Massachusetts has a statewide sales tax rate of 6.25% that applies to most tangible personal property and certain telecommunications services. Unlike many other states, Massachusetts does not allow counties or cities to add their own sales taxes. This creates a simpler tax structure that avoids regional disparities in tax rates and creates a level playing field for businesses.

Sales tax provides Massachusetts with a stable revenue stream that finances state services such as education, transportation, and healthcare. Below, we’ll explore how Massachusetts applies sales tax to clothing and how to automate sales tax collection in the state.

What’s in this article?

• Is there sales tax on clothing in Massachusetts?
  
• Is there sales tax on laundry services in Massachusetts?
  
• Sales tax refunds in Massachusetts
  
• How to automate sales tax collection in Massachusetts
  

Is there sales tax on clothing in Massachusetts?

In Massachusetts, most clothing and footwear items designed for everyday use are exempt from sales tax. These include shirts, trousers, dresses, socks, shoes, and similar apparel. This exemption applies to individual clothing items or pairs of shoes up to $175; if the price of an individual item exceeds $175, only the amount over $175 is subject to sales tax. Retailers are responsible for correctly applying the sales tax exemption and must be familiar with the rules.

Examples:

• If you buy a pair of shoes for $250, you won’t pay any tax on the first $175 but you will pay $4.69 in sales tax on the remaining $75.

• When multiple clothing items are purchased in a single transaction, each item is considered separately for the $175 threshold. For instance, if you buy two shirts for $100 each, both are exempt because each item is below the $175 threshold – even though the total purchase is worth $200.

Certain clothing items are exceptions to this rule and are subject to sales tax regardless of their prices. These items include specialized clothing and footwear designed primarily for accessorising, athletics, or protective use, such as:

• Athletic shoes and cleats (not including trainers)

• Athletic uniforms

• Jewellery and accessories

• Handbags and purses

• Work gloves

• Hard hats

• Safety goggles

Is there sales tax on laundry services in Massachusetts?

No. Most services are not taxed in Massachusetts, including laundry services. But products purchased to do laundry, such as laundry detergent and dryer sheets, are subject to the state’s sales tax.

Sales tax refunds in Massachusetts

Sales tax can be refunded in Massachusetts for the following reasons:

• Overpayment of sales tax: If a business or individual overpays sales tax, they can apply for a refund. This might happen due to errors in tax calculation or changes in the tax rate.

• Returns and exchanges: When customers return goods to a retailer and receive a refund, the retailer typically refunds the sales tax they paid on those goods as well. Retailers can adjust their sales tax reporting to reflect these returns.

• Sales tax exemptions: Certain purchases qualify for sales tax exemptions, including purchases made by non-profits or government agencies and purchases of specific items such as prescription medications. If a retailer mistakenly charges sales tax on an exempt purchase, the customer can request a refund.

How to apply for a sales tax refund

A business can file an amended return or an abatement application with the Massachusetts Department of Revenue to reduce the amount of tax due and generate an overpayment on its account. The business can apply this overpayment to the following year’s estimated tax as a credit, or it can request a refund.

The Department of Revenue automatically issues most refunds. The turnaround time for returns filed online is about six weeks, but it could take up to 10 for paper returns. An overpayment refund will begin earning interest if it’s not paid to the taxpayer within 90 days of the due date for filing.

How to automate sales tax collection in Massachusetts

Stripe Tax can automate sales tax collection, calculation, and reporting for businesses, which improves the accuracy and efficiency of these processes. Here’s how to automate sales tax collection in Massachusetts using Stripe.

Set up your Stripe account

• If you haven’t done so already, sign up for a Stripe account.

• Enter all necessary business information, such as your legal name, address, and tax ID number.

• Connect your bank account to Stripe to facilitate transactions and transfers.

Activate Stripe Tax

• Log in to your Stripe account and access the Stripe Dashboard.

• Go to the “Tax” section and click “Get started.” Follow the instructions to activate the service.

Configure tax settings

• Enter your business address correctly to determine tax nexus and applicable rates.

• Specify which of your products or services are taxable in Massachusetts. Stripe has a comprehensive catalogue to assist with this classification.

Set up Massachusetts tax rates

• Stripe Tax automatically calculates the correct tax rates based on the customer’s location, applying the statewide 6.25% sales tax.

• If needed, you can manually adjust or add specific rates, although Massachusetts doesn’t impose additional local sales taxes.

Integrate Stripe with your online store

• For e-commerce platforms such as Shopify, WooCommerce, and BigCommerce, integrate Stripe with your store. Most platforms have built-in settings or plug-ins for easy integration.

• For custom-built sites, use Stripe’s application programming interface (API) to integrate payment processing and tax calculations. Stripe provides detailed documentation to guide you.

Enable tax collection at checkout

• Ensure your checkout process can calculate sales tax based on the customer’s shipping address.

• Clearly show the calculated tax amount to the customer before they complete their purchase.

Monitor and report sales tax

• Use the Stripe Dashboard to track sales, collected taxes, and transactions. Stripe has detailed reporting that you can filter by date, region, and tax type.

• Regularly download sales tax reports from Stripe to file your returns with the Massachusetts Department of Revenue. While Stripe Tax doesn’t file taxes for you, it provides all necessary information for compliance.