Massachusetts has one advantage and one trap for small businesses. The advantage: a flat 5% state rate on ordinary income — no surprise brackets as you grow. The trap: the Millionaire's Tax, an extra 4% surcharge on income above ~$1,083,150 in 2025, nudged up slightly for 2026.
This guide covers the essentials every MA-registered LLC, sole prop, or S-Corp owner should have clear — before April shows up.
The three rates that matter
5%
Ordinary income
Flat, no brackets
9%
Above ~$1.08M
Millionaire's Tax
6.25%
Sales tax
State level — no county add-on
In practice almost every client we work with stays within the 5% bracket. The Millionaire's Tax tends to hit folks who sold a big property, received equity, or had an exceptional year. If that's your situation, let's talk before year-end — there are legal deferral mechanisms worth exploring.
The four deadlines DOR charges penalties on
| Deadline | What | Who it applies to |
|---|---|---|
| April 15 | Annual state return (Form 1) + payment | Every resident |
| Apr 15, Jun 15, Sep 15, Jan 15 | Estimated payments (4 installments) | Self-employed + S-Corp owners |
| April 15 | Extension (Form M-4868) | Filers who need more time |
| 20th of the following month | Sales tax return (ST-9) | Anyone collecting sales tax |
Sales tax: the quiet one that bites the most
Sales tax is the simplest rule and the one most businesses miss. Quick refresher:
- 6.25% flat statewide (no county or city surcharges)
- Exemptions: grocery food (exempt), prescription drugs (exempt), clothing up to $175 per item (exempt), interstate sales (exempt)
- Applies to: sellers of tangible goods and certain services (hotels, telecom, etc.)
Most of our construction and cleaning clients don't collect sales tax because pure service in MA is typically exempt. But the moment you sell materials (e.g., install flooring and supply the material), the material portion becomes taxable.
No sales tax
Pure service
- Residential cleaning
- Labor-only remodeling
- Accounting advisory
- Landscaping labor (no material)
Tax on the material
Service + material
- Flooring (provided + installed)
- Painting (paint included)
- Landscaping with mulch/stone
- Welding with consumables
The #1 mistake we see in MA S-Corps
S-Corp owners who pay themselves a salary below reasonable to dodge payroll tax — the IRS (and DOR) notice. "Reasonable" isn't a magic number, but our working rule of thumb:
Real savings come from structuring correctly, not gaming the rule. A well-structured MA S-Corp with $150k net profit easily saves $8–12k per year on self-employment tax vs. a single-member LLC — but it requires actual payroll, a defensible reasonable salary, and a clean K-1 at year-end.
What Lynx does for MA clients
- Monthly payroll via Zoho Books + integrated Gusto
- Four estimated payments prepared (federal + state)
- Sales tax monthly if your sector collects
- Bank reconciliation and P&L delivered by the 10th of each month
- CPA handoff dossier prepared ahead of the Form 1120-S deadline
This content is informational and reflects rules in force as of 04/2026. Every business has its own quirks — consult a CPA or EA before making decisions based solely on this article.