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Amazon Sales Tax Nexus in Massachusetts? (Absolutely Not!)

author photo of Sylvia F. Dion

Will Massachusetts residents soon be paying sales tax on their Amazon purchases? Should Amazon already be collecting Massachusetts sales tax?

If you've been following the media reports about how Amazon’s recent “expansion” in Massachusetts gives the company nexus, or how Massachusetts may soon be enacting an “Amazon Law”, then you may think that Amazon should either be collecting Massachusetts sales tax already or soon will be.

But much of what has been reported is less than accurate!

Now before I jump into clarifying Amazon’s recent activity in Massachusetts (and whether that activity creates nexus or not) and what proposed legislation in Massachusetts will really do, I’ll add that this story was of part'icular significance to me because I happen to be a Massachusetts based consultant. And so, I’ve been closely following this development – and have read one too many stories that have reported less than accurate information.

Does Amazon Already Have Sales Tax Nexus in Massachusetts?

Several months ago media reports started surfacing about Amazon’s plans to open a facility in Cambridge, Massachusetts in early 2012. Many of these reports were incorrectly reporting that Amazon’s expansion into Massachusetts would translate into a sales tax collection requirement for the company. (See “Events converge to sharpen focus on Internet sales tax”, Boston Business Journal, 3/23/12) But this new “Amazon” facility would not be part of, Inc., the parent company, nor would the facility be part of either of Amazon’s U.S. retail entities – LLC or Amazon Digital Services, Inc. This new facility would house the employees and operations of an Amazon software development subsidiary, a2z Development Center, Inc., a separate legal entity. Under Massachusetts current law, a2z Development Center, Inc. would not create nexus for Amazon’s on-line retail business.

Then, in mid-March of this year Amazon announced it would acquire 100% of the outstanding shares of Kiva Systems, Inc., a Massachusetts based developer and manufacturer of warehouse inventory movement robots. This $775 million acquisition would be, Inc.’s second largest acquisition to date (, is its largest) and one seen as a major move to supplement its rapidly expanding fulfillment center network. (Amazon spent $4.6 billion last year on warehouses in 2011, its largest operating expense for the year.)

Acquiring this Massachusetts based robotics company only intensified the chatter that Amazon had established a physical presence in Massachusetts and should begin collecting sales tax. But acquiring all of the shares of Kiva Systems, Inc. would mean that Kiva would be a 100% owned subsidiary. Unless Amazon took additional action, such as merging Kiva into one of Amazon’s retail entities, Kiva Systems, Inc. would remain a separate legal entity, which again, would not create nexus for Amazon’s on-line retail business.

The Massachusetts Main Street Fairness Coalition Is Launched

But this chatter quickly grew to a roar following the April 9th launch of The Massachusetts Main Street Fairness Coalition, a coalition of Massachusetts retailers, local officials, labor unions, trade and business associations and individuals who argue that “Amazon has arrived in the Commonwealth”. According to the Coalition, “locating a facility in Cambridge and purchasing a robotics firm in North Reading” established a “physical presence for Amazon in Massachusetts requiring them to register with the Massachusetts Department of Revenue to collect and remit Massachusetts sales tax on purchases made by Massachusetts residents”. Not surprisingly, the media frenzy took off, not just in Massachusetts but on a national level too. The media's message? Amazon was once again skirting its sales tax collection responsibilities in yet another state. (See the Massachusetts Main Street Fairness Coalition webpage for a listing of news articles and Coalition press releases. The April 9th press release launching the Coalition is reproduced at the end of the press coverage listing.)

Now, I sympathize with Coalition and admire its tenacity. On May 31st the Coalition even sent a letter to the Massachusetts Department of Revenue (DOR) Commissioner practically demanding that the DOR hold Amazon responsible for collecting the 6.25% sales tax. The letter even cites the opinion of a leading Massachusetts state tax attorney (who, by-the-way, clearly states that Amazon's expansion must be "all within the same company" for nexus to apply) and cites several other states that have entered into "deals" with Amazon to begin collecting sales tax (states which, by-the-way, have enacted state laws to allow them to demand Amazon begin collecting sales tax.)

But as I just pointed out, neither the Cambridge facility of a2z Development Center, Inc. nor the North Reading headquarters of Kiva Systems, Inc. create sales tax nexus for Amazon’s on-line retail entities. Yes, I hate to tell the Coalition this, but under current Massachusetts law – their argument is completely invalid! Amazon does not currently have a sales tax collection responsibility in Massachusetts. But could things change in the future? Definitely!

