State Sales Tax

BACKGROUND

Massachusetts adopted a general sales tax in 1966, which was relatively later than most states in the U.S. Currently the Massachusetts sales tax is 6.25 percent on retail sales of tangible personal property in Massachusetts. Some consumer items are exempt from this tax follow: food, clothing (for purchases less than $75), prescription drugs and services. The sales tax generally is paid from the buyer to the vendor at the time of purchase; the vendor then remits the tax to the Commonwealth.

The sales tax tends to be a stable tax. While items purchased may decrease during an economic recession, this tax does not decrease as rapidly as income tax does because people generally need to buy food, clothing and shelter no matter their income.

General sales tax revenue in Massachusetts was equal to 1.4 percent of personal income in FY05. Only two states with a general sales tax collected less revenue as a share of personal income than the Commonwealth. 

In addition to the sales tax, Massachusetts has a “use tax” which is also 5 percent of the sales price or rental charge on tangible personal property. This includes mail order items, items purchased over the Internet or certain telecommunications services. This tax is paid and to be used, stored or consumed in the Commonwealth. The “use tax,” unlike the sales tax, generally is paid directly to the Commonwealth by the purchaser.

April 2009. The House Ways and Means FY10 Budget Recommendation did not include an increase of the sales tax.

May 2009. The Senate Ways and Means FY10 Budget Recommendation did not include an increase in the sales tax.

May 2009. The Massachusetts House of Representatives passed their version of the FY10 Budget that included a 25% increase in the Sales Tax, bringing the total up to 6.25% The amendment maintains existing sales tax exemptions, such as on food and clothing under $175. The sales tax increase was approved by a veto-proof majority. The Senate voted in favor of adopting the 25% increase in the sales tax proposed by the House of Representatives. [Tally Sheet: 29-10] [More from MassBudget]

February 2010. All four gubernatorial candidates endorsed cutting the state's 6.25 percent sales tax rate, positioning Gov. Deval Patrick as the only member of the field on record backing last year's 25-percent increase. Patrick, who preferred a gas tax hike and other targeted increases to the sales tax bump, ultimately signed the budget the Legislature sent him. Administration officials said Patrick would support restoring the 5 percent rate once revenues recover elsewhere.

July 2011. State Legislators consider passing a bill to implement a Sales Tax Holiday in mid-August despite severe budget cuts implemented in core services and programs. Governor Patrick vows to sign the bill into law if it comes to his desk. [Full Article: Boston Globe] [House Roll Call] [Senate Roll Call]

ADDITIONAL RESOURCES

For more background information see: Massachusetts Department of Revenue and Massachusetts Budget and Policy Center