Keeping State Taxation Powers Within the Law

U.S. Auto Parts Network, Inc. v. Commissioner of Revenue

In December 2022, the Massachusetts Supreme Judicial Court ruled in favor of U.S. Auto Parts Network, Inc., in a case that involving taxation of online sales. Pioneer Public Interest Law Center — then known as PioneerLegal — had submitted an amicus brief in the case.

In 2018, in the Wayfair case, the U.S. Supreme Court ruled that a state could, consistent with the Commerce Clause, require a company that engages in online retail sales to file a sales tax return and to collect the tax, provided the company has a “substantial nexus” with the state, even if it has no physical presence in the state. The Court  left it to the states to define “substantial nexus.” The Massachusetts Department of Revenue (DOR) then sent a tax bill to U.S. Auto Parts, an out-of-state retailer, for a period before the Wayfair decision.

Pioneer’s amicus brief argued that the application of Wayfair retroactively was impermissible, and the state’s SJC agreed. Importantly, the ruling in this case will apply in other instances where the DOR seeks to expand tax liabilities retroactively, an invidious technique that has been seen in other contexts.