Massachusetts Proposed Legislation

Let me first say that I’m not surprised that there's been some confusion about what legislation we may soon see passed in Massachusetts. This is because there have been four separate bills introduced during the current 2011-2012 Massachusetts Legislative session that could have impacted internet sales. But let’s look at what’s actually occurred in the Massachusetts legislature to date, and what the only Massachusetts proposal that stands a chance of passing really says.

If you’ve read some of the media coverage that's been circulating in the last 18 months or so about the various Massachusetts "Amazon" proposals, you may have read something along the lines of this statement, “a Massachusetts bill now under consideration on Beacon Hill would also expand the definition of physical presence to include affiliates.” (See “Amazon’s move to Cambridge allows Massachusetts to begin collecting sales taxes sold to state residents”, The Republican, 3/24/12)

Now, before I continue, I'll point out that back in January of 2011, there were three “click-through nexus” bills introduced in the Massachusetts legislature; H.1731, An Act to Protect Main Street Retailers and Promote Sales Tax Fairness in the Commonwealth, S.1450, An Act Applying the Sales Tax to Certain Retail Sales Over the Internet, and S.1554, An Act to Protect Main Street Retailers and Promote Sales Tax Fairness in the Commonwealth. All three of these bills initially made progress through the legislative process, and ultimately all three were the focus of a public hearing on April 7, 2011. But all three of these proposals, which would have changed the definition of a vendor to include remote retailers with in-state marketing affiliates, went nowhere after the April 7, 2011 hearing. (And yes folks, I’m talking 2011, not 2012.) And so, for a while there, much of the media was reporting that Massachusetts would have an “Amazon Law” on the books.

But there was one more bill introduced in January 2011 which continued to progress and which eventually became the initial draft for the one proposal under serious consideration by the current Massachusetts legislature.

H.1695, An Act to Promote Sales Tax Fairness for Main Street Retailers, was introduced on 1/24/11 and like the other three proposals, was also the subject of the April 7, 2011 hearing. But unlike the three “click-through nexus” proposals, H. 1695 continued its journey through the legislative process and on 8/15/11, accompanied a new draft, H. 3673, An Act to Promote Sales Tax Fairness for Main Street Retailers.

H. 3673: The One Massachusetts Proposal That Could Actually Pass

But guess what? H. 3673 is not a “click-through nexus” proposal. Nor does H. 3673 contain expansive affiliate nexus language.

In other words, H. 3673 says absolutely nothing about nexus being created if a remote seller contracts with an in-state party who post web-links to the remote seller’s retail site. Nor does H. 3763 contain language that would attribute nexus for sales tax collection purposes to a remote retail entity simply because related or commonly owned entities operate in the state. (Note: Because click-through nexus deals with a remote seller’s contractual relationship with in-state marketing affiliates, “click-through” or “web-linking” nexus is sometimes also referred to as “affiliate nexus”. Though in a legal sense, affiliate nexus means nexus by virtue of common ownership of entities operating in the nexus state.)

So how will H. 3673 “promote sales tax fairness for Main Street Retailers?” What exactly does H. 3763 do?

If passed, H. 3673 will authorize the Commonwealth to adopt the Streamlined Sales and Use Tax Agreement (“SSUTA") and will grant the Commissioner of Revenue the authority to promulgate rules and regulations consistent with the SSUTA. (See SECTION 22, H. 3673)

That’s right! Massachusetts could very well soon become a Streamlined Sales Tax (“SST”) member.

And in anticipation of moving towards SST membership, H. 3673 also addresses the many associated issues such as approval of an amnesty period (SECTION 7A., H. 3673), use of Certified Service Providers (SECTION 6, H. 3763), monetary allowances for sales tax collection (SECTION 8, H. 3673) and use of an SST approved exemption certificate (SECTION 6(3), H. 3673).

Will this legislation actually pass? It quite possibly could! H. 3673 was voted on favorably by various House Committees and by the Joint Rules Committee. Then on June 4, 2012, H. 3763 received an “ought to pass” recommendation by the House Rules Committee at which time the bill was also referred to the House Ways and Means Committee. (See the bill’s legislative history.)

