Massachusetts Internet Sales Tax Compliance: Wayfair Tax Laws Explained

Since the 2018 Wayfair Supreme Court ruling, the State of Massachusetts sales tax receipts from online purchases have failed to meet earlier predictions. A November 2017 report by the US Government Accountability Office revealed that the state would generate $279 million in additional revenue. With actual Massachusetts sales tax receipts from online transactions totaling $60 million , leaders are scratching their heads about what has gone wrong.

Although many states anticipated higher sales tax revenues following the favorable outcome in the Wayfair ruling, Massachusetts was one state that did not take all aspects of the ruling into consideration. The main reason why Massachusetts sales tax receipts did not increase following the ruling is primarily due minimal impact on online retailers. Companies with national stature such as Amazon, are far more likely to generate more in sales tax revenue which is driven by their high volume of online sales. However, Amazon has been collecting Massachusetts state sales tax dating back to 2013. Jared Walczak, senior policy analyst at Tax Foundation stated that “…government officials didn’t have a good grasp of just how much they were already collecting in online sales taxes.”

So, does this mean that states such as Massachusetts are doomed? Not quite. The Wayfair ruling gives authorization for states to collect taxes from companies with over $100,000 in state sales or over 200 transactions. Prior to now, Massachusetts, under a separate tax provision had set the threshold to sales of $500,000 with 100+ transactions which excluded many online retailers. The Massachusetts Legislature has passed new laws that lower the revenue threshold to the court approved amount of $100,000 and also eliminates the transaction volume threshold. Additionally, the new rules also require online marketplaces to collect tax from third-party vendors who use their site to generate revenue. While you should not expect to see the hefty gains that the Wayfair ruling was expected to bring, there are brighter days ahead in the budget for expected Massachusetts sales tax receipts.

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