Everything Your Online Business Needs to Know About New Sales Tax Laws in Massachusetts
Ecommerce has made the whole process of shopping less of a chore and more of a leisure activity. We can buy virtually everything we need online, from groceries and auto parts to pajamas and bed linens. In addition to being able to shop right from home, many buyers have enjoyed the benefit of not paying sales tax for a long time. Retailers have avoided the accounting stress of collecting data and complying with state sales tax laws. That all changed, however, with the U.S. Supreme Court ruling on South Dakota v. Wayfair, Inc. on June 21, 2018. Individual states are now cashing in on additional tax revenue by creating provisions to require online retailers to collect sales tax from their consumers and remit it to the state.
The Remote Seller Nexus Affects Ecommerce Businesses
States across the country faced the dilemma of trying to collect internet sales tax for many years. Some made attempts to start forcing internet retailers to collect and remit taxes in recent years. The laws they enacted established a relationship between online businesses and the states they sell goods to, otherwise known as the Remote Seller Nexus. Such a relationship is necessary for individual states to require retailers to pay their due. When the Supreme Court ruled on the case of South Dakota v. Wayfair, Inc., it allowed states to enforce ecommerce sales tax collection based on their sales volume or number of transactions in the state, even if the business doesn’t have a physical location there. This is an economic nexus.
How This Ruling Affects Websites and Sales Tax
There are only five states in the country that do not impose a sales tax on goods that consumers purchase. Massachusetts is not among these five, so it has faced the issue of collecting from online sellers and now requires them to collect and remit the taxes that are owed. They have joined many other states that are enacting and enforcing ecommerce sales tax laws. This process started with five states on October 1, 2019, when the economic nexus went into effect. If you are unsure of how to proceed, now is the time to learn your options and begin complying with regulations in the states in which your consumers reside.
How This Affects Businesses Selling in Massachusetts
Sales volume thresholds for Massachusetts were established on October 1, 2019. If your internet business meets these sales thresholds, you must collect sales tax from your buyers and remit that tax to the state. According to legislation passed on this date, you must collect and remit sales tax if your online business had over $500,000 in sales in Massachusetts and over 100 transactions resulting in deliveries within the state in the previous calendar year. Both thresholds must be met for the state to require your business to collect and pay sales tax. Note that the $500,000 threshold includes all sales within the state, even those that are not subject to sales tax. Marketplace facilitators are also affected by the new regulations. If your business houses inventory in a Massachusetts warehouse, you are required to collect sales or use tax. This law applies whether the warehouse is your own or is owned by a company operating an online marketplace.
Online Sales Tax and Your Ecommerce Company
Keeping things in line with government regulations and complying with online sales tax remittance needs to be a top priority for your company. You may wonder how you are going to accomplish all this extra accounting work and still look out for your business’ interests and revenues. It’s time to take measures to accommodate new Massachusetts laws, as well as those in other states in your sales demographic. Accounting mistakes, or even small oversights, can lead to hefty fines and problems for your company.
Don’t let this transition get in the way of your company’s progress. Forix is here to help you with sales tax collection and remittance while you focus on growing your business and bringing in profits. We align with tax service providers who have expertise in sales tax law to ensure your worries are allayed and your online business is safe from any errors that could bring you trouble down the road. Call Forix today and let us tell you how dedicated we are to helping your business through this transition.
Learn more about changing state online sales tax laws for Ecommerce sellers here.
Disclaimer: The information in this blog post is provided for general informational purposes only and should not be construed as legal advice from Forix.