- Nexus for Massachusetts Corporate Excise Purposes
- How the Corporate Excise Tax is Calculated
- Filing Requirements and Methods
- Estimated Taxes
Nexus for Massachusetts Corporate Excise Purposes
Generally, any corporation, domestic or foreign, which is exercising or continuing its charter in Massachusetts or is qualified to do or is actually doing business in the Commonwealth, has nexus in Massachusetts and is subject to the Massachusetts corporate excise.
Under Massachusetts law, "doing business," includes each and every act, power, right, privilege or immunity exercised or enjoyed in the Commonwealth, as an incident or by virtue of the powers and privileges acquired by the nature of such organizations, as well as, the buying, selling or procuring of services or property.
Examples of activities in Massachusetts that subject corporations to the excise, even when the corporation has no other physical presence or activities in Massachusetts, include:
- maintenance of a place of business;
- employment of labor;
- owning or using any part of its capital, plant or other property;
- renting, leasing, buying, selling or procuring services or real or tangible property;
- execution of contracts or exercise or enforcement of contract rights; or
- installation, assembly or servicing of products by the corporation's employees.
Public Law 86-272 excludes from state net income-based taxation those interstate activities constituting mere solicitation of orders for sales of tangible personal property filled by shipment or delivery from a point outside Massachusetts after orders are sent outside the state for approval or rejection (15 USC sec. 381(a)). The following are activities that ordinarily fall within the scope of "solicitation" under Public Law 86-272:
- activities including advertising related to generating retail demand for the products of a manufacturer or distributor by promoting the products to retailers who order the products from a wholesaler or other middleman;
- carrying samples only for display or for distribution without charge or other consideration;
- owning or furnishing automobiles to sales representatives, provided that the vehicles are used exclusively for solicitation purposes;
- passing inquiries and complaints on to the home office;
- incidental and minor advertising;
- checking customers' inventories for reorder only;
- maintaining a sample or display area for an aggregate of 14 calendar days or less during the tax year, provided that no sales or other activities inconsistent with solicitation take place;
- soliciting of sales by an in-state resident representative who maintains no in-state sales office or place of business; and
- training or holding periodic meetings of sales representatives.
For additional information on corporate nexus, please refer to Regulation 830 CMR 63.39.1.
How the Corporate Excise Tax is Calculated
The Massachusetts corporate excise is calculated by adding two different measures of tax: a net income measure, and either a property measure or a net worth measure, depending on whether the corporation is a tangible or an intangible property corporation. The income measure is calculated at a rate of 9.5 percent of the corporation's taxable net income apportioned to the Commonwealth. The property/net worth measure is imposed at a rate of $2.60 per $1,000 of either a corporation's taxable Massachusetts tangible property or its taxable net worth.
A corporation's total excise is the combination of the property/net worth and net income measures, or the minimum corporate excise, whichever is greater. For taxable years ending on or after December 31, 1988, the minimum corporate excise is $456.
Generally, any corporation that is exempt from the federal income tax under section 501 of the Internal Revenue Code (and has received the 501 exemption from the IRS), or is organized under M.G.L. Ch. 157, sec. 10, is exempt from the Massachusetts corporate excise tax. Examples of section 501 corporations are corporations organized for nonprofit religious, charitable, scientific or educational purposes. Examples of corporations organized under section 10 include agricultural, horticultural, and/or other cooperative corporations.
Also, the corporate excise does not apply to banking and financial institutions, insurance companies, safe deposit companies, public utility corporations, corporate trusts and certain other corporations having the right of eminent domain or that exercise a franchise in public ways. But these organizations are subject to other forms of taxation, such as net income, franchise or gross premium tax.
Filing Requirements and Methods
Corporate excise returns, together with payment in full of any tax due, must be filed on or before the 15th day of the 3rd month after the close of the corporation's taxable year, calendar or fiscal.
