United States

Massachusetts finalizes marketplace and remote retailer regulations

TAX ALERT  | 

On Dec. 2, 2019, the Massachusetts Department of Revenue released its final regulation on sales and use tax registration and collection requirements for remote retailers and marketplace facilitators. The regulation is effective Oct. 1, 2019. 

Massachusetts law enacted earlier this year requires remote sellers with more than $100,000 of in-state annual sales of products or services to collect and remit sales tax. In addition, both in-state and remote marketplace facilitators with annual Massachusetts sales of $100,000 must collect and remit tax on sales made through their platforms. 

The regulation provides numerous definitions and detailed filing requirements. The department emphasizes that qualifying sales for purposes of the threshold includes the marketplace facilitator's direct Massachusetts sales and the Massachusetts sales that it facilitates on behalf of marketplace sellers. The regulation also provides additional information and clarification regarding marketplace facilitator exemptions, liability relief, and administrative waivers in the event their sellers are collecting sales tax. 

It should be noted that the promulgated regulations are not identical to the “emergency regulations” on remote sellers and market facilitators released in September. One notable difference is that the new regulations specifically state that marketplace facilitator does not include persons who facilitate the rentals of motor vehicles or persons who facilitate the sale of meals. These exceptions require the sellers to be registered and paying tax on their products. 

Finally, the regulation clarifies that new remote collections rules will not “affect tax liability that accrued prior to its effective date.” The regulation specifically does not affect liability derived from marketplace facilitators with in state inventory in a Massachusetts warehouse or pursuant to 830 CMR 64H.1.7, the state’s “cookie nexus” regulation adopted effective Oct. 1, 2017. 

Takeaways

All businesses selling products and services in the Massachusetts should be aware of the new regulations and the underlying remote sales tax collection laws. Remote sellers and marketplace facilitators should know how the $100,000 thresholds are calculated, registration and filing requirements, and issues like how sales for resale exemptions are treated under the regulations. Additionally, remote sellers should also consider that over 40 states have adopted similar rules for remote sellers and almost as many states have adopted marketplace facilitator provisions.

Corporations with sales to Massachusetts should also consider the state’s recent adoption of economic income tax nexus for the corporate excise tax. For more information on that standard, please read our alert, Massachusetts finalizes economic nexus regulations for corporate taxes.

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