Corporate excise tax generally applies to all corporations operating in Massachusetts, both foreign and domestic. Due on the 15th day of the third month after the close of the corporation’s taxable year, which can be either the calendar or fiscal year, corporate excise tax payments can be filed online through MassTaxConnect. While electronic filing is only required of businesses that receive gross receipts and sales greater than $100,000 annually and generate all of their net taxable income in the Commonwealth, the Massachusetts Department of Revenue (DOR) encourages all corporations to file online.
What Is a Corporation?
Massachusetts follows federal entity classification rules. Any business entity that pays federal taxes as a corporation is taxable in Massachusetts as a corporation. Unincorporated businesses can elect to pay their taxes either as a corporation or an individual.
Calculating Corporate Excise Tax
The corporate excise tax is calculated by combining two different measures of tax:
- Net income measure: Equal to eight percent of a company’s taxable income; and
- Taxable property or net worth measure: Equal to $2.60 per $1,000 of an organization’s taxable property or net worth.
Classification of your organization as a tangible or intangible property corporation determines which calculation must be used. Intangible corporations — those with less than 10 percent of assets found in tangible property in Massachusetts that is not subject to local taxation — pay the net worth value rather than the property value. Schedule B included in Form 355 (Tangible or Intangible Property Corporation Classification) can help you determine if your organization is an intangible or tangible company.
The minimum excise tax that corporations must pay is $456.
The forms required to file corporate excise tax payments and returns differ depending on your organization’s structure and classification. They are:
- Form 355 (Business/Manufacturing Corporation Excise Return) — This is the most common excise tax form. It is used by standard corporations, both foreign and domestic.
- Form 355U (Excise for Taxpayers Subject to Combined Reporting) — Used by corporations that file combined income reports in the Commonwealth.
- Form 355S (S Corporation Excise Return) — Applies to S corporations, both foreign and domestic.
Paying Massachusetts Corporate Excise Tax
You can pay excise tax to DOR through the mail or online. There are different Massachusetts tax forms mailing addresses for each of the various excise tax documents corporations must file. Corporations may also pay excise tax online through MassTaxConnect.
If the corporate excise tax exceeds $1,000, your corporation is required to pay estimated tax payments on expected income. Estimated tax can be paid in full on or before the 15th day of the third month of the taxable year, or four separate installments can be submitted throughout the year on the following dates, with the following payment amounts:
|Installment Number||Percentage of Estimated Tax Due||Date of Payment in Taxable Year|
|1||40 percent||15th day of third month|
|2||25 percent||15th day of sixth month|
|3||25 percent||15th day of ninth month|
|4||10 percent||15th day of 12th month|
If you have a new corporation with fewer than 10 employees that’s required to pay estimated taxes in its first year, your corporation has different installment percentage requirements: 30 percent, 25 percent, 25 percent, and 20 percent for the respective quarters.
Organizations that are required to file excise taxes electronically must do the same for estimated taxes. All other corporations can file online or use Form 355-ES (Corporate Estimated Tax Payment) to submit such payments, which includes mailing address information. You can calculate taxes and find guidelines for Form 355-ES on DOR’s instructions for corporation estimated tax payment vouchers worksheet.
Don’t put off your corporation’s excise tax payment. Taking care of your company’s excise tax responsibilities early enables your company to kick off 2016 on the right foot.
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