The Massachusetts Directive will require Out-of-State Retailers with more than $500,000 in Sales into Massachusetts and at least 100 Transactional Sales delivered into the State within the previous 12 months to Collect and Remit the State’s 6.25% Sales and Use tax on all Sales made into the State.
NetChoice, a National Trade Association representing Online Retailers, and the American Catalog Mailers Association (ACMA), have filed a Suit to Block the New Massachusetts Department of Revenue Directive.
Department of Revenue Directive 17-1, which is set to take effect July 1st, considers any Downloaded Apps or Cookies that an E-Commerce Site Stores on Consumers’ Devices to represent a Physical Presence in Massachusetts, which could force the Merchant to Collect Sales Tax. For example, if a Massachusetts Consumer browses on the website of an Online-Only Retailer based in Florida that places Cookies on the device the Shopper’s use to Track Activity, that Florida Retailer would now be considered to have a Presence in Massachusetts and thus be Subject to State Sales Tax Collection Rules under prevailing Federal Law.
NetChoice and the ACMA argue that the Directive Violates the Federal Internet Tax Freedom Act, the Commerce Clause, and Massachusetts’ own Procedure for Implementing Regulations.
“This is the first time we’ve seen a state have such blatant disregard for Supreme Court precedent and the Internet Tax Freedom Act, which Congress enacted specifically to stop states from imposing sales that discriminate against the internet,” says Steve DelBianco, Executive Director of NetChoice. Massachusetts claims that an Out-of-State Business is setting up Shop in the Computers and Smartphones of Residents who enter the Website Address of that Business, he says. “One wonders why the state didn’t say the same thing about businesses with telephone numbers that were dialed by Massachusetts consumers over the last 75 years.”
The Groups’ argument draws heavily on the Landmark U.S. Supreme Court’s 1992 ruling in Quill Corp. v. North Dakota, that I took part in, that Prohibits States from requiring Merchants to Collect Taxes unless they have a Physical Presence, such as: a Store, Warehouse, or Sales Representative in the State, or “Nexus” in Legal Terms.
As I discussed in previous Posts, the original ruling does not include 21th Century Technologies, and needs to be updated. The issues in this Directive and the use of Affiliate Sales: selling on your website but the link takes you to another Website, like Amazon, to complete the Sales, but you receive a Fee for Creating the Sale.
NYC Wins When Everyone Can Vote! Michael H. Drucker
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