BOSTON – A new rule went into effect Tuesday that requires online retailers to collect Massachusetts' 6.25% sales tax from customers who live in the state.
Any online company with sales that exceed $100,000 delivered to people in Massachusetts in a calendar year will now be required to collect the sales tax. This rule will impact third-party online retailers such as Amazon and eBay.
"A lot more sellers that have been avoiding the tax and frankly using it as a competitive advantage over actual employers, actual stores here in Massachusetts are going to have to follow the tax rules," said Massachusetts Retailers Association President Jon Hurst. "This is about fairness and, you know, it's good for the small businesses."
The argument being made is that brick and mortar stores, whether they be a Walgreens or a mom and pop, have to collect sales tax on every purchase by law and Amazon, until now, did not have to. Thus, Amazon could charge less for the same product, which means many people were choosing to purchase there instead of within Massachusetts.
The precedent for this rule came from a Supreme Court case in 2018, where South Dakota argued that Boston-based Wayfair ought to include sales taxes in their purchases. The narrow 5-4 decision went in favor of the states, arguing that having a presence on people's laptops and phones was akin to having a physical store.
The $100,000 minimum is crucial to small business that operate online for whom shipping costs are not as minimal as Amazon's might be.
With the new tax rules in place, the state expects to generate $41.7 million for the fiscal 2020 budget.