Online retailers fight state sales tax directive
Out-of-state web-based retailers are taking a stand against paying sales tax in the state of Massachusetts.
According to a directive from the Department of Revenue, any online retailer vendor headquartered outside of the state is required to register, collect and remit sales tax. In Massachusetts, this is 6.25%. The directive applies to companies that sold more than $500,000 annually in the state and made sales for in-state delivery in 100 or more transactions.
The rule, called Department of Revenue Directive 17-1, will take hold on July 1. However, retailers are not going down without a fight.
Enlisting the help of NetChoice, a national trade association that represents online retailers, and the American Catalog Mailers Association, retailers are working to block the directive. Specifically, the team, which represents companies including PayPal and eBay, filed a motion in Massachusetts Superior Court stating that the directive is unconstitutional and violates the Internet Tax Freedom Act (ITFA), a federal ban on Internet access taxes; the commerce clause, and the state’s own procedure for implementing regulations.
“The Massachusetts regulation blatantly violates Supreme Court precedent and the Internet Tax Freedom Act, a law Congress enacted specifically to stop states from imposing sales that discriminate against the Internet,” Steve DelBianco, executive director of NetChoice.
The groups also argue that the directive violates the ITFA because it “imposes an obligation on certain Internet vendors to collect and remit sales or use tax on electronic commerce that are not imposed on other vendors who do not or might make sales of similar goods and services” through other means, such as catalog or mail order, according to the filing.
The Department of Revenue upholds that the rule intends to provide a level playing field for Massachusetts retailers."Challenges are not unexpected, and the Department will work with the Attorney General’s Office to defend the directive,” said DOR spokeswoman Nicole St. Peter Mac Dermott.
Next Big Thing: An IoT product senses funding
There’s no shortage of inventors and investors in the smart home space. And entrepreneurs have discovered the potential at the intersection of Internet and Things, or IoT.
Now knocking on the door of acceptance is a product called Notion, which made news recently by securing millions in funding from a group of investors. Notion describes itself as “the complete home awareness solution powered by an all-in-one IoT smart home sensor.”
Its $10 million in Series A funding was led by Draper Nexus and TransLink Capital, with additional participation from existing investors XL Innovate, Mesh VC and others, the latest round brings Notion’s total funding to approximately $15 million since its launch in 2013.
“At Notion, it’s our mission to build products and services that give homeowners peace of mind and ultimately empower them to live better, more present lives. That’s what complete home awareness means to us,” said Brett Jurgens, Co-Founder and CEO of Notion. “This additional funding will allow us to amplify our relationships with insurance companies, and we’re excited to work alongside these partners to build more positive connections with homeowners and reward them with reduced insurance costs.”
Notion points to its partnership with three of the top five home insurance providers in the country to offer a cost-effective loss mitigation system and home telematics solution. It will use the new funding to expand those existing partnerships, as well as pursue new relationships with leading property insurers. The capital will also support product development and manufacturing, increased marketing efforts, and critical hires across the company’s engineering, data science and marketing departments.
Home monitoring solutions come in two basic flavors, in the Notion world view: traditional, expensive security companies that require a hefty monthly fee and long-term contract, or more complicated DIY solutions that are limited to a single use.
Notion paints its program as low-cost and easy-to-install. Each sensor is identical and multi-functional, which means homeowners can place them in different spots around their home depending on what they care about — from doors opening and closing, to monitoring temperature, to detecting water leaks or a sounding alarm.
In addition to leading the round, Mitch Kitamura, Managing Director at Draper Nexus, and Toshi Otani, Co-Founder and Managing Director at TransLink Capital, will join the Notion board of directors.
“By putting Notion into homes across the country, insurance companies have unlocked an opportunity to positively engage with mainstream consumers via smart home technology,” Kitamura said.