In the US Supreme Court decision, South Dakota v. Wayfair, it was made clear that taxing sales from out-of-state sellers cannot be applied retroactively and electronic cookies do not constitute physical presence according to the Massachusetts Appellate Tax Board in a recent ruling. The Massachusetts Department of Revenue (DOR) recently attempted to impose a use tax remittance and collection responsibility in the form of an assessment on U.S. Auto Parts relating to taxability under its cookie nexus regulation (Internet Vendor Rule) for the periods prior to June 2018. U.S. Auto Parts is a California based company that did business in Massachusetts prior to the Wayfair decision. However, their business in the state was “limited to the placement of “cookies” and “apps” on the computers and portable devices of its Massachusetts customers.” The State DOR argued the presence of such cookies and apps created physical presence. The Massachusetts Appellate Tax Board ruled in favor of U.S. Auto Parts and granted the company an abatement in the amount of $60,139.81 citing affirmation for Wayfair and Quill.
The Massachusetts Appellate Tax Board’s decision should be noted for companies who were making sales to Massachusetts customers prior to Wayfair and who may have been subject to imposition of the cookie nexus rule as they should consider their facts and whether pursuing a refund is warranted. (Massachusetts Appellate Tax Board, U.S. AUTO PARTS NETWORK, INC. v. COMMISSIONER OF REVENUE, December 7, 2021)