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
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.)
Construction and cleaning businesses generally don't collect sales tax on the service itself: in MA, pure service 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.