Starting October 1, 2019, there are new Massachusetts sales and use tax collection requirements that apply to out-of-state “remote” sellers and marketplace facilitators (“marketplaces”). Remote sellers must collect tax on sales of tangible personal property or services into Massachusetts when they have Massachusetts sales that exceed $100,000 in a calendar year. Marketplaces must collect tax on behalf of third parties (“marketplace sellers”) selling on the marketplace when the marketplace’s total Massachusetts sales (including those facilitated on behalf of marketplace sellers and those made directly by the marketplace on its own behalf) exceed $100,000 in a calendar year.
The following are some frequently asked questions about the general application of these requirements, including how to register as a Massachusetts vendor, make payments of tax, and file returns electronically. Note that remote sellers and marketplaces may have to collect tax during the last quarter of 2019, as well as for calendar years beginning on or after January 1, 2020. Note also that DOR may update these FAQs from time to time. For more information about these requirements, see 830 CMR 64H.1.9: Remote Retailers and Marketplace Facilitators. To be notified of future DOR developments, you may receive updates from DOR.
Who is a remote seller?
A remote seller is generally a seller lacking a Massachusetts physical presence that sells tangible personal property or services into the state. A marketplace that lacks a Massachusetts physical presence but facilitates or makes direct Massachusetts sales is also a remote seller.
How is a remote seller different from an in-state seller?
Unlike remote sellers, in-state sellers have a physical presence in Massachusetts, such as in-state stores, employees, inventory, or representatives.
What are the sales/use tax obligations of remote sellers?
If a remote seller’s Massachusetts sales in either the prior or current calendar year exceed $100,000, it must register as a vendor, collect tax on its Massachusetts sales, and remit the tax to DOR.
What is a marketplace?
A marketplace, also known as a marketplace facilitator, is a business that provides an electronic or physical forum, such as a shop, store, internet website, or dedicated software application, where businesses sell tangible personal property or services. Marketplaces engage in one or more of the following activities:
- Contracting with sellers to facilitate the sale of the sellers’ products to buyers;
- Enabling the transmission or communication of the offer or acceptance between buyers and sellers; or
- Entering into agreements with third-party commercial entities that collect the payment from buyers and transmit the payment to the seller.
A business that provides only payment processing or advertising services, including listing products for sale, is not considered a marketplace. A marketplace might also sell tangible personal property or services on its own behalf and not on behalf of marketplace sellers.
Depending on the nature of its presence in Massachusetts, a marketplace may be either a remote seller or an in-state (i.e., physically present) seller with respect to these direct Massachusetts sales.
Who is a marketplace seller?
A marketplace seller is a business selling tangible personal property or services through a marketplace. Depending on the nature of its presence in Massachusetts, a marketplace seller may be a remote seller or an in-state (i.e., physically present) seller with respect to its Massachusetts sales.
What are the tax obligations of a marketplace?
If the marketplace is a remote seller, it must register as a vendor and collect and remit sales and use tax on all of its facilitated Massachusetts sales and its direct Massachusetts sales when its total of all such sales exceeds $100,000 in a calendar year.
If a marketplace is physically present, it must collect tax on all of its direct Massachusetts sales, regardless of the volume. However, the marketplace will only be required to collect and remit tax with respect to its facilitated Massachusetts sales when those sales as combined with its direct Massachusetts sales (if any) exceed $100,000.
Do marketplace rules apply to facilitated sales of software, including software subscriptions?
Yes. Sales of software, including desktop and mobile apps, are subject to tax as sales of tangible personal property. Businesses that facilitate the sale of software are required to register as a marketplace, and collect and remit tax on these sales. This requirement applies also to businesses that facilitate the sale of subscriptions to use software.
Do marketplace rules apply to facilitated rentals of motor vehicles?
DOR is not currently requiring marketplace facilitators that facilitate rentals of motor vehicles to apply the marketplace rules to those rentals, so long as the marketplace sellers (i.e., the persons renting the motor vehicles through the facilitator) are registered to collect and remit the tax.
Do marketplace rules apply to facilitated sales subject to meals tax?
A marketplace does not currently include a business that facilitates the sale of meals. Such businesses are not required to collect and remit tax on the sales of meals, as long as the restaurants themselves are registered to collect and remit tax. If, however, a business that facilitates the sale of meals purchases meals for resale, the business must provide a resale certificate to the restaurant and collect tax on the sale of those meals; see DOR Directive 04-6. DOR may issue further guidance relating to the responsibilities of businesses facilitating the sales of meals. Any later change that would apply the marketplace rules to these businesses will be applied by DOR on a prospective basis.
If you are a restaurant registered to collect and remit tax, you must continue to collect and remit tax on your sales of meals, unless you accept a resale certificate from a business reselling the meals in accordance with DOR Directive 04-6.
Determining Massachusetts Sales and the Required Filing Date
What are Massachusetts sales?
Massachusetts sales include all of a seller’s sales of tangible personal property or services delivered into the state, including sales exempt from tax. In the case of a marketplace, the computation includes the Massachusetts sales that are facilitated by the marketplace and the direct Massachusetts sales made by the marketplace (if any).
How does a remote seller or marketplace determine if it has a filing obligation beginning October 1, 2019 for the short period, October 1 to December 31, 2019?
