Sales tax boon – or not?

New tax decision said to be about creating equity

It’s going to cost some people a little more to make online purchases after the Supreme Court ruled in a case involving Massachusetts-based Wayfair that states can collect sales tax on purchases by residents no matter where the seller is located.

For many states, that not only clears up confusion stemming from a 25-year-old decision that said they could only collect if a company had a physical presence in their borders but opens up a stream of revenue that they were unable to capture before.

Not so much Massachusetts, though. Nearly 80 percent of purchases made online by Bay State residents are already subject to the sales tax after the Baker administration determined last year that an “economic presence” was the same as a physical presence. The regulatory change targeted companies with more than $500,000 in sales or more than 100 transactions to collect sales tax and turn it over to the Department of Revenue. Most online retailers had already begun complying but one, Crutchfield Corporation of Virginia, sued the state, claiming it violated federal law. That action is now likely moot in the wake of the Supreme Court decision.

At the Boston Globe, Jon Chesto made the astute observation that the timing of the decision was a godsend for lawmakers who were trying to figure out how to deal with the loss of a potential $2 billion after the Supreme Judicial Court rejected the so-called millionaire’s tax ballot question. Outgoing Senate President Harriette Chandler welcomed the relief while House Speaker Robert DeLeo said he’d go back to his members to decide the next step.

But it may not be the windfall some are expecting. A report by the federal General Accounting Office determined a change in online sales tax collections could mean as much as $13.4 billion nationwide for those states with a tax, with Massachusetts gaining between $169 million and $279 million. But that estimate did not take into account the regulatory change last fall.

Gov. Charlie Baker applauded the high court’s decision but said there would be no ramp-up in collecting sales tax, basically because it is already underway and those few who don’t collect and pay may not be required to because of their size.

The decision is also creating some problems to our northern neighbors in the Granite State, which proudly clings to its tax-free identity. New Hampshire Gov. Chris Sununu points out no one up there knows how to collect, let alone remit, sales tax because they never had to. It is, of course, the justices’ fault.

“It’s clear that none of those judges are from a low-tax state like New Hampshire because if they were, they’d know how outrageous the decision is,” Sununu told reporters. “I think it’s unconscionable that they would ask our businesses to become basically tax collectors for other states.”

The sales tax in Massachusetts is only one way for the state to collect on purchases form people who drive up north to avoid the tax man. There is also a “use tax,” which is the same 6.25 percent as the sales tax and is levied against any purchase that sales tax was not collected on but which is intended for use, storage, or consumption in the state. So that couch you bought in New Hampshire for $800 which you figured you saved $50 bucks on? You must send a check to DOR.

But the state also has a “safe harbor” for those purchase, which has stuffed a few million into the coffers over the years. Taxpayers can pay a set amount based on their income to satisfy any out-of-state purchases.

Meet the Author

Jack Sullivan

Senior Investigative Reporter, CommonWealth

About Jack Sullivan

Jack Sullivan is a veteran of the Boston newspaper scene for nearly three decades. Prior to joining CommonWealth, he was editorial page editor of The Patriot Ledger in Quincy, a part of the GateHouse Media chain. Prior to that he was news editor at another GateHouse paper, The Enterprise of Brockton, and also was city edition editor at the Ledger. Jack was an investigative and enterprise reporter and executive city editor at the Boston Herald and a reporter at The Boston Globe.

He has reported stories such as the federal investigation into the Teamsters, the workings of the Yawkey Trust and sale of the Red Sox, organized crime, the church sex abuse scandal and the September 11 terrorist attacks. He has covered the State House, state and local politics, K-16 education, courts, crime, and general assignment.

Jack received the New England Press Association award for investigative reporting for a series on unused properties owned by the Catholic Archdiocese of Boston, and shared the association's award for business for his reporting on the sale of the Boston Red Sox. As the Ledger editorial page editor, he won second place in 2007 for editorial writing from the Inland Press Association, the nation's oldest national journalism association of nearly 900 newspapers as members.

At CommonWealth, Jack and editor Bruce Mohl won first place for In-Depth Reporting from the Association of Capitol Reporters and Editors for a look at special education funding in Massachusetts. The same organization also awarded first place to a unique collaboration between WFXT-TV (FOX25) and CommonWealth for a series of stories on the Boston Redevelopment Authority and city employees getting affordable housing units, written by Jack and Bruce.

A Boston native, Jack has lived in Massachusetts all his life. He was a major in English and history with a minor in political science at the University of Massachusetts, Boston. A father and grandfather, he lives in Plymouth with his wife, Susan.

About Jack Sullivan

Jack Sullivan is a veteran of the Boston newspaper scene for nearly three decades. Prior to joining CommonWealth, he was editorial page editor of The Patriot Ledger in Quincy, a part of the GateHouse Media chain. Prior to that he was news editor at another GateHouse paper, The Enterprise of Brockton, and also was city edition editor at the Ledger. Jack was an investigative and enterprise reporter and executive city editor at the Boston Herald and a reporter at The Boston Globe.

He has reported stories such as the federal investigation into the Teamsters, the workings of the Yawkey Trust and sale of the Red Sox, organized crime, the church sex abuse scandal and the September 11 terrorist attacks. He has covered the State House, state and local politics, K-16 education, courts, crime, and general assignment.

Jack received the New England Press Association award for investigative reporting for a series on unused properties owned by the Catholic Archdiocese of Boston, and shared the association's award for business for his reporting on the sale of the Boston Red Sox. As the Ledger editorial page editor, he won second place in 2007 for editorial writing from the Inland Press Association, the nation's oldest national journalism association of nearly 900 newspapers as members.

At CommonWealth, Jack and editor Bruce Mohl won first place for In-Depth Reporting from the Association of Capitol Reporters and Editors for a look at special education funding in Massachusetts. The same organization also awarded first place to a unique collaboration between WFXT-TV (FOX25) and CommonWealth for a series of stories on the Boston Redevelopment Authority and city employees getting affordable housing units, written by Jack and Bruce.

A Boston native, Jack has lived in Massachusetts all his life. He was a major in English and history with a minor in political science at the University of Massachusetts, Boston. A father and grandfather, he lives in Plymouth with his wife, Susan.

In the end, the Supreme Court said it was about equity with the reach of technology disrupting old boundaries.

“Helping (Wayfair’s) customers evade a lawful tax unfairly shifts an increased share of the taxes to those consumers who buy from competitors with a physical presence in the State,” said the 5-4 majority ruling by Justice Anthony Kennedy. “It is essential to public confidence in the tax system that the Court avoid creating inequitable exceptions.”