Six online retailers sued the Massachusetts Department of Revenue (DOR) over a sales tax rule that predates the U.S. Supreme Court’s landmark Wayfair ruling. The Supreme Court ruled that states can collect sales taxes from out-of-state sellers even in jurisdictions where the sellers do not have a physical presence in the state.
Prior to the high court’s ruling, the State of Massachusetts required out-of-state online retailers to collect and remit sales taxes beginning in October 2017, nine months before the Supreme Court decision. When Wayfair was enacted, the DOR issued a statement that its existing regulation 830 CMR 64H.1.7 (Vendors Making Internet Sales), which took effect in October 2017, continued to apply and is not impacted by the Supreme Court’s decision.
It’s that nine months of sales tax collections due that is at issue for six retailers who have filed a lawsuit in Boston. These retailers contend that prior to Wayfair, Massachusetts Department of Revenue collection ruling was unconstitutional and, therefore, these retailers are not on the hook for almost $3 million in sales tax collections for the nine months of sales.
Should these retailers fail in their suit against the DOR, all out-of-state retailers may be on the hook for the retroactive payment of dollars in taxes on nine months of sales.