But even if H. 3673 does pass and Massachusetts does become a SST member state, Massachusetts would only be able to able to require remote (out-of-state) retailers, like Amazon, to collect Massachusetts sales tax if the Main Street Fairness Act (H. 2701/S. 1452) or the Marketplace Fairness Act (S. 1832) is enacted. Recall, that these are the two federal proposals that would grant SST full member states immediate collection authority - the other federal proposal, the Marketplace Equity Act (H. 3179) does not look to the SSUTA as it has its own guidelines that states must comply with. (Missed our extensive coverage on the various federal proposals? Click here for a listing of my many blog articles and latest whitepaper on the federal remote seller proposals.)

In other words, passage of H. 3763 alone would not give Massachusetts immediate authority to require Amazon. or any other remote retailer that lacks sales tax nexus to Massachusetts, to begin collecting the Commonwealth's sales tax. This authority would only come about if either the Main Street Fairness Act or the Marketplace Fairness Act are enacted by the end of 112th U.S. Congressional session and Massachusetts moves to full-member SST status. (Interested in reading more about SST? See fellow blogger, Corey Barwick's, blog entries on SST developments.)


So there you have it – what’s really happening in Massachusetts!

Are the Cambridge office of a2z Development Center Inc., and the acquisition of Kiva Systems, Inc. enough to require Amazon to begin collect sales tax already? Absolutely not!

Could things change in the future? Absolutely! But not as quickly as some folks might think. At this point, how quickly would depend on what happens with the federal remote seller proposals – proposals which are currently all stalled “in committee”.

But as far as H. 3673 goes - do stay tuned! The current formal session of the Massachusetts 187th Congress ends on July 31st, which means Massachusetts could soon begin its journey towards full SST membership.


Missed my last post? Catch it here: “Internet Sales Tax Legislation: A Plain English Guide (Whitepaper)

What’s up next? “Amazon, the Master Dealmaker: Are More to Come?", “What Ever Happened to those Federal Proposals?”, “How ‘Amazon Laws’ Impact Affiliate Marketers”, “More State Amazon Updates”, and much, much more…

About the Author: Sylvia Dion is the Founder and Managing Partner of PrietoDion Consulting Partners LLC, a SALT advisory firm which provides SALT services to businesses in the U.S. and throughout Europe, Canada, Latin American and Australia. Since 2011 Sylvia has served as a contributor to the SalesTaxSupport blogs and currently blogs on Internet Sales Tax, U.S. Sales Tax for Foreign Sellers, and Massachusetts Sales Tax. Sylvia has written articles for State Tax Notes, Bloomberg BNA and other premier tax journals. You can follow Sylvia on twitter and on Google+ and can contact Sylvia via e-mail at

Comments or questions may be submitted by using the on-page "Comment" feature, subject to disclaimer at bottom of page. Other contact options (and Consultation Requests) are also available on Sylvia's associated Firm Profile page.

Other recent “Internet Tax / E-Commerce” posts by Sylvia F. Dion, CPA:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.


5 Responses to Amazon Sales Tax Nexus in Massachusetts? (Absolutely Not!)

  • Posted by Massachusetts on October 27, 2014 12:55pm:

    […] or would be enacted in Massachusetts. (For a little more background on this, see my prior post, “Amazon Sales Tax Nexus in Massachusetts? (Absolutely Not!)”) That’s not to say that Massachusetts does not have an aggressive nexus policy, it’s just to […]

  • Posted by Jan on April 28, 2014 4:30am:

    Sylvia: any update on MA internet sales tax nexus? I've been monitoring SB1330 any insight? Thanks so much for staying on top of this subject.

  • Posted by Dave on July 30, 2012 11:37pm:

    Very interesting Sylvia and good article. There is a parallel story here in NC.

  • Posted by Michael on July 7, 2012 7:57pm:

    Sylvia, Thanks for the great information about the possible upcoming Amazon tax in Massachusetts. You are very insightful and I look forward to reading more of your posts in the future.. Thank you for doing a great job.. : )

    • Posted by Author photo of Sylvia F. DionSylvia F. Dion on July 9, 2012 1:20pm:

      Michael, Thank you for your kind words and for taking the time to read my recent post. Following and reporting on "internet sales tax" developments is certainly something I love doing. And these days, there's certainly no shortage of developments in this area! But unfortunately, often much of what's being reported is less than accurate, slanted or misleading. Anyway, thanks again!

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