Title: D & H Distributing Co. v. Commissioner of Revenue

State: massachusetts

Issuer: Massachusetts Supreme Court

Document:

NOTICE: All slip opinions and orders are subject to formal 
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SJC-12260 
 
D & H DISTRIBUTING COMPANY  vs.  COMMISSIONER OF REVENUE. 
 
 
 
Suffolk.     April 3, 2017. - July 31, 2017. 
 
Present:  Gants, C.J., Lenk, Hines, Gaziano, Lowy, Budd, 
& Cypher, JJ. 
 
 
Taxation, Sales and use tax.  Internet.  Constitutional Law, 
Commerce clause, Interstate commerce, Taxation.  Interstate 
Commerce. 
 
 
 
 
Appeal from a decision of the Appellate Tax Board. 
 
 
The Supreme Judicial Court on its own initiative 
transferred the case from the Appeals Court. 
 
 
 
Philip S. Olsen (Jonathan A. Block also present) for the 
taxpayer. 
 
Julie E. Green, Assistant Attorney General, for 
Commissioner of Revenue. 
 
 
 
CYPHER, J.  If a consumer enters his or her neighborhood 
sporting goods store in Massachusetts and purchases a baseball 
glove, the store, as the "vendor," collects the Massachusetts 
sales tax owed from the consumer and remits it to the Department 
of Revenue (department).  See G. L. c. 64H, §§ 1, 2.  This case 
2 
 
 
evaluates a more complex transaction in which a Massachusetts 
consumer instead finds a hypothetical baseball glove online, and 
purchases it from an out-of-State retailer who then orders the 
glove from a Massachusetts wholesaler and directs the wholesaler 
to deliver the glove directly to the doorstep of the 
Massachusetts consumer.  In that more complicated transaction, 
known as a "drop shipment sale," the wholesaler is considered to 
be the vendor, and is obligated to collect sales tax and remit 
it to the department. 
 
The taxpayer, D & H Distributing Company (D & H), is a 
company in the position of the hypothetical wholesaler just 
described.  It appeals from a decision of the Appellate Tax 
Board (board) in which the board concluded that under a 
provision of the Massachusetts sales tax statute known as the 
"drop shipment rule," D & H was responsible for collecting and 
remitting the sales tax due on products it sold to the out-of-
State retailers and then delivered to consumers.  G. L. c. 64H, 
§ 1.  We agree with the board's conclusion, and also reject 
D & H's argument that the statutory drop shipment rule violates 
the dormant commerce clause of the United States Constitution.  
Accordingly, we affirm the decision of the board. 
 
1.  Statutory framework.  a.  Sales tax.  General Laws 
c. 64H distinguishes between retail sales transactions and 
sales-for-resale transactions.  Retail sales of goods and 
3 
 
 
services are subject to tax in Massachusetts.  G. L. c. 64H, 
§ 2.  In contrast, sales for resale -- that is, sales of goods 
by a wholesale supplier to a retailer that will ultimately sell 
to an end consumer -- are not subject to tax; only the 
subsequent retail sale is.  See G. L. c. 64H, § 1 (defining 
"retail sale" as "a sale of services or tangible personal 
property or both for any purpose other than resale"); G. L. c. 
64H, § 2 (imposing sales tax upon "sales at retail"). 
 
The statute also distinguishes between a retailer that is 
engaged in business in Massachusetts and one that is not.  Where 
a retailer is engaged in business in Massachusetts but purchases 
the goods it sells a Massachusetts consumer from a wholesaler, 
sales tax is charged on the final sale to the customer, and the 
retailer is the "vendor," G. L. c. 64H, § 1, responsible to pay 
the tax.  G. L. c. 64H, § 2.  However, if a retailer is not 
engaged in business in Massachusetts in the sense that the 
retailer does not have any in-State physical presence, 
Massachusetts cannot require the retailer to collect and remit 
sales tax.  See Quill Corp. v. North Dakota, 504 U.S. 298, 314-
315 (1992) (retailers without in-State physical presence may not 
be compelled to collect State sales tax); National Bellas Hess, 
Inc. v. Department of Revenue of Ill., 386 U.S. 753, 758 (1967) 
4 
 
