible property or taxable net worth in Massachusetts.
  • Minimum tax: Regardless of income or size, every corporation must pay at least $456 in excise tax.

The combination of these measures ensures that all corporations, even those reporting losses, contribute a minimum tax to the Commonwealth.Certain industries, such as financial institutions and utilities, may face specialized tax structures under Massachusetts law

Due Dates for Tax Returns

Businesses that are taxed federally as a corporation can also be taxed as a corporation in Massachusetts. If your business is unincorporated, you can elect to pay taxes either as an individual or a corporation. You can reference the TIR to learn how the changes in due dates will influence extensions for returns that are due after January 1.

Due dates for tax returns for C corporations and partnerships that are due before or on December 31, 2017, are not in line with federal dates. Previously, the Department of Revenue announced that 2016 C corporation returns that met the federal filing deadline were available for late-file penalty relief. Massachusetts also plans to waive these penalties for C corporation returns that have requested a filing extension within a month of the new due date. However, this penalty will only be waived if the extension fee has been paid.

Filing Methods and Payment Options

Corporations are encouraged to use MassTaxConnect, the Department of Revenue’s online filing system. Electronic filing is mandatory if:

  • Gross receipts exceed $100,000; or
  • The corporation’s entire income is taxable in Massachusetts.

Payments may be made electronically, and corporations can also use the system to request extensions, amend returns, and view payment history. Late payments are subject to penalties and interest, though penalty relief may be available if a timely federal extension was filed.

Taxation Based on Business Structure

The legal form of a business will determine how their income will be taxed. For instance, most state-level corporations are required to pay a corporate income tax. However, certain pass-through companies are only taxed on personal income, including:

  • S corporations
  • Limited liability companies
  • Sole proprietorships
  • Partnerships

S Corporations and Pass-Through Entity Rules in Massachusetts

S corporations in Massachusetts generally do not pay the full 8% excise on income. Instead:

  • S corporations with total receipts under $6 million are typically exempt from the income-based excise.
  • S corporations with receipts between $6 million and $9 million are taxed at 1.83% of net income.
  • S corporations with receipts over $9 million pay the full 8.0% on income attributable to Massachusetts.

Pass-through entities like partnerships and LLCs are not subject to the corporate excise tax but must ensure members report all distributive income on their personal state returns.

Corporate Versus Personal Income Tax Rates

Corporate income and personal income tax rates can differ from state to state. For instance, corporate tax rates will typically be between 4 percent and 9 percent. Personal income tax rates can be as low as 0 percent and as high as 9 percent.

In New Hampshire and Tennessee, individuals only pay taxes on dividend and interest income. In adding to a personal income tax or corporate income tax, many states apply a privilege tax or franchise taxes against businesses. Privilege and franchise taxes are taxes that businesses pay for the privilege of being allowed to operate in their state.

Similar to other taxes, the franchise tax that a business will pay depends on its legal form. Franchise taxes can either be based on the net worth of a business or a flat fee.

If you are personally passed income from your business, this income must be reported on your individual state tax return, regardless of your business's legal form.

Comparing the MA Corp Tax Rate to Other States

At 8.0%, the MA corp tax rate is slightly above the national median but lower than some nearby states like New Jersey (11.5%) and Connecticut (7.5%). However, Massachusetts offers several business tax credits and deductions that can significantly lower a corporation’s effective rate.Examples include:

  • Research and Development (R&D) Credit
  • Investment Tax Credit (ITC) for qualifying property
  • Economic Development Incentive Program (EDIP) Credit

These incentives help offset the higher statutory rate and encourage corporate investment within the Commonwealth.

Multi-State Taxation

When a business operates in multiple states, they may be required to pay taxes in each state. For instance, if you formed your business in another state but earn income in Massachusetts, your business may be taxed in this state. Multi-state taxation rules can be very complicated and difficult to understand, which is why it's important to get advice from a tax professional to make sure you are paying your required taxes.

Apportionment and Nexus Rules for Multi-State Corporations

Businesses operating in multiple states must determine what portion of their income is taxable in Massachusetts. The state uses a single sales factor apportionment formula, meaning only the share of sales occurring within Massachusetts determines taxable income.

A corporation is subject to the Massachusetts excise tax if it:

  • Has employees or property in Massachusetts,
  • Owns or leases real or tangible property in the state, or
  • Derives income from Massachusetts customers.

Even corporations without a physical presence may be considered to have “economic nexus” if they exceed sales thresholds under Massachusetts law.

Frequently Asked Questions

1. What is the current MA corp tax rate?

The Massachusetts corporate excise tax rate is 8.0% of net income plus $2.60 per $1,000 of tangible property or net worth, whichever is greater.

2. What is the minimum corporate excise tax in Massachusetts?

Every corporation, regardless of income, must pay a minimum excise tax of $456.

3. Do S corporations pay the Massachusetts corporate excise tax?

Yes, but the amount depends on receipts. S corps earning under $6 million are typically exempt from the income portion, while larger S corps may pay between 1.83% and 8.0%.

4. How do multi-state corporations calculate MA taxable income?

They use a single sales factor apportionment formula, meaning only Massachusetts-based sales are used to determine taxable income.

5. Where can I file and pay my Massachusetts corporate excise tax?

Corporations can file and pay online using MassTaxConnect. Electronic filing is required for corporations with more than $100,000 in gross receipts.

If you need help with your Massachusetts corporate tax return, you can post your legal needs on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.