Directive 17-1
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Massachusetts Department of Revenue Repeals Directive 17-1

The Massachusetts Department of Revenue (Department) has just issued Directive 17-2 revoking Directive 17-1 which adopted an economic nexus standard for sales tax purposes. Directive 17-2 states that the revocation is in anticipation of the Department proposing a regulation that would presumably adopt the standards of Directive 17-1. It appears that the Department took seriously, perhaps among other concerns, internet sellers’ arguments that Directive 17-1 was an improperly promulgated rule. Internet sellers that recently received letters from the Department regarding Directive 17-1 (see our previous blog post) may need to reconsider their approach.

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Massachusetts DOR Sending Letters to Sellers Regarding July 1 Effective Date of Economic Nexus Directive

Recently, the Massachusetts Department of Revenue (Department) sent letters to several companies regarding Directive 17-1. The Directive announces a “rule” requiring remote internet sellers to register for and begin collecting Massachusetts sales and use tax (sales tax) by July 1, 2017, if they had more than $500,000 in Massachusetts sales during the preceding year. The legal premise behind the rule is that the Department believes sellers with more than $500,000 in annual Massachusetts sales must have more than a de minimis physical presence so that requiring sales tax collection would not be prohibited by Quill Corp v. North Dakota, 504 US 298 (1992). The Directive’s examples of such physical presence include the presence of cookies on purchasers’ computers, use of third-party carriers to make white-glove deliveries and the use of online marketplaces to sell products. The Directive also states that sellers who fail to collect tax beginning July 1, 2017 will...

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