Massachusetts And Online State Tax: What You Need To Know

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,

Monika founded Miles Consulting Group which focuses on multi-state tax consulting, helping clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for 12 years combined in Big 4 Public Accounting and private industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.

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