What You Need to Know About Massachusetts and Online Sales Tax

Side view of a piggy bank with the flag design of Massachusetts

How is Massachusetts approaching online sales tax? This post explains!

Over the last couple of months we’ve been taking a closer look at how various states are approaching the issue of online sales tax. Some states, like Washington and Nevada, have enacted “Amazon Laws” that make some retailers responsible for collecting and remitting state sales tax. Other states, such as Arizona, haven’t created new legislation directly about the issue yet and seem to be waiting to see how the debate is settled, either in Congress or through other states’ laws.

Today we look at a state that has been a little bit slower to enact online sales tax legislation, but is starting to make changes internet retailers need to know about: Massachusetts. Keep reading for the details.

A Summary of Massachusetts’ Online Sales Tax Legislation

Massachusetts is an interesting state to look at right now, because they’re just entering the online sales tax debate as a state. As of July 1, out-of-state internet retailers will be responsible for collecting state sales tax due to Department of Revenue Directive 17-1.

How does this comply with the ‘physical presence’ precedent set forth by Quill Corp. v. North Dakota? As NPR explains, “The state is adopting a hyper-literal definition of physical presence — one that relies on any downloaded apps as well as ‘cookies,’ the little bits of data that websites store on users’ computers or phones to track their visits. Massachusetts is now considering them a physical in-state operation for a company.”

However, this does present an interesting question: Who owns the physical property? NPR’s article goes on to explain, “There’s a presumption that the internet vendor retains ownership of that little tiny bit of advertising software tracking code,” however it’s a new area that’s definitely ambiguous.

Legalities of Massachusetts’ Online Sales Tax Legislation

It’s not surprising that major internet retailers don’t like this new legislation out of Massachusetts. In fact, a trade group representing companies like eBay and PayPal has said it plans to sue the state over the directive, claiming, “The directive violates the federal Internet Tax Freedom Act, the commerce clause, and Massachusetts’ own procedure for implementing regulations.” This state will definitely be interesting to follow as the story unfolds!

Do you have questions about how online sales tax or other multi-state tax issues could affect your company? Contact us today! In the meantime, keep following our blog for more updates regarding the online sales tax debate, and follow me on LinkedIn or Google+ for other interesting updates that may affect your business!

Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects. To learn more, contact us today at www.MilesConsultingGroup.com.

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