Not The Sweet Kind Of “Cookies”: The New Tax On Vendors Making Internet Sales

By Samantha M. Vasques, & March 19, 2018Uncategorized

Sure, it’s the holiday season, but these cookies aren’t the heart-shaped kind that you give your Valentine. These “cookies” are packets of data that businesses rely on to operate their websites. Cookies allow businesses to identify and track users, then customize those users’ web experiences. For the non tech-savvy among us,the concept is best understood by reference to the old Hansel and Gretel story: cookies are the bread crumbs that businesses can use to follow your trail and recognize you when you land back on their home page.

Why should cookies matter to you? Well, if you own a business and your website uses cookies, you may be subject to recent tax regulations issued by Massachusetts, and similar regulations that are under way in Connecticut. In the most basic terms, if your business’ home base is outside of Massachusetts, and you don’t already pay sales or use tax in the state, look at your Massachusetts revenue and deliveries. If you’ve made half a million dollars’ worth of sales over the Internet to customers in Massachusetts, and made 100 or more deliveries into the state, your business may be subject to tax. Connecticut’s Commissioner of Revenue has indicated that his state will take a similar path in early 2018, potentially with a lower threshold of $300,000 in sales over the Internet for out-of-state businesses.

What’s interesting is that an Internet vendor’s use of cookies is a key part of the justification for the new regulation in Massachusetts. In the state’s view, cookies, along with other in-state software and ancillary data, constitute a vendor’s “physical” presence in Massachusetts. The regulation specifically notes that cookies are “distributed to or stored on the computers or other physical communications devices of a vendor’s in-state customers, and may enable the vendor’s use of such physical device.”

By staking their claim to taxes on out-of-state businesses’ Internet sales, Massachusetts is betting that the United States Supreme Court will take a fresh look at the law it laid down in Quill Corp. v. North Dakota, 504 U.S. 298 (1992). In that case, the Supreme Court held that an out-of-state mail-order business was not subject to North Dakota’s use tax merely by soliciting sales and delivering goods in the state. While the business in Quill had no physical presence in North Dakota, Massachusetts declares that Internet vendors do have such a presence by virtue of—among other things—the software and data used by in-state consumers.

Are “cookies” so different from catalogs that the Supreme Court will overturn Quill and allow states to tax out-of-state businesses making sales over the Internet? Whether this new regulatory framework will survive a constitutional challenge remains to be seen. What is certain, however, is that businesses must stay informed in a rapidly-changing tax landscape and be prepared for new taxes on Internet sales, as other states follow the lead of Massachusetts and Connecticut. To learn more about this issue or for information on other business matters important to your organization, contact Attorney Samantha M. Vasques at 401-824-5100 or email

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Samantha M. Vasques is an Associate with Pannone Lopes Devereaux & O'Gara LLC and a member of the Estate and Trust Planning, Administration and Litigation, Corporate & Business and Litigation Teams. She concentrates her practice on providing legal support, advocacy and counsel representing clients including performing pre-trial investigation and discovery, and motions and pleadings preparation through trial, settlement and the appeal process. Attorney Vasques is the co-author of "A New Hope: Tortious Interference with an Expected Inheritance in Rhode Island," which was published in the Roger Williams University Law Review.

She earned her J.D., summa cum laude, from Roger Williams University School of Law, and was Assistant Editor of the Law Review (2013-2014). She is a recipient of CALI Excellence for the Future Awards in several subjects, including in Business Planning, Contracts, Evidence, Property and Sales. Attorney Vasques also served as a Judicial Law Clerk for the Honorable Justice William P. Robinson III of the Rhode Island Supreme Court and as a Judicial Extern for the Honorable O. Rogeriee Thompson of the United States Court of Appeals for the First Circuit in Providence, RI. She graduated with a B.A. in Economics from the University of Massachusetts at Amherst, summa cum laude. Attorney Vasques is admitted to practice law in Massachusetts and Rhode Island and is a member of the Board of the Rhode Island Women's Bar Association and a member of the Rhode Island Bar Journal Editorial Board.

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