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Overstock and Massachusetts: The Line in the Sand


 Overstock Draws Another Line in the Sand: Massachusetts.

Massachusetts is considering online sales tax legislation, and for Overstock.com, them's fightin' words. The online retailer has let it be known that if the state tries to require it to collect and remit Massachusetts sales tax, it will pull out of the state.

A Line in the Sand

Overstock doesn't have a physical presence, or nexus, in the Bay State. However, numerous Massachusetts affiliates advertise Overstock on their websites and help drive traffic to the site. According to NECN.com, those affiliates recently received a letter from Overstock CEO Jonathan Johnson, who wrote of Massachusetts' proposed legislation:

"We believe these bills are not only harmful to business, but unconstitutional ... (and) if any of these bills pass, overstock dot com will sever its relationships with all Massachusetts based affiliate advertisers before any bill becomes law." 

There is little doubt that Overstock would carry out that threat. EcommerceBytes notes that the company has  pulled out of ten states over similar legislation. According to the Overstock.com Tax Nexus Information page, the company was recently "forced to terminate" its relationship with advertising affiliates in the states of New York, Rhode Island and North Carolina because of affiliate tax nexus laws. It underscores that "United States Supreme Court decisions prohibit states from imposing any tax collection obligations on out-of-state retailers except where such a retailer has a physical presence in the state."

Massachusetts could be next on the chopping block.

Proposed Legislation

Two bills are currently being considered by Massachusetts lawmakers.

S. 1330, An Act applying the sales tax to certain retail sales over the Internet, would amend existing law by inserting the following:

"Any person shall be presumed to be a vendor if said person enters into an agreement with a resident of the Commonwealth under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an internet website or otherwise, to the person, if the cumulative gross receipts from sales by the person to customers in the Commonwealth who are referred to the person by all residents with similar agreements with the person is in excess of 10,000 dollars during the preceding twelve months. ...."

H. 2762, An Act to protect main street retailers and promote sales tax fairness in the Commonwealth, amends existing by replacing the current definition of Vendor with the following:

“'Vendor', a retailer or other person selling tangible personal property or services … including any person making sales of tangible personal property or services taxable under this chapter by soliciting business through an independent contractor or other representative if the vendor enters into an agreement with a resident of the commonwealth under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an internet website or otherwise, to the vendor, if the cumulative gross receipts from sales by the vendor to customers in the commonwealth who are referred to the vendor by all residents with this type of an agreement with the vendor is in excess of ten thousand dollars during the preceding four quarterly periods ending on the last day of February, May, August, and November. ...."

S. 1462, An Act relative to jobs, workforce development, and main street fairness,  also contains a provision relating to main street fairness.

Bully

Jon Hurst, president of the Retailers Association of Massachusetts, noted that "Overstock certainly has not agreed to collect anywhere, and they've been a real bully on all this. They use the local affiliates to ultimately do their lobbying work in order to try to prevent these laws from passing." (NECN.com).

Not a Bully

Overstock General Counsel Mark Griffen maintains that the company "is in favor of federal legislation." However, it does not support the Marketplace Fairness Act of 2013. (EcommerceBytes).

While Overstock has drawn a line in the sand over this issue, Amazon.com has shown itself to be more flexible. The largest online retailer in the world supports the Marketplace Fairness Act of 2013; it will also  begin collecting Massachusetts sales tax in November of this year.

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photo credit: Keith Weston via photopin cc


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.