Although incorporating your business in Delaware, specifically as a Delaware corporation, allows you a great deal of freedom, you may still be subject to state regulations, depending on where you do business.
If you plan to conduct business in the state of Massachusetts, you must first apply for a Massachusetts business license. We'll simplify the procedure as we go. In the meantime, how can you know if you're operating legally in the state of Massachusetts?
When To Register As Doing Business In Massachusetts
The State of Massachusetts refers to Delaware C companies and all other corporations incorporated outside of Massachusetts as "foreign corporations.
It is a violation of Massachusetts law for a foreign corporation to conduct business in the state without registering.
- Has property in the state that they own or lease
- Perform any kind of work on a structure such as a railway or road.
- Involve yourself in any other activity that requires you to put in some effort.
When To Register To Collect Taxes In Massachusetts
A corporation must pay sales tax in accordance with the laws of the state where it operates. These restrictions are known as sales tax nexus.
To put it another way, you can think of the nexus as a particular version of that state's border; if you carry out certain commercial operations within that border, you're subject to the state's sales tax requirements.
As a rule, these transactions take place in the form of purchasing and selling.
Sellers in Massachusetts are only subject to the state's sales tax nexus requirements if they offer tangible products or services to residents of the state.
Sales tax nexus previously did not apply to non-physical commodities such as subscriptions to streaming services or SaaS memberships. That all changed in 2018, thanks to an important court decision. You may be subject to sales tax nexus in a state if you purchase or sell non-physical items or services there.
Massachusetts Sales Tax Nexus (Physical Goods And Property)
If you perform any of the following activities, you may need to register with the Massachusetts Department of Revenue in order to collect sales and use tax:
- In general, Massachusetts sells, rents, or leases
- Has a Massachusetts business location
- Purchases tangible personal property or telecommunications services in Massachusetts for resale.
More information about physical presence for sales tax purposes can be found on the State's website.
Massachusetts Sales Tax Nexus (Non-Physical Goods And Property)
The new state sales tax laws applying to non-physical (ie. internet) sales allow you to qualify for sales tax nexus even without physical presence or goods. In Massachusetts, you need to cross a certain threshold to qualify.
You will need to collect sales tax if you:
- Make remote sales to Massachusetts customers than exceed $100,000 in a calendar year; or
- Operate a marketplace that facilitates the sale of tangible personal property by marketplace sellers, and whose direct and facilitated Massachusetts sales exceed $100,000 in a calendar year
If you would like to take a deep dive, you can check out the State's website.
As usual, this isn’t legal advice—just a guide. If you are unsure whether you have Massachusetts sales tax nexus, consult with your legal counsel and/or an accountant who is knowledgeable about Massachusetts legal code and tax regulations.
How To Register To Do Business In Massachusetts
Choose a name under which to conduct business. This does not have to be the name you registered with Delaware when you formed your company, but it can be.
- Complete an application. You must file a Application for Registration with the Massachusetts Secretary of State, as well as a Delaware Certificate of Good Standing.
- Make the payment. You must now pay a $400 filing fee to the Massachusetts Secretary of State.
- Submit your Registration Application.
- Wait. Processing time ranges between two and four weeks.
Once you've been approved to operate as a qualified foreign business in Massachusetts, you must comply with certain requirements.
Compliance As A Qualified Foreign Business In Massachusetts
Maintaining a registered agent and filing your yearly report are two criteria to keep in compliance and continue legally doing business in Massachusetts. You'll additionally have to pay a business excise tax on top of that.
Registered Agent In Massachusetts
In Massachusetts, your registered agent is your point of contact with local authorities. If your company does not have a physical location in Massachusetts, finding a registered agent to receive state notices on your behalf is a necessity.
A registered office in Massachusetts is necessary for foreign corporations. The office must be an actual address of your registered agent or a recognized registered agent service, not a P.O. box.
Any vital information, such as business mail, will be forwarded to you by your registered agent. A number of companies hire registered agents on a contract basis. They usually cost between $50 and $100 each year.
Annual Reporting In Massachusetts
Every year, you must update the State with any changes to the company's address or the membership of the Board of Directors and officials. You'll provide details such as:
- Your company's official name
- Your registered agent's name and address
- Board members, managers, and officers' names and addresses
- Certified copies of any revisions to the corporation's articles of incorporation, as well as any mergers to which it may be a party.
If you complete your annual report electronically, you will be charged a cost of $100.
Paying Massachusetts Corporate Excise Tax
Lastly, Massachusetts has a corporate excise tax. The tax is calculated based on two factors:
- A net income measure and
- Either a property measure or a net worth measure
For more information on filing and paying your annual taxes, please see the following guidance from the Massachusetts Department of Revenue.
How To Register To Collect Sales Taxes In Massachusetts
If you have a sales tax nexus with Massachusetts, you must obtain a seller's permit. You must register your company with MassTaxConnect.
After that, the state will issue you a Sales and Use Tax Registration Certificate, allowing you to collect and submit sales and use tax.
Hiring And Paying Employees In Massachusetts
In Massachusetts, if you recruit a new employee or independent contractor, you must report them to the state within 14 days after their first day of work. You can use MassTaxConnect to record new hires in Massachusetts.
Paycheck withholdings should be handled by your payroll provider, but you must register as an employer with the State and create an online employer account.
Massachusetts provides the following information for a detailed guidance to your responsibilities.
The Easiest Way To Register Your Business In Massachusetts
You must keep track of a number of moving components in order to register your business in Massachusetts. Failure to file the correct documents, give the correct information, or stay current on compliance rules can result in major issues.
It's simple using Capbase. When you use Capbase to organize your Delaware corporation, we'll automatically generate the information you'll need to register to do business in Massachusetts and keep you up to date on any required filings.
The compliance calendar in your Capbase account will alert you to forthcoming fees, reporting, and other requirements, so you can maintain your Massachusetts startup in good standing.