 
(same).1  In light of the Supreme Court's physical presence 
requirement, in the previously described hypothetical, if the 
out-of-State retailer of the baseball glove purchased online by 
the Massachusetts consumer had no physical business presence 
here, it could not be compelled to collect Massachusetts sales 
tax. 
 
b.  Use tax.  The use tax, under G. L. c. 64I, was designed 
to prevent loss of sales tax revenue from such out-of-State 
retail purchases.  Commissioner of Revenue v. J.C. Penney Co., 
431 Mass. 684, 687 (2000).  The use tax obligates consumers to 
remit tax to the Commissioner of Revenue (commissioner) "upon 
the storage, use or other consumption in the commonwealth of 
tangible personal property or services purchased from any 
vendor," G. L. c. 64I, § 2, that was not subject to sales tax 
upon the original sale.  G. L. c. 64I, § 3.  In practice, 
however, consumers seldom remit use tax of their own volition, 
and are not likely even to be aware of the requirement.  See 
Tenczar, DOR to Taxpayers:  Don't Forget Use Tax, Commonwealth 
                     
 
1 The United States Supreme Court's decision in Quill v. 
North Dakota, 504 U.S. 298 (1992), has been roundly criticized, 
including in a recent Supreme Court concurrence, but remains 
binding on this court.  See Direct Mktg. Ass'n v. Brohl, 135 S. 
Ct. 1124, 1134-1135 (2015) (Kennedy, J., concurring) (describing 
Quill as "inflicting extreme harm and unfairness on the States" 
in light of "the dramatic technological and social changes that 
[have] taken place in our increasingly interconnected economy," 
and comparing $180 billion of United States mail-order sales in 
1992 to $3.16 trillion of electronic commerce sales in 2008). 
5 
 
 
Mag. (Winter 2014) (Massachusetts 2012 use tax compliance rate 
estimated at under two percent; commissioner believes "people 
don't pay because they really don't understand how the use tax 
works").2  States that rely on use tax lose substantial tax 
revenue.  See Direct Mktg. Ass'n v. Brohl, 135 S. Ct. 1124, 1127 
(2015) (low compliance with use tax leads to significant revenue 
loss).3 
 
c.  The drop shipment rule.  The drop shipment rule, G. L. 
c. 64H, § 1, offers an alternative to the consumer-reported use 
tax scheme.  The rule applies to a sales transaction such as the 
hypothetical online baseball glove purchase.  When the wholesale 
                     
 
2 The Commonwealth Magazine article is available at 
https://commonwealthmagazine.org/economy/003-dor-to-taxpayers-
dont-forget-use-tax [https://perma.cc/6NPJ-7BZX].  See also N. 
Manzi, Use Tax Collection on Income Tax Returns in Other States, 
Research Department of the Minnesota House of Representatives, 
at 8 (updated Apr. 2015), http://www.house.leg.state.mn.us 
/hrd/pubs/usetax.pdf [https://perma.cc/B9PZ-E7QV] (Massachusetts 
use tax revenues have increased in wake of more explicit 
reporting structures). 
 
 
3 See also Direct Mktg. Ass'n v. Brohl, 814 F.3d 1129, 1133 
(l0th Cir.), cert. denied, 137 S. Ct. 591 (2016) ("The regimes 
differ greatly in effectiveness -- compliance with the sales tax 
is extremely high, and compliance with the use tax is extremely 
low"); D. Bruce, W.F. Fox, & L. Luna, State and Local Government 
Sales Tax Revenue Losses from Electronic Commerce, at 4 (2009) 
(forecasting across Federal, State, and local uncaptured 2012 
electronic commerce tax revenue at $11.4 billion).  But see 
Henchman, Internet Sales Tax Collections Falling Far Short of 
Experts' Estimates, Tax Found. (Mar. 18, 2013), 
https://taxfoundation.org 
/internet-sales-tax-collections-falling-far-short-experts-
estimates [https://perma.cc/2U43-27QM] (tax revenue in 
California and New York from online sales, although substantial, 
was much lower than forecast). 
6 
 
