Moderated by Srishti, Digital Transformation Consultant at Hyperbots
Srishti: Hello, everyone! My name is Srishti Rajvir, and I’m a digital transformation consultant at Hyperbots today. I’m delighted to have Dave Sackett as my guest. Thank you so much for taking the time, Dave.
Dave Sackett: Yeah. Thanks, Srishti.
Srishti: So a little bit about Dave for our viewers. He is the VP of Finance at Persimmon Technologies, and today we will be discussing the Massachusetts sales tax system. So whenever you’re ready, Dave, we can get started.
Dave Sackett: Okay, sounds good. I’m ready.
Srishti: Alright, to start with, could you explain how Massachusetts’ sales tax system stands out, especially in terms of the rates and the products that are taxable?
Dave Sackett: Sure, Massachusetts has a statewide sales tax rate of 6.25% on most goods and services. This is relatively straightforward, but there are some exceptions. For example, there’s tangible personal property that’s taxable, while food and clothing are generally exempt. Prepared food, like meals in restaurants and hot food sold in grocery stores, is taxable. It’s important for businesses to understand these distinctions to avoid errors when they file their taxes.
Srishti: That’s helpful. Speaking of exemptions, could you provide some specific examples of goods or services that are exempt from sales tax in Massachusetts?
Dave Sackett: Yeah, sure. Certain goods and services are exempt from sales tax, including clothing, most food items, and prescription drugs. For example, if you buy a pair of jeans or a sweater, it won’t be taxed. However, if you dine at a restaurant or buy food outside, that is taxed at the 6.25% rate. Another example is prescription medications. These are exempt, but over-the-counter drugs, vitamins, and cold medicines—you’ll be paying tax on those.
Srishti: That sounds like businesses really need to stay on top of the details to remain compliant. So what challenges do businesses face in handling sales tax with these exemptions and different rates, especially those with multiple locations?
Dave Sackett: Yeah, there is complexity in applying the correct tax rates, especially when dealing with exemptions. One of the biggest challenges is knowing whether something is taxable or not. Businesses that operate across municipalities face additional complications, as some localities impose their own taxes on top of the state rate. Tracking which items are taxable or exempt requires a system. For example, differentiating between grocery store food and prepared meals—a grocery store might sell both a cold salad, which is exempt, and a hot meal, which is taxable. Distinguishing between these two for every transaction requires a tool.
Srishti: I see. How frequently do Massachusetts sales tax rates or exemptions change, and what strategies do businesses use to keep up with these updates?
Dave Sackett: Massachusetts generally has a stable tax rate, but exemptions can change. It’s politically driven in some cases, and there are occasional updates to the regulations. For example, changes can occur in the types of food services that are exempt from sales tax. Companies need to monitor updates from the Massachusetts Department of Revenue to ensure compliance with any changes in the laws. Having an automated system that can track these changes and apply them across transactions is a super helpful tool. For instance, if a state changes its policy on sales tax exemption for certain food items, businesses would need to update their point-of-sale system immediately to reflect that change and ensure they’re collecting the correct tax.
Srishti: Understood. And in your experience, how can AI and automation help businesses maintain compliance with Massachusetts’ sales tax rules?
Dave Sackett: AI and automation can play a huge role in improving efficiency and accuracy in tracking sales tax. AI can automatically determine the correct tax rate for transactions based on the customer’s location, the product type, and whether it’s taxable or exempt.
Srishti: Additionally…
Dave Sackett: There are AI tools to keep track of regulatory changes, ensuring businesses update their systems whenever tax rates or exemption rules change. If Massachusetts were to modify the taxability of certain digital products, AI could update the system instantly to reflect the new rule, ensuring businesses don’t miss it.
Srishti: Understood. Can you share a specific example of how AI has helped a business navigate Massachusetts’ sales tax rules?
Dave Sackett: Yes. A company that sells both tangible goods and prepared food had issues ensuring the correct sales tax was applied at checkout, especially when operating in multiple regions. With AI automation, the system is now automatically classifying food items as either taxable or exempt based on the preparation method. For example, a customer buying a cold sandwich from a deli would pay no tax, but a hot sandwich would be taxed. AI in the background ensures the correct tax is applied each time. This streamlined the process, reducing manual effort and errors.
Srishti: That’s an amazing example. Now, when businesses have to handle multiple exemptions or taxability rules, how can they streamline their processes to avoid errors?
Dave Sackett: To avoid errors, businesses need correct classifications and automated tracking of tax. AI can help by instantly classifying products at the point of sale and ensuring the correct tax rate is applied to each transaction. Businesses should also invest in systems that integrate directly with the state tax authority for updates. For example, if Massachusetts changes the definition of prepared food or creates new exemptions, the system should automatically update without manual intervention by the finance team.
Srishti: Understood, and this is really helpful. That brings me to the last question: what advice would you offer to businesses finding it difficult to keep up with sales tax rules in Massachusetts?
Dave Sackett: My advice would be to implement a reliable sales tax automation solution that uses AI. These tools can handle complex calculations, track changes in regulations, and apply the right tax rate in every situation. Staying informed is critical, so combining automation with a proactive approach to monitoring state regulations will reduce the risk of non-compliance. Also, maintain a strong relationship with your tax advisor to ensure your business stays on top of Massachusetts-specific rules. Additionally, businesses must consider not just sales tax but also Massachusetts use tax on items they buy and use in the business.
Srishti: Understood. Thank you so much for sharing your expertise today. It has been really insightful. I’m sure our audience will find these tips very helpful. That brings us to the end of our discussion. Thank you so much, Dave, for being a part of this.
Dave Sackett: Yeah. Thank you. Happy to help.
Srishti: Of course. Thank you so much, and to our viewers, we’ll stay connected and see you next time. Bye-bye. Have a good one!
