E-commerce tax revolt was only a matter of time
It was only a matter of time before the Baker administration ended up in court over this one.
A group of e-commerce companies including Overstock.com and eBay has followed through on the threat that I wrote about on Wednesday: It has sued Governor Charlie Baker’s revenue department over a mandate that would take effect on July 1.
The Baker administration wants to require online vendors above a certain size to collect the 6.25 percent state sales tax on purchases made by local buyers. State officials here have previously steered clear of trying something like this. Amazon has been collecting sales taxes here since 2013, but that’s because it has a clear physical presence in Massachusetts: a robotics company, warehouses, engineers.
The Baker administration’s new directive declares that dropping an app on a consumer’s phone, sticking a cookie on a shopper’s laptop, or using a computer server within the state’s borders are enough of a nexus to merit the tax collection requirement.
NetChoice vehemently disagrees. In its lawsuit in Suffolk Superior Court, the trade group claims the directive violates a 1992 US Supreme Court decision known as “Quill” that requires an out-of-state seller to have a physical presence in a state to be responsible for sales tax collection.
But to Jon Hurst, president of the Retailers Association of Massachusetts, the change is long overdue. Technology to collect the sales tax today is affordable and easy to implement, Hurst says. These e-commerce businesses now have a 6.25-percent “government granted pricing advantage,” he says, over the mom-and-pop retailers that Hurst represents.
But they might not have that advantage for much longer.