Massachusetts Regulation Creates Sales Tax Requirement for Vendors Making Internet Sales
posted Oct 18, 2017 by Harold Shapiro, CPA in the Global Tax Blog
Do you sell to Massachusetts residents? The Massachusetts Department of Revenue adopted Regulation 830 CMR 64H.1.7 which explains when certain internet vendors with a principal place of business located outside the state must register and collect sales tax.
Effective September 22, 2017, an internet vendor is defined as a vendor that derives sales from transactions consummated over the internet, whether such transactions are:
- Completed on a website maintained or operated by the vendor itself, or
- Completed on a website maintained or operated by a related person or a person with which the vendor contracts, including a market place facilitator and/or fulfilled by a related person or a person with whom the vendor contracts.
An internet vendor, in addition to its internet sales, may also derive sales from orders completed other than over the internet.
Sales Tax Requirement
Effective September 22, 2017, Massachusetts requires out-of-state vendors to collect tax on internet sales to Massachusetts residents:
(1) during the preceding 12 months, October 1, 2016 to September 30, 2017, it had in excess of $500,000 in Massachusetts sales from transactions completed over the internet and made sales resulting in a delivery into Massachusetts in 100 or more transactions; and
(2) for each calendar year beginning with 2018, if during the preceding calendar year it had in excess of $500,000 in Massachusetts sales from transactions completed over the internet and made sales resulting in a delivery into Massachusetts in 100 or more transactions.
In addition to the meeting the above requirements, the internet vendor must also have one or more of the following contacts that function to facilitate or enhance such sales and constitute the requisite in-state physical presence:
- Property interests in and/or out of in-state software (e.g. “apps”) and ancillary data (e.g. “cookies”) which are distributed to or stored on the computers or other physical communications’ devices of a vendor’s in-state customers, and may enable the vendors use of such physical devices;
- Contracts and/or other relationships with content distribution networks resulting in the use of in-state servers or other computer hardware and/or the receipt of server or hardware related in-state services; and/or
- Contracts and/or other relationships with online marketplace facilitators and/or delivery companies resulting in in-state services, including, but not limited to, payment processing and order fulfillment, order management, return processing or otherwise assisting with returns and exchanges, the preparation of sales reports or other analytics and consumer access to consumer service.
The regulation contains a number of definitions of some of the terms used in the regulation.
Please contact us if you have any questions concerning this regulation.