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BNA Bloomberg – Massachusetts Online Sales Tax Moving Toward Lawsuit

BNA Bloomberg – Massachusetts Online Sales Tax Moving Toward Lawsuit

“For over a decade we’ve had a debate about how states can collect remote sales tax,” Steve DelBianco, executive director of NetChoice, told Bloomberg BNA in a June 5 email. “Meanwhile, Congress reached an overwhelming national consensus that President Obama quickly signed into law last year—the Permanent Internet Tax Freedom Act. But this Massachusetts regulation is completely at-odds with the key proviso of that law, which prohibits taxes designed to discriminate against Internet activity.”

However, NetChoice will argue in its lawsuit that case law has established that businesses need to have a physical presence in the state in order to collect that state’s sales tax. Saying anyone with a website can be taxed and regulated by every state where a resident can request that website is a legal overreach, DelBianco said.

“That’s like saying that any business with a telephone can be taxed by any state where a caller can simply dial the number,” he said.

Furthermore, DelBianco said the directive sets a bad precedent for websites that are based in Massachusetts, like Potpourri, Chadwicks, and Wayfair Inc., whose business could be harmed if other states follow Massachusetts’ lead. Wayfair is party in the litigation challenging South Dakota’s digital tax statute.

“This unprecedented regulation could come back to haunt Massachusetts companies when other states retaliate in kind,” he said.