Business & Tech

Mass. officials make move to capture online sales taxes

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The tax collectors for Massachusetts’ state coffers caught Amazon in their web in 2013. Now, they’re going after the other big e-commerce companies.

The state Department of Revenue just issued a directive telling out-of-state vendors to start collecting sales taxes on Massachusetts purchases on July 1. The requirement would kick in for many companies that sell more than $500,000 of goods annually here, effectively capturing out-of-state Internet retailers.

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The agency is prioritizing major online retailers that are not already collecting sales taxes in the state. Governor Charlie Baker’s administration hopes to use the new directive to raise $30 million for the next fiscal year. It’s worth noting that online merchants with fewer than 100 transactions a year in the state would be exempt.

Brick-and-mortar retailers have long complained that Internet merchants had an unfair advantage: A 1992 US Supreme Court decision — Quill Corp. vs. North Dakota, aka “Quill” — meant that retailers need a physical presence in a state to be forced to collect sales taxes there.

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Here in Massachusetts, the revenue department had leverage to force Amazon to pay up in 2013 after it opened a substantial office in Cambridge and acquired a local robotics firm, Kiva Systems.

Now, the agency is saying there are reasons why Quill applies to other Internet retailers. One of its arguments: these sellers often put software such as apps on customers’ computers and phones, software that should be considered tangible personal property.

This interpretation could take many people by surprise. Sullivan & Worcester partner Richard Jones said some attorneys at his Boston firm were a bit shocked to get the news. Jones expects this approach could be challenged in court.

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Bill Rennie, vice president at the Retailers Association of Massachusetts, said his group welcomes the help, even though the administration’s approach could face a legal fight.

“We’ve been waiting decades for a level playing field,” Rennie said. “We need some type of sales tax parity here. ... Times have changed. Online retail is everywhere. You’ve got really, really big Internet companies selling into Massachusetts the same products that our members sell.”

With the inaction in Congress on this issue, a number of states are trying to take on Quill in various ways. Now, Massachusetts is joining the fray.

Jon Chesto can be reached at jon.chesto@globe.com. Follow him on Twitter @jonchesto.
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