 
supplier is engaged in business in the Commonwealth but the 
retailer is not, the drop shipment rule requires the 
Massachusetts wholesale supplier to collect and remit the sales 
tax due on the ultimate retail sale to the consumer.  G. L. 
c. 64H, § 1.4  Because the sales and use tax schemes are 
"complementary," Town Fair Tire Ctrs., Inc. v. Commissioner of 
Revenue, 454 Mass. 601, 605 (2009), transactions subject to tax 
under the drop shipment rule, as retail sales, are exempt from 
use tax.  G. L. c. 64I, § 7 (a). 
 
The commissioner has consistently interpreted and enforced 
the statutory drop shipment rule in the manner just described 
                     
 
4 Specifically, the drop shipment rule, which is set out as 
part of the definition of "[s]ale at retail," provides: 
 
 
"When tangible personal property is physically 
delivered by an owner, a former owner thereof, a factor, or 
an agent or representative of the owner, former owner or 
factor, to the ultimate purchaser residing in or doing 
business in the commonwealth, or to any person for 
redelivery to the purchaser, pursuant to a retail sale made 
by a vendor not engaged in business in the commonwealth, 
the person making or effectuating the delivery shall be 
considered the vendor of that property, the transaction 
shall be a retail sale in the commonwealth by the person 
and that person, if engaged in business in the 
commonwealth, shall include the retail selling price in its 
gross receipts, regardless of any contrary statutory or 
contractual terms concerning the passage of title or risk 
of loss which may be expressly or impliedly applicable to 
any contract or other agreement or arrangement for the 
sale, transportation, shipment or delivery of that 
property.  He shall include the retail selling price of the 
property in his gross receipts."  (Emphases added.) 
 
G. L. c. 64H, § 1. 
7 
 
 
since the sales tax statute became effective in 1968, following 
the Supreme Court's National Bellas Hess decision that the Court 
reaffirmed in the Quill case.  See, e.g., Letter Ruling 79-43 
(Oct. 25, 1979); Letter Ruling 80-76 (Oct. 27, 1980); Letter 
Ruling 81-85 (Sept. 17, 1981); Letter Ruling 84-26 (Apr. 27, 
1984); Letter Ruling 85-35 (Feb. 27, 1985); and Technical 
Information Release 04-26 (Oct. 21, 2004), 1 Official MassTax 
Guide, at PWS-112, PWS-451, PWS-481, PWS-521, PWS-640, PWS-696 
(Thomson Reuters 2017).  See also National Bellas Hess, Inc., 
386 U.S. at 758.  The rule is undergirded by the separate 
statutory presumption that a sale is a taxable retail sale, with 
the burden of proving otherwise placed upon the vendor.  G. L. 
c. 64H, § 8 (a).5 
2.  Background.  D & H sells consumer goods to retailers at 
wholesale and delivers the goods to Massachusetts consumers and 
others on behalf of those retailers.  D & H appeals from a 
decision of the board rejecting its claim to abate sales taxes 
                     
 
5 General Laws c. 64H, § 8, provides in relevant part: 
 
 
"(a) It shall be presumed that all gross receipts of a 
vendor from the sale of services or tangible personal 
property are from sales subject to tax until the contrary 
is established.  The burden of proving that a sale of 
services or tangible personal property by any vendor is not 
a sale at retail shall be upon such vendor unless he takes 
from the purchaser a certificate to the effect that the 
service or property is purchased for resale, and such 
certificate is received and made available to the 
[Commissioner of Revenue] . . . ." 
8 
 
