Massachusetts Sets $500K Threshold for Corporate Nexus

Massachusetts has drawn a sharper line around which corporations and business entities fall under the state’s corporate excise tax. With the finalization of Regulation 830 CMR 63.39.1, the Department of Revenue set a clear economic and virtual nexus threshold of $500,000. Corporations generating sales above this amount from Massachusetts sources may now be subject to the state’s excise tax, even without a physical presence. As a result, companies with online operations, licensing arrangements, or partnership interests should carefully review their Massachusetts nexus exposure.

The change reflects a broader shift in state taxation after Wayfair, extending Massachusetts’ reach to companies that operate online or hold intangible assets. It also underscores the state’s broad interpretation of nexus, applying not only to general business corporations but also to financial institutions, insurance companies, and corporate partners in Massachusetts-based partnerships.

The regulation spells out which activities can create a taxable connection, from owning or using property in the state to visits by employees or other representatives. It also identifies exceptions, including property in transit and certain protections under federal law. For many corporations, especially those with remote operations or online sales, the update highlights the importance of reviewing whether Massachusetts activity may now trigger excise tax obligations.

Who’s covered, and what triggers nexus?

Massachusetts’ corporate excise rules reach beyond traditional notions of physical presence. General business corporations, banks, insurance companies, and corporate partners in Massachusetts-based partnerships may all fall under the state’s jurisdiction. Ownership or use of property, whether tangible or intangible, establishes a connection. Employee or independent contractor activity in the state—ranging from sales and delivery to technical support—also counts, as do visits that are regular, systematic, or involve oversight of related in-state operations.

Intangible property plays a central role. Licenses, franchises, or intellectual property generating income tied to Massachusetts create taxable activity, even if the company has no office or warehouse in the state. And the regulation draws a clear line for virtual commerce: corporations with $500,000 or more in sales sourced to Massachusetts now meet the threshold for excise liability. In unitary business arrangements, sales of related parties are included to determine whether the threshold is met.

The rules aim for clarity but signal that Massachusetts will assert jurisdiction broadly. Even limited or remote activity—periodic visits, online sales, or revenue from intangible assets—may trigger tax obligations. For companies operating across state lines or primarily online, the update underscores the need to evaluate connections carefully, as nexus no longer depends solely on traditional footprints in the state.

Exceptions and Special Rules

Massachusetts provides several exceptions to its broad corporate excise reach. Owning property in a licensed public warehouse or having goods merely in transit through the state does not create nexus. Holding shares of a Massachusetts corporation or maintaining financial accounts with in-state banks generally also fall outside the state’s jurisdiction.

Federal protections under Public Law 86-272 limit liability for out-of-state sellers of tangible goods, but only for the income measure of the excise. The law does not shield sales of services or intangible property nor does it apply to the non-income or minimum excise tax. Online activity, such as placing cookies or gathering customer data, may disqualify a company from protection if it is not entirely ancillary to solicitation.

Partnerships present additional considerations. A corporation that is a partner in a Massachusetts partnership is generally treated as having nexus, and tiered partnerships extend this attribution through multiple levels. Passive investors in publicly traded partnerships are excepted unless other in-state connections exist.

Together, these exceptions and rules clarify the boundaries of Massachusetts’ corporate excise jurisdiction while reinforcing the state’s broad reach, particularly for companies with virtual, online, or intangible operations.

Massachusetts is asserting a broad reach in determining which corporations fall under its corporate excise tax. Businesses with substantial sales, property, employees, or intangible activity in the state—even virtual—may now be subject to tax.

Frequently Asked Questions about Nexus in Massachusetts

How We Help

AAFCPAs provides comprehensive State and Local Tax (SALT) solutions designed to help businesses navigate complex multistate tax rules with confidence. Our team advises on corporate income tax, sales and use tax, personal property tax, gross receipts tax, and related compliance obligations. We guide clients through nexus analysis, apportionment, and multistate indirect tax compliance, helping businesses understand where and how taxes apply as they expand into new markets. Beyond compliance, we deliver proactive, strategic guidance for mergers and acquisitions, tax credits, economic development incentives, and remote workforce considerations.

Businesses rely on AAFCPAs not only for technical expertise but for a collaborative approach that emphasizes clear communication, responsiveness, and consistent support. By integrating thoughtful planning with tech-enabled multi-state compliance solutions, we help clients manage risk, optimize tax positions, and focus on growth while ensuring adherence to state and local regulations.

These insights were contributed by Brian O’Hearn, CPA, MSA, Tax Manager.

Questions? Reach out to our authors directly or your AAFCPAs partner.

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