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Massachusetts promulgates corporate nexus regulation

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October 2019


The Massachusetts Department of Revenue on October 18 adopted changes to its Corporate Nexus regulation, 830 CMR 63.39.1, including adding a presumption that a corporation has corporate excise tax nexus if it has more than $500,000 of sourced Massachusetts sales for the tax year. The regulation does not specify an applicable date for the adopted changes.

The takeaway

Massachusetts’ adoption of a bright-line test for economic nexus based on the Wayfair decision is the primary development here. However, the new corporate nexus regulation contains several nuanced expansions to the state’s taxing jurisdiction. For example, the new nexus regulation carves out a broader set of situations in which an otherwise independent contractor will be deemed to create nexus. Moreover, the nexus exemption for corporate limited partners in a securities partnership and the de minimis exemption for the holding of certain limited partner interests by a foreign corporation have been dropped from the nexus regulation. 

The new nexus regulation generally is shorter than the prior one; for example, the section on P.L. 86-272 has removed the list of protected and unprotected activities. However, one area of expansion (as noted above) concerns when an employee visiting from outside of the state will create nexus, though the line drawn is not a bright one.

Finally, one area that could have been elaborated upon is how the bright line test interacts with P.L. 86-272. One question would be whether a corporation that ships tangible personal property into the state where the solicitation came through a Massachusetts customer accessing the vendor’s website is exempt from the income measure of the corporate excise, but not the non-income measure of the corporate excise if there are more than $500,000 in Massachusetts sales. Another unanswered question is whether the purchase of a digital good from a vendor’s website is protected.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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