Online retailers fight state sales tax directive

Out-of-state Web-based retailers are taking a stand against paying sales tax in the state of Massachusetts.



According to a directive from the Department of Revenue, any online retailer vendor headquartered outside of the state is required to register, collect and remit sales tax. In Massachusetts, this is 6.25%. The directive applies to companies that sold more than $500,000 annually in the state and made sales for in-state delivery in 100 or more transactions.



The rule, called Department of Revenue Directive 17-1, will take hold on July 1. However, retailers are not going down without a fight.



Enlisting the help of NetChoice, a national trade association that represents online retailers, and the American Catalog Mailers Association, retailers are working to block the directive. Specifically, the team, which represents companies including PayPal and eBay, filed a motion in Massachusetts Superior Court stating that the directive is unconstitutional and violates the Internet Tax Freedom Act (ITFA), a federal ban on Internet access taxes; the commerce clause, and the state’s own procedure for implementing regulations.



“The Massachusetts regulation blatantly violates Supreme Court precedent and the Internet Tax Freedom Act, a law Congress enacted specifically to stop states from imposing sales that discriminate against the Internet,” Steve DelBianco, executive director of NetChoice.



The groups also argue that the directive violates the ITFA because it “imposes an obligation on certain Internet vendors to collect and remit sales or use tax on electronic commerce that are not imposed on other vendors who do not or might make sales of similar goods and services” through other means, such as catalog or mail order, according to the filing.



The Department of Revenue upholds that the rule intends to provide a level playing field for Massachusetts retailers."Challenges are not unexpected, and the Department will work with the Attorney General’s Office to defend the directive,” said DOR spokeswoman Nicole St. Peter Mac Dermott.