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News & Knowledge

USA: Proposed Massachusetts tax regulations for online vendors

3rd October 2017
Jon Barooshian, Bowditch & Dewey

In response to public comments issued on September 8, 2017 that won’t be published in the Massachusetts Register until September 22, 2017, the Massachusetts Department of Revenue (“DOR”) will require online vendors to collect Massachusetts sales tax if they have property interests in or use in-state apps and “cookies,” effective October 1, 2017. MSI's Massachusetts law member Bowditch & Dewey provides a summary of the proposed regulations.

In response to public comments issued on September 8, 2017 that won’t be published in the Massachusetts Register until September 22, 2017, the Massachusetts Department of Revenue (“DOR”) will require online vendors to collect Massachusetts sales tax if they have property interests in or use in-state apps and “cookies,” effective October 1, 2017.

Proposed regulation 830 CMR 64H.1.7 provides that a vendor engaged “in making taxable sales in the commonwealth or that sells taxable tangible personal property or services for use in the Commonwealth is subject to a sales or use tax collection duty when it is ‘engaged in business in the Commonwealth’” under state law and meets U.S. constitutional requirements. Beginning on October 1, vendors must collect sales tax if they make 100 or more individual transactions and exceed $500,000 worth of in-state sales in a year.

Similar to Directive 17-1, which the Department of Revenue issued in April but withdrew in June, the proposed regulation assumes that online vendors have a physical presence in Massachusetts with software and “cookies” that consumers download onto phones, tablets, and computers to buy merchandise online.

“Cookies” are data files stored on your computer by a web browser and contain information about you such as recent products you might have researched online, your interests, and sometimes your name.  Online vendors use this information gathered from browser data to tailor your internet experience. The DOR claims that like software, internet cookies constitute enough of a presence in the state to satisfy any constitutional prohibition.  The U.S. Supreme Court’s 1992 decision in Quill Corp. v. North Dakota prohibits states from imposing sales and use tax collection obligations on vendors without an in-state physical presence.

View the full article Proposed Massachusetts Tax Regulations for Online Vendors Effective October 1, 2017 on Bowditch & Dewey’s tax blog

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