NetChoice, a trade association of internet companies and organizations, and American Catalog Mailers Association (ACMA), a trade association representing the interests of companies, individuals and organizations engaged in and supporting catalog marketing, have filed a suit to stop Massachusetts from requiring out-of-state online retailers to collect sales taxes. The groups are suing over a regulation — slated to take effect in two weeks — that targets out-of-state businesses that solicit customers in the state by redefining what it means to be "engaged in business in the commonwealth." Since retailers can easily reach out to consumers online, Massachusetts claims that internet cookies — i.e., data files which are stored on your computer by a web browser — constitute tangible personal property and presence for purposes of sales tax. NetChoice and ACMA allege that the regulation, called Directive 17-1: Requirement that Out-of-State Internet Vendors with Significant Massachusetts Sales Must Collect Sales or Use Tax, "imposes an obligation on certain internet vendors to collect and remit sales or use tax on electronic commerce that aren't imposed on other vendors who do or might make sales of similar goods and services through some other means." Catalog, mail order, television infomercial and toll-free calls are all considered “other means.”
Total Retail’s Take: Amazon.com recently changed the online sales tax landscape when it began collecting sales taxes from all states with sales tax laws on April 1. E-commerce tax regulations have been tricky for online retailers that don't have a physical presence in a state, and the result of this lawsuit will help clear a few things up for brands selling products online in Massachusetts.