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Mass. Revokes Tax Directive For Out-Of-State Online Sellers — For Now

(Jesse Costa/WBUR)
(Jesse Costa/WBUR)

Out-of-state online retailers selling in Massachusetts will get a short reprieve — for now.

They will not be required to start collecting the state's 6.25 percent sales tax on July 1, as previously planned.

On Wednesday, the Department of Revenue revoked its April directive, while also outlining plans to reissue a similar rule as a "regulation" soon.

"The Department anticipates proposing regulations which, if adopted after public notice, comment, and hearing ... would require large Internet vendors to collect Massachusetts sales and use tax on a prospective basis under standards similar to those described [in the original directive]," the revocation notice states.

The department's decision follows a lawsuit by NetChoice, a trade association representing e-commerce sites.

"The state’s decision to completely revoke its directive is as much of a win as we could have hoped for," said Steve DelBianco, NetChoice's executive director. "We were expecting the state to agree to an injunction delaying their directive, until the rest of the legal arguments could be heard."

A Department of Revenue official insisted this is a "procedural change" and "the proposed interpretation for online sales collection remains the same."

Depending on how long the regulatory process takes, the new policy could be in place sometime this fall, according to the official.

As a result of a 1992 Supreme Court decision, states can only force internet retailers to collect sales tax if they have a physical presence in the state.

Massachusetts is attempting to adopt a hyper-literal definition of the ruling, saying that cookies stored locally on your computer or a shopping app you download to your phone create a physical in-state operation for a company.

DelBianco disagrees. "[Y]ou can’t argue that accessing a website is equivalent to giving that website a physical presence in your state," he said.

The Baker administration had estimated this new rule could bring in an additional $30 million of revenue for the next fiscal year.


Asma Khalid Reporter
Asma Khalid formerly led WBUR's BostonomiX, a biz/tech team covering the innovation economy.



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