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Mass Online Sales Tax Rule: Barrier or Opportunity?

By Retail CIO Outlook | Monday, March 04, 2019

Mass Online Sales Tax RuleThe landmark Wayfair ruling created turbulence among e-sellers; formerly, the retailers had to collect sales tax only if a company had a physical presence in the state, but the new law makes it mandatory for remote e-sellers to levy the online sales tax. Six e-commerce companies sued the Massachusetts Department of revenue in a pretext to ex post facto online sales tax payment demand of $3 million. The DOR was sued in Suffolk county superior court stating that it is illegal to collect a retroactive tax and was discriminating against out of state retailers.

The lawsuit was filed in early December as an aftermath to June’s verdict by U.S. Supreme Court which allowed sales tax collection by South Dakota from Wayfair and Newegg. The new criterion for tax collection determined that E-tailers should remit taxes even in territories that did not have their physical presence like stores or warehouses. The out of sate online sellers should pay taxes to local and state governments according to the new ruling. In Massachusetts case, the DOP demanded tax payment for sales that happened before the verdict. The attorney representing the six retailers said that it is forbidden to collect tax retroactively and no other state has demanded online sales tax before the date of ruling.

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Retailers acted as a medium to collect taxes from buyers and before the ruling online sales tax were not collected by the sellers. If the companies decided to pay sales tax ex post facto, it must pay from its own money. Newegg alleges that out of state retailers wouldn’t benefit against retailers in Massachusetts and cause violation against the commerce clause of U.S. constitution furthermore they stated that the tax doesn’t apply to people who sell products through infomercials which violates the federal internet tax freedom act.

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The lawsuit’s purpose is to eradicate ex post facto tax ruling and declare October 2017 regulation as unconstitutional as it discriminates online sellers against infomercial and print media sellers. The suing party demands local court to not only block the ability to collect ex post facto tax payment but the entire Massachusetts regulation.

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