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Massachusetts' Economic Nexus Reg to be Enforced Retroactively

author photo of Sylvia F. Dion

In the days immediately following the U.S. Supreme Court’s decision in South Dakota V. Wayfair, many states quickly issued "Wayfair" statements. While some states applauded the decision, others affirmed their "economic nexus" rules adopted prior to Wayfair, and others noted they would review their rules in light of the decision and issue additional guidance at a later date.

Like other states, the Massachusetts Department of Revenue (DOR) also issued a "Wayfair" statement. In the DOR's June 22nd press release, “U.S. Supreme Court Releases Decision on Wayfair Online Sales Tax Case - Regulation 830 CMR 64H.1.7 Remains in Effect,” the DOR noted that the U.S. Supreme Court had struck down the “physical presence” requirement, that the decision had no impact on the DOR’s existing regulation on Vendors Making Internet Sales (830 CMR 64H.1.7), and that its regulation which would continue to apply.

Massachusetts Regulation on Vendors Making Internet Sales

The Massachusetts regulation referred to in the DOR's Wayfair press release, is the Massachusetts Regulation on Vendors on Making Internet Sales, 830 CMR 64H.1.7 (this regulation is also referred to as Massachusetts' "bright-line", "economic nexus" or "remote seller" regulation). This regulation, which went into effect on October 1, 2017, addresses the registration and remittance obligations of certain vendors making internet sales. Under the regulation’s general rule, an internet vendor whose principal place of business is located outside of Massachusetts and is not otherwise subject to tax, is required to register, collect and remit Massachusetts sales or use tax if the vendor’s Massachusetts sales and transactions meet the following economic thresholds during the following periods.

  • For the period beginning October 1, 2017 through December 31, 2017, if during the 12-month period from October 1, 2016 to September 30, 2017, the vendor 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.
  • For each calendar year beginning with 2018, if during the preceding calendar year, the vendor 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.

The Massachusetts regulation was adopted after the DOR’s initial policy, announced in DOR Directive 17-1, was legally challenged and revoked. Like the initial Directive, Massachusetts Regulation 830 CMR 64H.1.7 explains how large internet vendors typically have an interest in software apps or use “cookies” which are downloaded onto the devices of their in-state customers, tend to use content distribution networks which often have internet servers in the state, or contract with fulfillment providers or delivery companies who offer expanded services – all of which, according to the regulation, create a physical nexus in Massachusetts. (For a more detailed overview of the DOR's economic nexus policy announced in DOR Directive 17-1 and the DOR's legal analysis justifying its policy, see my April 10, 2017 “Massachusetts Expands Sales Tax Nexus Policy for Internet Vendors”).

DOR Issues Technical Information Release 18-1, Clarifies Position on Wayfair’s Impact on its Internet Vendor Regulation and Enforcement Date

While other states rapidly adopted economic nexus and issued additional remote seller guidance in the weeks after the Wayfair decision, Massachusetts remained largely silent until September 17, 2018, when the DOR issued Technical Information Release (TIR) 18-8: Tax Jurisdiction Over Internet Vendors Prior to and Subsequent to Wayfair, Inc. v. South Dakota. The TIR was issued to further explain the DOR's position on the Wayfair decision and its impact on the DOR’s regulation. In TIR 18-8, the Department restates the regulation's sales and transactions economic thresholds and emphasizes it intends to enforce the regulation’s effective date of October 1, 2017 for all periods prior to and subsequent to Wayfair. In TIR 18-8, the DOR also reaffirms its position that its regulation was not impacted by the Supreme Court’s decision in Wayfair, and adds that “construing the constitutional law pre-Wayfair, the Regulation noted that vendors with a large volume of Massachusetts Internet sales would typically have certain physical contacts with the state related to their Internet transactions that would create physical presence under Quill, including, but not limited to, a property interest in or the use of software located in the state.” The TIR adds that post-Wayfair, the U.S. Supreme Court eliminated the physical presence requirements as “unsound and incorrect” in favor of a rule that “nexus is established when the taxpayer or collector avails itself of the substantial privilege of carrying on business in that jurisdiction” which in turn is met by the “economic and virtual contacts (the taxpayer or collector) have with the State.”

Final Thoughts

Because the Massachusetts DOR has now firmly stated, in TIR 18-1, that its regulation applied even prior to the Wayfair decision, the DOR has made it clear it plans to enforce its regulation retroactively back to October 1, 2017. This may be bad news for out-of-state vendors who met the regulation's economic nexus thresholds and other criteria (such as the use of in-state “cookies”) but who opted not to comply with the Massachusetts internet vendor regulation until Wayfair was decided. For this reason, out-of-state vendors who believe they may have been subject to the Massachusetts regulation from its effective date of October 1, 2017 should evaluate their exposure and consider a Voluntary Disclosure.

But here's a few final thoughts. TIR 18-1 was issued soon after recent legal action involving the regulation occurred. You see, less than a month after the regulation's effective date of October 1, 2017, the regulation was challenged by a Virginia online electronics retailer, Crutchfield Corp., on the grounds that the regulation violated Quill's physical presence requirement and the Internet Tax Freedom Act (ITFA). Several other states that enacted economic nexus laws prior to Wayfair faced similar legal challenges - but since the Wayfair outcome, challenges in most other states have been resolved. However, the Crutchfield challenge appears to be far from over. The latest developments include the DOR's refusal to provide key documents requested by Crutchfield's attorney's, which lead Crutchfield to file a legal motion to compel the DOR to produce these documents. With the TIR being issued so soon after the DOR's recent refusal to comply with Crutchfield's request, perhaps the DOR saw this as the perfect time to once again voice its position that its regulation has aways been legally valid and enforceable, even prior to Wayfair.

And here's one more thought. It appears the DOR may be anticipating the possibility that Massachusetts could enact an economic nexus law with lower thresholds than those in its regulation. The TIR includes a footnote which states that "the thresholds in the regulation are subject to future amendments in state law, and in the case of a change in administrative policy, taxes would be assessed only on a prospective basis." Given the flurry of states that are adopting economic nexus rules with thresholds that are exactly like, or very similar to, South Dakota's, it wouldn' be surprising to see a more aggressive economic nexus law enacted in Massachusetts in the future.


Economic Nexus Chart: By the way, I you’d like to see a full listing of all the states that have adopted economic nexus, please see our Economic Nexus chart at our blog post, “States Follow South Dakota: A By-State Guide on Economic Nexus.”

Foreign Seller? And if you're a foreign seller, I've written a post published in the U.S. Sales Tax for Foreign Sellers blog that specifically address the questions and concerns foreign sellers may have. (Please see our "Wayfair & Economic Nexus for Foreign Sellers: Key Sales Tax Questions") The post is written in an FAQ format and contains helpful guidance not only for foreign sellers, but U.S. sellers as well.

Questions or Comments? And finally, if you have questions or wish to post a comment, please feel free to do so below. And if you’re uncertain as to how economic nexus impacts your business, or would like to discuss your situation further, please feel free to contact me via the link in my Author's Box below, via the "Consultation Request" box below, or via my firm's webpage here at

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 “Massachusetts (MA)” posts by Sylvia F. Dion, CPA:

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