Massachusetts LLC Taxes

A thriving job market and growing economy continue to attract many new residents and businesses to the state of Massachusetts. But, navigating the state’s unique business taxes and regulations can make it seem like starting a new venture is more hassle than it’s worth.

Regardless of the size of your business, if you operate a limited liability company (LLC) in Massachusetts, you’ll need to ensure you stay up to date on your finances and pay federal, state, and local taxes. Our guide will help you understand the taxes you must pay for your Massachusetts LLC.

Recommended: Schedule a free consultation with an accountant to stay on top of your taxes. 

Massachusetts LLC Taxes Owed

Pass-through taxation is a key benefit of operating an LLC, which means the business’s profits pass through to its members’ individual tax returns. As a result, your LLC itself doesn’t pay taxes to the federal government or the state of Massachusetts. Instead, LLC owners must pay taxes on their portion of the income they make from the LLC. 

In Massachusetts, LLC owners can expect to pay the following taxes:

Federal Taxes

Regardless of where your business is located, if you have an LLC within the United States, you will have to pay federal income taxes and federal self-employment taxes. These taxes are reported on your Form 1040.

Federal Self-Employment Taxes

It doesn’t matter if your LLC is a single-member LLC or a multi-member LLC; all LLC members must pay self-employment taxes on their share of the LLC’s profits. The self-employment tax rate is 15.3%. 

Federal Income Taxes

Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets, as well as the percent owed, will change each year. 

Massachusetts State Taxes

Each state has its own laws that dictate how it taxes individuals and businesses. Below you’ll find important state-level taxes likely to impact LLCs in Massachusetts.

Massachusetts Income Taxes

The income tax rate in Massachusetts is 5%. While this isn’t a terribly high rate when compared to other states, local tax burdens can increase it to more than 10%.

Massachusetts Sales and Use Tax

The state sales tax rate for Massachusetts is 6.25%. Fortunately, Massachusetts doesn’t have local sales taxes like many other states do. That means the sales tax rate will remain the same no matter where you buy or sell within Massachusetts.

Register for a Sales Tax License in Massachusetts

If your business sells taxable goods or services, you must register with the Massachusetts Department of Revenue.

Additional State Taxes

The Massachusetts Department of Revenue collects various state-specific taxes that businesses may have to pay, depending on their location, industry, and number of employees. Some examples of these additional taxes include:

  • Cigarette, Tobacco, and Vaping Excise Tax
  • Motor Fuel Excise Tax
  • Property Tax
  • Room Occupancy Excise Tax
  • Telecommunications Tax

If you have questions regarding these or other taxes your LLC must pay, visit the Massachusetts Department of Revenue website to learn more or contact it directly.

Massachusetts Local Taxes

The local laws and ordinances in Boston may differ from those in Cambridge. Regardless of where you live in Massachusetts, check with your local jurisdiction to ensure your business obtains the required local permits and follows any local regulations that may impact its operations.

Massachusetts LLC Compliance

You must obey Massachusetts state and local laws in order to maintain your business in good standing. While LLCs technically don’t file taxes with the state, they must still file an annual report each year.

Massachusetts LLC Annual Report

All Massachusetts LLCs need to file an annual report with the Massachusetts Secretary of the Commonwealth. The filing fee is $500 or $520 if you file online.

You must file your annual report each year before the anniversary of your LLC’s formation date. You’ll pay for the first annual report on the day the state approves the formation of your LLC. Going forward, it’ll come due the day before. If the state approves the formation of your LLC on Jan. 26, for example, your next annual report will be due on Jan. 25.

Failure to file on time will mark your LLC as delinquent. If it retains this status for too long, the state will dissolve your LLC. 

For more information, check out our Massachusetts LLC Annual Report guide.

LLC taxes are complex. While our guide can provide you with important information, we recommend you schedule a free consultation with an accountant to ensure you handle your business taxes correctly.