Judge Denies Motion to Vacate Decision Invalidating Directive Mandating Collection of Sales Tax by Out-of-State Internet Providers

As we previously noted, Judge Kaplan invalidated a directive issued by the Massachusetts Department of Revenue (DOR). Directive 17-1 would have required internet vendors outside of Massachusetts to collect and remit sales taxes to the DOR where certain thresholds of product sales into Massachusetts were met. Judge Kaplan ruled that because the directive substantially altered the rights and interests of internet vendors, the directive amounted to an improperly imposed regulation. That was chapter one.

In chapter two, the subject of this post, the DOR moved to vacate Judge Kaplan’s original decision (copy here). According to the DOR, it had revoked the directive before the court had entered final judgment. Judge Kaplan denied the motion to the extent that it sought to vacate the original decision. According to Judge Kaplan:

The court denies the motion to the extent that it requests that the Decision be vacated. Count I of the complaint [, which alleged that the  directive violated G.L. c. 30A,] presented a pure issue of law. The parties submitted what appeared to be comprehensive briefs addressing it. There was a lengthy oral argument on the issue on June 27, 2017. The Directive was to go into effect on July 1, 2017. During argument, the DOR rejected the court’s suggestion that it voluntarily delay the date by which internet retailers would have to be in compliance with the Directive. During argument, the court made quite clear its intention to enter a final judgment on Count [I] (and dismiss the other counts), if it concluded that the Directive was a regulation, as it was undisputed that it had not been promulgated following the procedures required by the Administrative Procedures Act. The DOR expressed no objection to this approach until the following day. By then, the Court had completed and signed the Decision while the matters raised by Count One were still actively in dispute between the parties to this litigation.

Judge Kaplan did, however, amend his order set out in his original decision to provide as follows: “Final Judgment shall enter dismissing the Complaint on the grounds that the claims asserted therein have become moot.”

American Catalog Mailers Association et al. v. Michael J. Heffernan

September 11, 2017

Full decision here.

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