Early last month, the Massachusetts Department of Revenue released a document detailing its plans to require remote sellers to collect a tax on goods sold as a result of cookies placed on consumers’ browsers in its state. This would, in effect, give cookies a “physical” presence in MA, meaning that marketers will need to consider where their customers are when they place cookies on their computers, as sellers using cookie based tracking will now classify as a click-through nexus.
“Nexus laws are the standards by which a jurisdiction can require a seller to register, calculate, collect and remit sales taxes on their transactions within that jurisdiction,” says Matthew Walsh, principal of indirect tax at the compliance firm Sovos. “As a general rule in the US, nexus requires a physical presence in a jurisdiction before the state can compel the seller to register and collect. This standard was laid out in the Supreme Court decision of Quill vs. North Dakota.”
States have been actively trying to amend or kill off the Quill law for quite some time, mostly by expanding the standards by which a seller has a physical presence in a given state, according to Walsh. This move by MA represents a turning point in digital marketing and compliance.
“What MA has done is say that a remote seller who uses cookies downloaded onto a shopper’s computer now has a physical presence in the state because of the cookie, and they have established nexus in MA by way of that cookie. The cookie is property, the cookie is in MA, the seller now has a physical presence in MA, [so], nexus,” Walsh says.
The thing is, marketers are already weaning themselves off of cookies. Cookies aren’t dead by any means, but the future of digital marketing doesn’t necessarily include a new and improved cookie. But the thing with this law in MA is that it doesn’t really matter.
“Regardless of medium, setting a digital presence standard could put marketers in the cross hairs of remote sales tax nexus,” says Sovos Head of Marketing, Eric Olson. “While there is a trend toward opt-in user tracking that could diminish the use of cookies as a tool over the next decade, there continues to be a push toward mobile and, more specifically, the use of data stored in installed applications, which also qualifies as physical presence under this law.”
