News and Insights

Massachusetts Rules That Wayfair Cannot Be Applied Retroactively

Tax Development Dec 23, 2022

Massachusetts Rules That Wayfair Cannot Be Applied Retroactively” Decision

As reported earlier, the Massachusetts Supreme Judicial Court agreed to a direct review of U.S. Auto Parts Network, Inc. v. Commissioner1 to determine the application of the state’s “cookie nexus” regulation, which was in effect for two years from October 1, 2017 until October 1, 2019. The state’s economic nexus statute modeled on the Wayfair2 decision became effective on that ending date, replacing the regulation.

Last year, the Massachusetts Appellate Tax Board (ATB) overturned the Department of Revenue’s (“the Department’s”) decision in U.S. Auto Parts, requiring the collection of sales tax for tax periods prior to the Supreme Court’s Wayfair decision. Previously, the Department ruled that placing cookies and apps on Massachusetts customers’ computers and using third-party content delivery networks with servers in Massachusetts created sales tax nexus for U.S. Auto Parts under Massachusetts’ “cookie nexus” standard. The ATB, however, disagreed with the Department and concluded that despite the complexity involved in defining physical presence, the cookies, apps, and content delivery networks in the state did not constitute physical presence nexus. The ATB also ruled that the Wayfair decision would not be applied retroactively to the tax periods at issue. The Department appealed the case to the Massachusetts Court of Appeals, and U.S. Auto Parts then applied for direct review by the Massachusetts Supreme Judicial Court. 

This week, the Supreme Judicial Court issued its ruling concluding that the Commissioner of Revenue could not apply the new nexus rules instituted after Wayfair to apply retroactively to the years at issue in this case. The Court further concluded that what the Commissioner described as “electrons” in the Commonwealth does not satisfy the applicable physical presence test to require collection of sales and use tax. 

It should be noted that the Court’s decision only addressed the tax years between October 2017 and October 2019, before new regulations were in place to follow the Wayfair decision.

1 MA Ct App. No. 2022-P-0194.

2 South Dakota v. Wayfair Inc. 138 S. Ct. 2080 (2018). 


Brian Stromen

Mary Bernard

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at