The Connecticut Department of Revenue Services will issue sales and use tax nexus guidance that will include software physical presence indicia used by Massachusetts. Massachusetts treats certain software apps and browser “cookies” as contacts with the state. In addition, Commissioner Kevin B. Sullivan stated that the Connecticut guidance will update e-commerce sales tax liability for greater than $300,000 Connecticut-destined sales based on existing state nexus law. The revised guidance will be issued early in 2018.
According to the Commissioner, the Department currently requires all top 500 national online retailers not registered and collecting tax in Connecticut to report their total past two years of annual instate-destined sales. Those retailers are then billed for past sales tax liability unless there is a voluntary disclosure agreement for purposes of prospective compliance.
Massachusetts “Cookie” Nexus Model
Generally, in Massachusetts, a vendor with a principal place of business located outside the state is not subject to tax. However, Massachusetts requires an Internet vendor to collect Massachusetts sales or use tax if the vendor meets two conditions.
The first condition occurs if, during the previous year, the vendor had:
- more than $500,000 in Massachusetts sales from transactions completed over the Internet; and
- made sales resulting in a delivery into Massachusetts in 100 or more transactions.
The second condition occurs if the vendor had property interests in and/or the ability to use software (e.g., “apps” ) and ancillary data (e.g., “cookies” ) stored on devices of Massachusetts customers. A vendor will meet this condition when the software or data enables the vendor to use customers’ devices.
An Internet vendor with this type of contact with Massachusetts is considered to have instate physical presence sufficient to create nexus and impose registration, reporting, and remitting obligations on the vendor.
E-mail, Connecticut Department of Revenue Services, November 17, 2017