 
assessed by the commissioner pursuant to the drop shipment rule 
for the period from September 1, 2006, to March 31, 2009.  D & H 
challenges the manner in which the commissioner applied the rule 
to its business, arguing that the drop shipment rule required 
the commissioner to prove, for each challenged sale transaction, 
that the out-of-State retailer was not engaged in business in 
the Commonwealth and thus not itself compelled to collect sales 
tax.  For the reasons that follow, we conclude that the 
commissioner and the board correctly determined that D & H was 
responsible as the vendor for collecting and remitting the sales 
tax due on products it sold to the out-of-State retailers and 
then delivered to consumers where it failed to meet its burden 
of proving that the retailers were engaged in business in 
Massachusetts.  Accordingly, we affirm the decision of the 
board. 
 
a.  Facts.  We summarize the findings of fact made by the 
board.  See G. L. c. 58A, § 13 ("The decision of the board shall 
be final as to findings of fact").  D & H is a wholesale 
supplier of consumer products, including computer products, home 
electronics, and sporting goods, which it sold primarily to 
retailers like "big box stores" and their electronic commerce 
equivalents.  At all times relevant to this case, D & H was 
incorporated and headquartered in Pennsylvania and had six 
warehouse distribution centers throughout the country.  It 
9 
 
 
employed a sales representative who lived and worked in 
Massachusetts.  D & H considered this presence sufficient to 
establish nexus for sales tax purposes.6 
 
Before contracting with retailers to sell and deliver 
goods, D & H required that all retailers submit a customer 
application.  As part of that application, retailers were 
required to list all States in which they did business, and to 
provide copies of resale certificates swearing that all goods 
were purchased for resale, with sales tax to be collected by the 
retailer on ultimate sale to the end consumer.  See G. L. 
c. 64H, § 8.  The terms and conditions of the application stated 
that retailers would be billed sales tax until they furnished 
such certificates.  This was an attempt by D & H to ensure that 
sales by D & H would not be characterized as taxable sales.7 
 
The drop shipment transactions at issue were structured as 
follows.  First, a Massachusetts consumer purchased a product 
from an out-of-State retailer.  Second, the out-of-State 
                     
 
6 "Engaged in business in the commonwealth" is one means of 
establishing nexus for sales tax purposes; in this opinion, we 
use "engaged in business" interchangeably with "nexus."  See 
Technical Information Release 96-8 (Oct. 16, 1996), 1 Official 
MassTax Guide PWS-37 (Thomson Reuters 2017). 
 
 
7 Specifically, the application required retailers to 
certify, "[I]f any property or service so purchased tax-free is 
used or consumed by the firm to make it subject to a Sales or 
Use Tax, we will pay the tax due directly to the proper taxing 
authority when the state law so provides or informs the seller 
for added tax billing." 
10 
 
 
retailer purchased the product from D & H.  Finally, at the 
retailer's direction, D & H packaged and shipped the product 
directly to the Massachusetts consumer.  Neither D & H nor the 
retailer collected sales tax on these drop shipment sales. 
 
The commissioner conducted an audit of D & H records for 
the years 2006-2009, focusing on drop shipment transactions.  
The auditor identified the drop-shipment transactions as those 
with a ship-to address (i.e., the address of the end consumer) 
in Massachusetts but a bill-to address (that of the retailer) 
outside Massachusetts.  From this group, the auditor first 
eliminated sales to retailers known to be engaged in business in 
Massachusetts, such as Best Buy and Target.  The auditor 
similarly removed from consideration sales to retailers 
registered as Massachusetts vendors for sales tax purposes. 
 
