Massachusetts is likely to join a growing number of states that require e-commerce sites like Amazon.com Inc., eBay Inc., and Etsy Inc. to collect and remit tax on transactions by third-party sellers that move merchandise over their platforms.
The Massachusetts Senate approved a $42 billion fiscal year 2020 budget (H. 3801) May 23 that would require marketplace facilitators to register with the Department of Revenue to collect and remit state sales tax on behalf of vendors selling products across their platforms. The move is expected to generate $41.7 million in new tax revenue.
The House April 25 approved the marketplace facilitator requirements in its version of the budget, and the requirements are also part of Gov. Charlie Baker’s (R) proposed budget (H.1).
Threshold amounts for marketplace facilitators would be established by the DOR, according to H. 3801. The requirements would take effect July 1, at the start of the state’s fiscal year.
Also included in the Senate bill is a proposal to lower the threshold at which remote sellers would be required to register with the state to collect and remit state sales tax. The current threshold is $500,000 in annual sales and 100 individual sales in the state’s cookie regulation, which says remote sellers establish a physical presence in the state through electronic “cookies” and other means on customers’ phones and tablets. The Senate budget would allow the DOR to lower the threshold, provided that it is less than 100,000. Similar language is included in the House budget and Baker’s budget.
The cookie regulation on May 13 survived a legal challenge brought by six e-retailers when a Massachusetts judge dismissed the case. Another lawsuit is pending in a Virginia court.
Joining the Party
More than 20 states have enacted or are considering marketplace facilitator legislation. And at least 35 states are expected to have marketplace facilitator laws by the end of the 2019 legislative year, Joe Crosby, CEO and principal with MultiState Associates, previously told Bloomberg Tax.
Most of the states’ actions reflect new sales tax opportunities created under the U.S. Supreme Court’s June 2018 ruling in South Dakota v. Wayfair.
That decision tossed out the court’s 1992 physical presence standard affirmed in Quill Corp. v. North Dakota, which limited the ability of states to tax remote sales. The majority in the 5-4 ruling suggested strongly that South Dakota’s law requiring remote sellers to collect sales tax if they met economic thresholds of at least $100,000 in sales or 200 or more transactions during a given year would pass constitutional muster.
The Massachusetts Senate bill now heads to a conference committee to hash out differences in House and Senate spending priorities before being sent to Baker.