MA Sales Tax 101 States

Massachusetts “Cookie” Sales Tax Nexus now in Effect

by Jennifer Dunn

Massachusetts clothing sales tax

While it suffered a brief setback, the Massachusetts “cookie” sales tax is back. Starting October 1, 2017, the state of Massachusetts says that any vendor who meets the following criteria has sales tax nexus and should charge sales tax to Massachusetts buyers:

  1. Sells to Massachusetts and uses apps or places browser cookies on a buyer’s computer
  2. Makes more than 100 sales in a year in the state and over $500,000

In other words, Massachusetts has declared that using an app to make a sale, or placing a cookie in someone’s browser is tantamount to having a significant presence in the state, and is enough to create sales tax nexus and require that seller to collect sales tax from buyers in the state.

What Changed?

Earlier this summer, Massachusetts repealed Directive 17-1, which stated essentially the same thing – that browser cookies create sales tax nexus. So how is this back? According to the Boston Herald, a “Directive” is an interpretation of existing sales tax law. Because the directive was challenged in court, Massachusetts instead released a rule using the same language, but this time as a “regulation,” which should hold more legal weight.

This directive is similar to other states’ “economic nexus” laws in that it’s purpose is to require online sellers who do not currently have what is considered nexus under the Quill Corp. v. North Dakota definition of the term to be required to collect sales tax. These laws (or regulations) are designed to help states keep up with the new ways business is done in the age of eCommerce.

However, just because a state rewrites a directive, or regulation, or even a law doesn’t mean that it won’t be challenged in court just like it’s predecessor Directive 17-1. You can probably expect to see a challenge very soon, if the wheels haven’t already been set in motion.

What does the “cookie” tax mean for online sellers?

As Massachusetts’ regulation currently stands, online sellers who sell through apps on a customer’s computer or who place browser cookies on a customer’s computer and meet the threshold of sales tax transactions are required to collect sales tax on

Fortunately, in a regulation that claims to close loopholes regarding sales tax on internet purchases, there is a loophole for marketplace sellers such as Amazon FBA and eBay sellers. According to the Massachusetts Department of Revenue, vendors who’s “only contacts with Massachusetts are that in-state customers may access a site on the vendor’s out-of-state computer server” are not subject to the tax.

As an online seller, you’ll be subject to Massachusetts under this regulation if you:

  • Provide an app for your Massachusetts customers to download in order to buy from your store
  • Place browser cookies (used to store login info, shopping cart info, etc.) on your customer’s devices in Massachusetts
  • Makes more than 100 sales in a year in the state and over $500,000

Massachusetts’ new regulation is just one of many ways in which states are attempting to require more out-of-state retailers to collect sales tax. Stay tuned here to the TaxJar blog for more updates as the sales tax landscape for online sellers continues to shift.

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