Massachusetts Establishes New Economic Nexus Threshold and Enacts Marketplace Nexus Legislation

Effective Date: October 1, 2019 for lowered threshold

Threshold: $100,000, effective October 1, 2019

Measurement Date: Prior or Current Calendar Year

Includable Transactions: Gross sales excluding marketplace sales for individual sellers if the marketplace facilitator is collecting

When You Need to Register Once You Exceed the Threshold: First day of the first month that starts two months after the month in which you first exceeded the threshold.

Massachusetts has enacted legislation that creates new requirements for remote retailers and marketplace facilitators, effective October 1, 2019. A remote retailer or marketplace facilitator is required to collect and remit tax if its sales within Massachusetts in the prior or current taxable year exceed $100,000. The state had a previous economic nexus and “cookie nexus” standard of $500,000 and 100 transactions.

The legislation defines “marketplace facilitator” as a person that contracts with one or more marketplace sellers to facilitate for consideration the sale of the seller’s tangible personal property or services through a marketplace operated by the person. A marketplace facilitator engages directly or indirectly in activities such as communicating offers/acceptance between buyers and sellers, owning electronic or physical infrastructure to bring buyers and sellers together, providing a virtual currency to buyers for use on the platform, and R&D activities for software related to the previous activities.

In addition, a marketplace facilitator engages in activities like payment processing, fulfilment and storage, listing, branding, and customer service in respect to a marketplace seller’s products or services. Marketplace facilitators do not include persons that solely provide payment processing services.

Marketplace facilitators must include both their own direct sales and sales facilitated on behalf of marketplace sellers towards the threshold. Marketplace sellers are not required to count marketplace sales towards their threshold if a marketplace facilitator reports, collects, and remits tax on those sales.

The $100,000 threshold also applies to marketplace facilitators that are not remote and they must include both direct and facilitated sales towards the threshold and collect tax on those sales once they exceed the threshold.

The marketplace facilitator may request and may be granted a waiver at the discretion of the commissioner based on the remittance of the tax by the marketplace seller. The marketplace facilitator will be required to collect the tax registration numbers of any marketplace sellers who take responsibility for the collection of the tax.

The Massachusetts commissioner will issue regulations and guidance to further explain sales and use tax rules for remote retailers, marketplace facilitators, and marketplace sellers. The state has also emergency and proposed regulations that will repeal the cookie nexus provision as of October 1, 2019 when its new economic nexus provisions are effective. (H. 4000, Laws 2019, effective October 1, 2019)

UPDATE: The Massachusetts Department of Revenue posted information on December 13, 2019 on 830 CMR 64H.1.9: Remote Retailers and Marketplace Facilitators which includes information about when sellers must register once they exceed the state’s economic nexus threshold. Per the guidance, if a seller exceeds threshold by October 31 of the current year, they must register as of January 1 the following year. If a seller exceeds the threshold between November 1 and December 31 of the current year, they must register on the first of the month following 2 months after the month they exceed threshold.

Posted on August 12, 2019