Having thus winnowed the list of taxable drop-shipment 
transactions, the auditor provided the list to D & H so that it 
had an opportunity to demonstrate the nontaxable nature of any 
contested transaction.  D & H provided several resale 
certificates that were sufficient to establish a nontaxable 
transaction.  As to the rest, D & H offered no evidence that the 
sales at issue were made to retailers engaged in business in the 
Commonwealth that would thus be responsible for collecting sales 
tax.  At the audit's conclusion, the commissioner assessed D & H 
additional taxes, interest, and penalties totaling $525,024.17 
11 
 
 
for the periods at issue.  The auditor used the wholesale resale 
price as a proxy for the final sales price. 
 
b.  Procedural history.  Following the audit, D & H sought 
an abatement, which the commissioner denied.  D & H then 
appealed from this decision to the board.  In its hearing before 
the board, D & H offered documentary evidence and the testimony 
of its comptroller, and the commissioner presented her case 
through the auditor's testimony.  The board issued its decision 
for the commissioner in October, 2014, followed by findings of 
fact and report in April, 2016.  D & H then filed its appeal in 
the Appeals Court, and we transferred the case to this court on 
our own motion. 
 
3.  Discussion.  a.  Standard of review.  "We will not 
disturb the board's findings so long as they are supported by 
substantial evidence and a correct application of the law."  
Bell Atl. Mobile of Mass. Corp. v. Commissioner of Revenue, 451 
Mass. 280, 283 (2008).  Although we resolve questions of law de 
novo, in doing so we give "substantial deference" to the board's 
reasonable interpretation of tax statutes because the board is 
an agency charged with administration of tax law (citation 
omitted).  Attorney Gen. v. Commissioner of Ins., 450 Mass. 311, 
319 (2008). 
 
b.  Burden of proof.  D & H argues that before the 
commissioner may assess sales tax against a wholesale deliverer 
12 
 
 
of retail goods pursuant to the drop shipment rule, the 
commissioner must establish that the retailer in the 
transactions at issue did not do business in Massachusetts.  
Although the commissioner must provide an evidentiary basis for 
an assessment, we reject D & H's contention that the 
commissioner failed adequately to do so here. 
 
The validity of a tax assessment is presumptively correct, 
and the taxpayer bears the burden of proving he or she is 
entitled to an abatement as a matter of law.  Schlaiker v. 
Assessors of Great Barrington, 365 Mass. 243, 245 (1974).  See 
Boston Professional Hockey Ass'n v. Commissioner of Revenue, 443 
Mass. 276, 285 (2005), quoting Koch v. Commissioner of Revenue, 
416 Mass. 540, 556 (1993) ("The taxpayer has the burden of 
proving as a matter of law [its] right to an abatement of the 
tax").  See generally General Elec. Co. v. Assessors of Lynn, 
393 Mass. 591, 599 (1984) ("taxpayer bears the burden of 
persuasion of every material fact").  This is consistent with 
the general principle that the moving party bears the burden of 
proof, and finds additional support in several "compelling 
rationales" unique to tax law.  Raleigh v. Illinois Dep't of 
Revenue, 530 U.S. 15, 21 (2000).  "[N]ot to be disregarded 
lightly," these "powerful justifications" for the taxpayer's 
burden include "the vital interest of the government in 
acquiring its lifeblood, revenue"; "the taxpayer's readier 
13 
 
 
access to the relevant information," and "the importance of 
encouraging voluntary compliance by giving taxpayers incentives 
to self-report and to keep adequate records in case of dispute" 
(citations omitted).  Id. 
 
Certainly, the taxpayer's burden of proof does not relieve 
the department of its obligation to provide support for the 
validity of its assessment.8  See First Nat'l Stores, Inc. v. 
Assessors of Somerville, 358 Mass. 554, 559 (1971).  See also In 
re Healthco Int'l, Inc., 257 B.R. 379, 382-383 (Bankr. D. Mass. 
2001), aff'd as to sales tax issue, U.S. Dist. Ct., No. 01-
40047-JLT (D. Mass. July 8, 2001) (commissioner failed to meet 
burden of production where department had destroyed all audit 
records and could neither substantiate nor even explain 
assessment amount).  In the absence of supporting evidence for a 
tax assessment, a taxpayer will be entitled to an abatement.  
See First Nat'l Stores, Inc., 358 Mass. at 559.  See also In re 
Healthco Int'l, Inc., 257 B.R. at 383, citing Waban, Inc. v. 
Commissioner of Revenue, 22 Mass. App. Tax Bd. Rep. 31, 38 
(1997) (taxpayer entitled to abatement where department 
                     
