Virginia Retailer Seeks to Block Massachusetts Nexus Regulation

Charles Maniace
November 7, 2017

The Massachusetts Department of Revenue recently enacted a regulation that places a tax collection obligation on e-commerce sellers which became effective on October 1. Sovos laid out the potential ramifications here. In the last several days, Crutchfield Corp. (an internet and catalog retailer headquartered in Virginia) filed a legal complaint in their local court system against the MA DOR seeking to block enforcement of this new rule.
By way of a quick recap, the MA regulation imposes a tax collection burden on e-commerce sellers if they:
  1. Have sales in excess of $500,000 in Massachusetts derived from 100 or more transactions, and
  2. Have property in Massachusetts (via software or application cookies) or make use of in-state marketplace facilitators or order fulfillment companies.
Given that states may only impose sales tax requirement on vendors physically present in their jurisdiction, Massachusetts new nexus standard applicable to e-commerce sellers purports to clarify that such sellers are generally already physically present. 
Therein lies the problem according to the complaint. While Crutchfield asserts that they have no physical presence in Massachusetts, the crux of their legal argument is that the new Regulation improperly singles out internet vendors and imposes a requirement which does not apply to other sellers. They likewise contend that their use of “electronic contacts” as a means of establishing physical presence violates the federal Internet Tax Freedom Act’s prohibition against discriminatory taxes on electronic commerce.

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Charles Maniace

Chuck is Vice President –Regulatory Analysis & Design at Sovos, a global provider of software that safeguards businesses from the burden and risk of modern tax. An attorney by trade, he leads a team of attorneys and tax professionals that provide the tax and regulatory content that keeps Sovos customers continually compliant. Over his 20-year career in tax and regulatory automation, he has provided analysis to the Wall Street Journal, NBC, Bloomberg and more. Chuck has also been named to the Accounting Today list of Top 100 Most Influential People four times.
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