Businesses incorporated under the laws of Massachusetts, or businesses doing business in Massachusetts but incorporated elsewhere, should file Form 355. A corporation organized in Massachusetts may be eligible to use the simpler Form 355SBC (small business corporation) if it meets all of the following criteria:
- its gross receipts or sales and total income are under $100,000;
- all of its net income is taxable to Massachusetts and is not subject to corporate tax in another state;
- it is not a domestic international sales corporation (DISC), S corporation or a security corporation.
- no claims are being made for credits, special deductions or adjustments against its Massachusetts corporate excise; and
- the corporation does not own 50 percent or more of the voting stock of another corporation and does not have 50 percent or more of its voting stock owned by another corporation.
Corporations incorporated under the laws of Massachusetts, or corporations doing business in Massachusetts but incorporated elsewhere that are participating in a combined report of their net income to Massachusetts must, file Form 355C.
S corporations incorporated under the laws of the Massachusetts or S corporations doing business in Massachusetts but incorporated elsewhere, should file Form 355S.
The following chart summarizes what returns domestic, foreign, domestic combined and foreign combined corporations must file. Note: Electronic filing requirements are in place for this tax type. Refer to Technical Information Release (TIR) 04-30 for detailed information.
Type of Massachusetts corporation
Form to File
Small domestic corporation
|Domestic or foreign corporation||Form 355||Form 1120|
|Domestic or foreign corporation (part of a MA combined group)||Form 355C||Form 1120|
|S corporation||Form 355S||Form 1120S|
Quarterly estimated payments
Form 8109 or EFTPS
Electronic funds transfer (EFT): Corporations required to make electronic payments, and those wishing to do so voluntarily, should be aware that the Department offers two EFT methods: ACH Credit or ACH Debit. For more information about these electronic payment options, see Electronic Payment Options.
Corporations making certain tax payments above certain thresholds must participate in the Electronic Federal Tax Payment System (EFTPS). Visit the Internal Revenue Service website for additional information on these requirements.
All corporations that reasonably estimate their corporate excise to be in excess of $1,000 for the taxable year are required to make estimated tax payments to the Commonwealth. Estimated taxes may be paid in full on or before the 15th day of the third month of the corporation's taxable year or in four installment payments according to the schedule below.
Corporate estimated tax installments are due as follows:
|Installment||% of Estimated Tax Due||Due Date from Start of Taxable Year|
|1st||40%||15th day of 3rd month|
|2nd||25%||15th day of 6th month|
|3rd||25%||15th day of 9th month|
|4th||10%||15th day of 12th month|
Note: New corporations in their first full taxable year with less than 10 employees have different estimated payment percentages - 30%, 25%, 25% and 20% respectively.
Special Optical Character Readable (OCR) payment vouchers are mailed to all corporations that have made estimated payments or should be making estimated payments. Also note, accepts corporate excise estimated payments.
Corporations not mandated to make electronic payments are encouraged to make their payments electronically, otherwise, they are required to make their estimated payments using Form 355-ES . For further information about Massachusetts' requirements, see the EFT section above. Visit the Internal Revenue Service website for information about electronic payment requirements.
Corporations that underpay, or fail to pay, their estimated taxes may incur an additional charge on the amount of the underpayment for the period of the underpayment. Form M-2220 , Underpayment of Massachusetts Estimated Tax by Corporations, is used to compute the additional charge. To help to avoid a possible underpayment penalty on its taxes, a corporation should, when filing its first voucher on Form 355-ES, estimate its tax to be at least equal to the prior year's tax. If the prior year's tax was the minimum tax, the corporation should make a payment, or payments, equal to the minimum tax to safeguard against a possible underpayment penalty.
Note: Any corporation having $1 million or more of federal taxable income in any of its three preceding taxable years (as defined in Section 6655(g) of the IRC) may only use its prior year tax liability to calculate its first quarterly estimated tax payment. Any reduction in the first installment payment that results from using this method must be added to its second installment payment.
For more information on corporate estimated taxes, refer to 830 CMR 63B.2.2, and M.G.L. Chapter 63B.