 
8 The Department of Revenue (department) may verify by audit 
the accuracy of any filed tax return.  G. L. c. 62C, § 26 (b).  
When such an audit identifies a deficiency, the department may 
assess the proper tax and make a demand for payment.  G. L. 
c. 62C, §§ 26 (b), 31.  A taxpayer disputing the assessment may 
apply for abatement, and any tax found "excessive in amount or 
illegal" shall be abated, in whole or in part.  G. L. c. 62C, 
§ 37. 
14 
 
 
introduced no documentary evidence and scant testimony 
supporting its assessment); Coan v. Commissioner of Revenue, 25 
Mass. App. Tax Bd. Rep. 763, 766 (2000) (same, where department 
was unable to establish evidentiary basis for its assessment 
despite readier access to relevant records). 
 
In this case, the department established a factual basis 
for the validity of its assessment, which D & H failed to rebut. 
D & H had a business practice of requiring any retailer customer 
to disclose the States in which it did business; the auditor 
compiled a list of drop shipment transactions in which the 
retailer was not registered as a Massachusetts vendor and no tax 
had been collected, affording D & H the opportunity to rebut the 
conclusion that the retailers did not do business in 
Massachusetts; and D & H did not do so.  Particularly where 
D & H has "readier access to the relevant information" than does 
the commissioner, its failure to demonstrate that its retail 
customers were doing business in the Commonwealth ends the 
inquiry.  See Raleigh, 530 U.S. at 21; William Rodman & Sons, 
Inc. v. State Tax Comm'n, 373 Mass. 606, 611 (1977) ("[a]s a 
matter of sound policy," burden should be placed on wholesaler 
with best access to records).  Moreover, D & H bore the burden 
of proving otherwise pursuant not only to the general principle 
that the burden rests with the taxpayer claiming an abatement, 
but also to G. L. c. 64H, § 8 (a) (absent resale certificate 
15 
 
 
from purchaser, "[t]he burden of proving that a sale of services 
or tangible personal property by any vendor is not a sale at 
retail shall be upon such vendor"). 
 
c.  Dormant commerce clause.9  D & H also challenges the 
drop shipment rule on constitutional grounds, contending that 
the rule discriminates against interstate commerce.  See art. I, 
§ 8, cl. 3, of the United States Constitution; Complete Auto 
Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977) (State tax does 
not unconstitutionally burden interstate commerce if tax is 
applied to activity having substantial nexus with State, is 
fairly apportioned, does not discriminate against interstate 
commerce, and is fairly related to services provided by State).  
Addressing a constitutional challenge to a tax measure "begin[s] 
with the premise that the tax is endowed with a presumption of 
validity and is not to be found void unless its invalidity is 
established beyond a rational doubt."  Andover Sav. Bank v. 
Commissioner of Revenue, 387 Mass. 229, 235 (1982). 
  
A tax is discriminatory in violation of the dormant 
commerce clause when it results in "differential treatment of 
in-[S]tate and out-of-[S]tate economic interests that benefits 
                     
 
9 Article I, § 8, cl. 3, of the United States Constitution -
- the commerce clause -- expressly grants Congress broad power 
to regulate interstate commerce.  Comptroller of the Treasury of 
Md. v. Wynne, 135 S. Ct. 1787, 1794 (2015) (Wynne).  Where 
Congress has neither preempted nor approved State regulation, 
the negatively implied dormant commerce clause still operates to 
limit State interference with interstate commerce.  Id. 
16 
 
