Sales/Use/Indirect:
Massachusetts Supreme Judicial Court Affirms that DOR Cannot Enforce Wayfair Retroactively

Case No. SJC-13283, Mass. (12/22/22). Deferring to the Massachusetts Appellate Tax Board’s (ATB) ruling in the same case from 2021 involving an online retail company and pre-Wayfair tax periods at issue [see State Tax Matters, Issue 2021-49, for details on this 2021 ruling], the Massachusetts Supreme Judicial Court (Court) held that the use of mobile applications (apps), cookies, and content delivery networks (CDNs) does not constitute an in-state physical presence as required by “pre-2018 jurisprudence” under the Massachusetts Department of Revenue’s (Department) now repealed sales and use tax economic nexus administrative regulation that included a $500,000 and 100 sales “cookie nexus” threshold [see former 830 CMR 64H.1.7 (Vendors Making Internet Sales) for more details on this regulation]. The Court explained that the former regulation incorporated the bright-line rule set forth in the US Supreme Court’s pre-2018 jurisprudence and does not by its plain terms permit the Department to apply the US Supreme Court’s new rule (i.e., Wayfair) to the former tax periods at issue in this case. The Court also concluded that the existence of in-state “electrons” does not satisfy the applicable physical presence test for the prior periods at issue and thus given the online retailer’s lack of an in-state physical presence, it affirmed granting the taxpayer’s underlying Massachusetts sales tax abatement claim. Please contact us with any questions.