Out-of-State Internet Vendors Sales Tax Collection

The Massachusetts Department of Revenue (MA DOR) recently issued a tax directive affecting out-of-state vendors and their responsibility to collect and remit Massachusetts sales or use tax. According to the directive, effective July 1, 2017, an internet vendor with a place of business outside the Commonwealth is now required to register, collect and remit Massachusetts sales or use tax if it had Massachusetts sales of more than $500,000 and more than 100 Massachusetts sales transactions during the year.

Essentially, MA DOR is asserting that modern-day internet vendors with a large volume of in-state sales have constant contact with buyers via cell phones, tablets, and laptops, resulting in a business having a “virtual presence” in the Commonwealth in a meaningful way without that presence being physical in the traditional sense of the term.

MA DOR’s approach is a departure from long standing rules that a taxpayer must first have some type of physical presence in a state before it is required to collect sales tax.  Although seen as an aggressive attempt to collect sales tax from online retailers, this rule applies to all taxpayers that meet the above-mentioned criteria.

If you operate an out-of-state internet business with a virtual presence in the Commonwealth, you should determine if you must begin collecting and remitting sales and use tax effective July 1, 2017. 

To discuss this issue or any other state or local tax issue, please feel free to contact Rodman CPAs.