We previously reported on the Massachusetts Department of Revenue’s Directive 17-1 (the “Directive”), setting forth the Department’s bright-line nexus threshold for internet vendors, effective July 1, 2017. Specifically, the Directive provides that an internet vendor with a principal place of business located outside of Massachusetts is required to register, collect and remit Massachusetts sales or use tax with respect to its Massachusetts sales if it: (1) had Massachusetts sales in excess of $500,000 during the…
On April 3, 2017, the Massachusetts Department of Revenue (the “Department”) issued Directive 17-1 (the “Directive”), setting forth the Department’s bright-line nexus threshold for internet vendors, effective July 1, 2017. Specifically, the Directive provides that an internet vendor with a principal place of business located outside of Massachusetts is required to register, collect and remit Massachusetts sales or use tax with respect to its Massachusetts sales if it: (1) had Massachusetts sales in excess of $500,000 during the preceding calendar year; and (2) made 100 or more sales for delivery into Massachusetts during the preceding calendar year. For the short period between July 1, 2017 and December 31, 2017, the Department will review whether these sales thresholds were met between July 1, 2016 and June 30, 2017.
Statutory definitions often carry ambiguous terms and subtle distinctions. However small these distinctions may seem, their interpretation can mean millions in state tax. In Massachusetts, for example, multistate corporations generally apportion their business income using a three-factor formula based on a property factor, a payroll factor, and a double-weighted sales factor. However, certain out-of-state corporations, like “manufacturing corporations” or “mutual fund service corporations,” may be required to apportion their business income using Massachusetts’s single-sales factor apportionment formula. In the event a single-sales factor apportionment formula applies, an out-of-state company’s Massachusetts corporate excise tax liability may increase, as none of that company’s out-of-state property and payroll expenses are accounted for in apportioning income.