Although the precedent for economic nexus was set in June 2018, states were attempting to come up with ways to collect and remit sales tax from online transactions long before the Wayfair case made it to the courts.
Massachusetts and Ohio, for example, decided to define the computer code from internet cookies as a tangible item that could establish a physical presence nexus. However, once Wayfair passed, was this “cookie nexus” still in effect? The answer is, “Yes.” However, as always, regulations are still more complicated and confusing.
Massachusetts’ Cookie And Economic Nexus Rules
As Avalara explains:
- Massachusetts’ economic nexus provisions require remote sellers to collect and remit state sales tax if the sales are greater than $100,000 in the current or previous calendar year. However, if you make sales of less than $100,000 into the state, you fall under a small seller exception and don’t need to worry about sales tax.
- The cookie nexus required companies with more than $500,000 in internet sales and more than 100 transactions to collect and remit sales tax, if the company placed “cookie” onto the computers of MA customers. If your business falls under these thresholds, the provisions don’t apply to you.
So, if your company makes between $100,000 and $500,000 in internet sales and has fewer than 100 transactions, then you’ve established economic nexus, but not cookie nexus. What does this mean for the sales tax you need to collect and remit? This is where the confusion comes in.
The new Massachusetts economic nexus thresholds are effective October 1, 2019, so we recommend that companies exceeding the $100,000 threshold begin collecting and remitting as soon as possible. But, as always, don’t forget to look in the rear-view mirror and consider ALL possible nexus creating activities prior to October 1, 2019 to make sure that physical presence didn’t precede economic nexus!
States Double Dipping With Economic Nexus And Other Provisions
Massachusetts is looking into repealing the cookie nexus rule, but it brings up a few more interesting questions:
- What other state workarounds are still in effect?
- Are any of them being repealed now that states are enacting economic nexus laws?
- If not, do the economic nexus provisions as well as these other rules still apply to internet retailers?
Avalara shares a helpful chart that shows what types of nexus states enacted and which have been repealed. For example, you can see:
- Colorado and Arkansas repealed their affiliate nexus laws, while more than 30 states still have theirs in place.
- Washington, California, Colorado, Arkansas and Ohio repealed their click-through nexus laws, but 20 states still have them in place.
- Washington and Kentucky repealed their non-collecting seller use tax reporting laws, but 11 states still have them in place.
As you can see, states’ nexus guidelines are continuing to change post-Wayfair. The best way to determine which states you need to keep up with is through a nexus review. We can help with that! Our review will show you which states your company has exposure and how to develop a plan to get up-to-date on your sales tax or other state fees. Please contact us to learn more and get started!
