The Massachusetts Department of Revenue released the finalized version of 830 CMR 64H.1.7 on September 22, 2017. The finalized regulation contains much the same (but not identical) language as the proposed regulation which in-turn borrowed heavily from the previously rescinded Directive 17.1. Throughout these machinations, the purpose has always remained the same – utilizing existing physical presence doctrine to create a tax collection requirement for remote sales.
Regulation 830 CMR 64H.1.7 creates a "Bright Line" rule that imposes a sales tax requirement on remote sellers/internet vendors that have Massachusetts sales in excess of $500,000 derived from 100 or more transactions. Internet sellers who meet these thresholds are effectively presumed to have physical presence through at least one of the following avenues:
- In-state property – such as software or “cookies” residing on residents computers or other electronic devices
- Contracts and/or other relationships with in-state content distribution networks
- Contracts and/or other relationships with in-state online marketplace facilitators and/or delivery companies (e.g. payment processing and order fulfillment, order management, return processing, preparing sales reports or other analytics and consumer access to customer service).
Essentially, the Commonwealth presumes such activities exist with any substantial online retailer and therefore traditional nexus exists. However, this leaves open the possibility of rebutting that presumption, however unlikely, based on a seller’s own particular facts and circumstances.
The finalized regulation is effective September 22, 2017 However, online vendors which are affected do not need to begin collecting Massachusetts sales tax until October 1, 2017.
About the Author
Erik Wallin is a Senior Tax Counsel on the Tax Research Team at Sovos Compliance. Erik has been with Sovos Compliance since 2011, and his main areas of focus are on U.S. Transaction Tax Law which includes special expertise in the taxation of technology and the taxation mechanisms that apply throughout the Colorado home rule jurisdictions. Erik is a member of the Massachusetts Bar, has a B.A. from York College of Pennsylvania, a J.D. from New England School of Law, and an LL.M. in Taxation from Boston University.More Content by Erik Wallin