Connecticut – State To Mimic Massachusetts’ Digital “Cookie” Tax Rule

Bloomberg BNA
by Aaron Nicodemus
November 17, 2017

Connecticut will pursue a “cookie” nexus regime requiring out-of-state internet vendors to collect state sales and use tax in early 2018—similar to a first-of-its-kind regulation already in place in neighboring Massachusetts.

Kevin Sullivan, commissioner of the Connecticut Department of Revenue Services, said the agency will issue new guidance and regulations on the “taxability of Connecticut destined e-commerce sales” by early 2018. He made the announcement Nov. 15 at the New England State and Local Tax Forum held in Newton, Mass.

Massachusetts regulation 830 CMR 64H.1.7, which took effect Oct. 1, requires online vendors to collect Massachusetts sales tax if they have property interests in or use in-state apps and “cookies.” Online vendors also must collect sales tax if they make 100 or more individual transactions and exceed $500,000 worth of in-state sales in a year. Sullivan said that Connecticut’s threshold would be lower.

Sullivan told Bloomberg Tax in an email Nov. 16 that the regulations will likely apply to e-retailers that sell “more than $300,000 annually or more.”

“That guidance will be based on the state’s existing maximum nexus criteria, and include examples of physical presence similar to what Massachusetts is doing,” Sullivan said. “At present, we continue to pursue disclosure of Connecticut destined sales by businesses among the top 500 e-commerce entities not registered and collecting Connecticut sales tax and then billing, but also offering the opportunity for prospective-only resolution by voluntary disclosure agreement.”

Hundreds of Registrations

Practitioners have said that Massachusetts’ regulation is an indirect assault on the U.S. Supreme Court’s 1992 decision in Quill Corp. v. North Dakota, which prohibits states from imposing sales and use tax collection obligations on vendors lacking an in-state physical presence. The Massachusetts Department of Revenue has said its regulation isn’t a “kill- Quill” measure.

“We looked at nexus in terms of digital commerce,” Kevin Brown, general counsel for the Massachusetts Department of Revenue, said at another Nov. 15 panel. “Customers are using devices. You have networks of servers communicating with customers, making deliveries, and all of those things can be defined as a physical presence.”

Brown said that the DOR has received several hundred registrations from companies looking to begin collecting sales tax.

“But we have an interesting challenge down in Virginia,” he said, referring to Crutchfield Corp.’s suit filed Oct. 24 in Virginia Court challenging the regulation.


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