The remote seller or marketplace should total its Massachusetts sales from October 1, 2018 through September 30, 2019 and determine whether those sales exceed $100,000. If so, the remote seller or marketplace is required to collect and remit tax for the short period, October 1 to December 31, 2019.
How does a remote seller or marketplace determine if it must begin collecting and remitting tax for a calendar year (or a partial calendar year) beginning on or after January 1, 2020?
The remote seller or marketplace must total its Massachusetts sales from the preceding calendar year. If those Massachusetts sales exceeded $100,000 prior to November 1 of that preceding year, the seller or marketplace is required to begin collection and remittance as of January 1. If those Massachusetts sales exceeded $100,000 after November 1 of that year, the seller or marketplace is required to begin collection and remittance as of the 1st day of the 1st month beginning two months after the month in which the $100,000 threshold was exceeded.
A remote seller or marketplace must also keep track of its Massachusetts sales during the current calendar year. If those Massachusetts sales exceed $100,000 during the calendar year, the seller or marketplace is required to begin collection and remittance as of the 1st day of the 1st month beginning two months after the month in which the $100,000 threshold was exceeded.
Is there a requirement that a remote seller or remote marketplace have a certain number of Massachusetts transactions before becoming subject to the collection requirement?
No, remote sellers or remote marketplaces must collect tax on their Massachusetts sales when their Massachusetts sales exceed $100,000 in a calendar year, as noted above, regardless of the number of their Massachusetts transactions.
When a marketplace collects tax on a Massachusetts sale on behalf of a marketplace seller, does that sale count towards the seller’s $100,000 threshold?
No, only the direct Massachusetts sales by a marketplace seller are counted towards the $100,000 threshold for such seller.
Other Marketplace Requirements
What information must a marketplace communicate to a marketplace seller?
A marketplace that is required to collect tax on its facilitated sales must inform the marketplace sellers that sell through the marketplace of this collection requirement before it begins collecting the tax. For purposes of communicating this information, the marketplace must provide or otherwise reasonably make available to these sellers a marketplace facilitator collection certificate (see sample) stating that it will collect and remit tax on behalf of the sellers as of a certain date. Marketplaces will receive this marketplace facilitator collection certificate, Form ST-16, from DOR after registering as a marketplace.
Are marketplace sellers responsible for the tax on their Massachusetts sales when those sales are facilitated by a marketplace?
Marketplace sellers are generally not responsible for the tax on their Massachusetts sales facilitated by a marketplace if the marketplace is to collect and remit tax on such sales. For purposes of securing this treatment, the marketplace seller must receive in good faith through electronic communication or otherwise a marketplace facilitator collection certificate from the marketplace stating that the marketplace will collect and remit such tax.
Is there a waiver process whereby a marketplace seller may request to be removed from the marketplace requirements as they would otherwise apply?
Yes, in limited circumstances, a waiver may be requested by a marketplace seller, whereby the marketplace seller and not the marketplace would remit the tax. The marketplace seller waiver can only be requested by sellers that are engaged in the sale of telecommunications services.
The person requesting the seller waiver must satisfy to DOR that the collection and remittance of tax will not be jeopardized. Further, a waiver request by a marketplace seller requires sufficient notice be given to the affected marketplace.
Is there a waiver process whereby a marketplace may request to be removed from the marketplace requirements as they would otherwise apply?
Yes, in limited circumstances, a waiver may be requested by a marketplace, whereby the marketplace would collect tax on behalf of marketplace sellers and provide the tax to the sellers for remittance.
In this instance, the person requesting the marketplace waiver must satisfy to DOR that the collection and remittance of tax will not be jeopardized. Further, a waiver request by a marketplace requires the approval of the affected marketplace seller.
Registration and Filing Information
How do remote sellers and marketplaces register as vendors in Massachusetts?
Remote sellers and marketplaces that are not already registered as Massachusetts vendors must register online using MassTaxConnect.
How do remote sellers and marketplaces file returns and make payments?
Once registered, remote sellers and marketplaces must file returns and make payments through MassTaxConnect.
How often are remote sellers and marketplaces required to file returns and pay tax?
Remote sellers and marketplaces are required to file Massachusetts sales and use tax returns on a monthly basis. Returns are due for each calendar month on or before the 20th day of the following calendar month. Payment of tax is due with each return.
If I am a foreign (non-U.S.) entity, how do I register as a remote retailer or marketplace facilitator?
If you are a foreign (non-U.S.) entity that has been issued a Federal Tax Identification Number (also known as an EIN or FEIN) by the Internal Revenue Service (www.irs.gov), please register online using MassTaxConnect. If you are not eligible or required to obtain a Federal Tax Identification Number, please contact us at (617) 887-6367 for assistance with registration.
If all of my sales are exempt, do I need to file returns reporting zero tax due?
If you are required to register with DOR and you have no taxable sales, you must file an annual return reporting zero tax due.
Tax Department: (617) 887-6367
Toll-free in Massachusetts: (800) 392-6089
8:30 a.m. – 4:30 p.m., Monday through Friday
Please Note: Foreign (non-U.S.) entities with questions about registering to collect sales tax please contact email@example.com.