 
the former and burdens the latter."  Oregon Waste Sys., Inc. v. 
Department of Envtl. Quality of Or., 511 U.S. 93, 99 (1994).  
D & H argues that wholesale suppliers with a Massachusetts nexus 
are penalized for doing business with out-of-State retailers, 
because transactions with in-State retailers do not cast 
wholesale suppliers as vendors obligated to collect sales tax.  
But even assuming this disparity for the sake of argument, such 
a scheme would establish for Massachusetts retailers a 
disadvantage at odds with the concerns animating the dormant 
commerce clause.  See Department of Revenue of Ky. v. Davis, 553 
U.S. 328, 337-338 (2008) ("The modern law of what has come to be 
called the dormant [c]ommerce [c]lause is driven by concern 
about 'economic protectionism -- that is, regulatory measures 
designed to benefit in-[S]tate economic interests by burdening 
out-of-[S]tate competitors'" [citation omitted]). 
 
Moreover, by focusing on the party collecting the tax, 
D & H fails to demonstrate any unconstitutional burden created 
by the tax itself.10  See Quill Corp., 504 U.S. at 312 ("the 
                     
 
10 Because the drop shipment rule requires that vendors 
include the retail selling price in gross receipts, G. L. 
c. 64H, § 1, D & H Distributing Company (D & H) argues that it 
lacks the necessary information for compliance because it has 
knowledge only of the wholesale price.  But a wholesale supplier 
like D & H is better positioned than the Commissioner of Revenue 
(commissioner) to solicit this information in its contractual 
dealings with thousands of out-of-State retailers.  See Lyon 
Metal Prods., Inc. v. State Bd. of Equalization, 58 Cal. App. 
4th 906, 912 n.3 (1997), cert. denied, 524 U.S. 916 (1998).  
17 
 
 
[c]ommerce [c]lause and its nexus requirement are informed not 
so much by concerns about fairness for the individual defendant 
as by structural concerns about the effects of [S]tate 
regulation on the national economy").  See also Genentech, Inc. 
v. Commissioner of Revenue, 476 Mass. 258, 272 (2017).  Such an 
unconstitutional burden exists when a State taxes a transaction 
"more heavily when it crosses [S]tate lines than when it occurs 
entirely within the State."  Comptroller of the Treasury of Md. 
v. Wynne, 135 S. Ct. 1787, 1794 (2015), quoting Armco Inc. v. 
Hardesty, 467 U.S. 638, 642 (1984).11  Here, "the same sales tax 
would be imposed on the transaction if it had happened entirely 
within [Massachusetts]."  Lyon Metal Prods., Inc. v. State Bd. 
of Equalization, 58 Cal. App. 4th 906, 912 (1997), cert. denied, 
524 U.S. 916 (1998) (finding no commerce clause violation under 
                                                                  
Alternatively, a standard markup may be codified.  See 2 J.R. 
Hellerstein & W. Hellerstein, State Taxation § 18.04[1][b][iv] 
(3d ed. 2002) (citing Cal. Code Regs. tit. 18, § 1706[c][2], 
which calculates retail price using ten per cent markup on drop 
shipper's price absent other evidence).  We do not resolve the 
issue here, where the commissioner assessed sales tax based only 
on the lower wholesale price. 
 
 
11 A State tax subjecting interstate commerce to the burden 
of "multiple taxation" also creates an undue burden.  Wynne, 135 
S. Ct. at 1794.  D & H argues that the drop shipment rule does 
this by subjecting the same transactions to both sales and use 
tax.  This argument misapprehends the complementary nature of 
our sales and use tax schemes, discussed supra, under which any 
transaction subject to sales tax is exempt from use tax.  G. L. 
c. 64I, § 7 (a).  Even ignoring the low consumer compliance with 
the use tax, any use tax collected in error on a drop shipment 
entitles the consumer to a credit. 
18 
 
 
California's cognate rule).  Because transactions with retailers 
in and out of State are equally subject to tax, there is no 
greater burden on the interstate transaction and thus no 
violation of the dormant commerce clause. 
 
 
 
 
 
 
 
Decision of the Appellate  
 
 
 
 
 
 
 
  Tax Board affirmed.