830 CMR, § 64H.6.1

Current through Register 1533, October 25, 2024

Section 64H.6.1 - Casual and Isolated Sales

(1)Statement of Purpose; Outline of Topics.

(a)Purpose. 830 CMR 64H.6.1 describes the application of the Massachusetts sales and use tax to casual and isolated sales made by persons, groups, for-profit, and nonprofit organizations, and persons, groups, or organizations acting through or on their behalf. It also deals with the taxation of sales made to them. 830 CMR 64H.6.1 will apply retroactively to all open tax years.

(b)Outline of Topics. This regulation is organized as follows:

1. Statement of Purpose; Outline of Topics.

2. Definitions.

3. General Rules.

4. Special Rules for Fundraising Activities.

5. Sales in the Regular Course of Business.

6. Special Substantiation Requirements.

7. Examples.

8. Vendor Registration Requirements.

9. Revocation of Prior Policies, Rulings and Agreements.

(2)Definitions. For purposes of 830 CMR 64H.6.1, the terms below have the following meanings:

Casual and Isolated Sales, sales of tangible personal property originally acquired for use or consumption by a seller and later resold by that seller other than in the regular course of a business engaged in by that seller.

Government Organization, government organizations include the United States and its agencies, the Commonwealth of Massachusetts, and any of its political subdivisions and their respective agencies, and any organization that Massachusetts is prohibited from taxing under the Constitution or laws of the United States.

Nonprofit Organization, includes any organization falling within the provisions of the Internal Revenue Code (IRC) § 501(c) as amended and in effect for the applicable period, whether or not the organization has been classified as such by the Internal Revenue Service or the Department of Revenue.

Retail Establishment, any store or other medium or facility through which the business of selling services or tangible personal property at retail is regularly conducted. The presence of a retail establishment is a question of fact.

Sale at Retail or Retail Sale, a sale of services or tangible personal property or both for any purpose other than resale in the regular course of business.

(3)General Rules.

(a) The sales or use tax does not apply to casual and isolated sales made by a person, group, or organization not regularly engaged in the business of selling tangible personal property. The casual and isolated sales exemption set forth in M.G.L. c. 64H, § 6(c) may apply to sales by a person, group or organization engaged in the business of making sales of tangible personal property, if the sales are of a type of property not ordinarily sold in the regular course of the person's, group's or organization's business. See, e.g.,830 CMR 64H.6.1(7)(a)5. The use tax, however, does apply to the casual and isolated sale of a motor vehicle or trailer as defined in M.G.L. c. 90, § 1, or of a boat or airplane where the purchaser is not the spouse, parent, brother, sister, or child of the seller.

(b) Items not purchased for resale in the regular course of business are generally taxable. Whether or not the purchase of such property was taxable, any person, group, or organization may later make casual and isolated sales of such property. So long as the property sold at such sales was not originally acquired for resale, the number of these sales in a calendar year is immaterial.

(c) Sales to government organizations are exempt under M.G.L. c. 64H, § 6(d).

(d) Under M.G.L. c. 64H, § 6(e), sales to nonprofit organizations which are exempt from taxation under the Internal Revenue Code § 501(c)(3) or sales to nonprofit organizations that are in the process of obtaining exemption under § 501(c)(3), but have not yet obtained certification from the Internal Revenue Service (hereinafter "§ 501(c)(3) organizations") are exempt from sales tax if the following rules are met.

1. The tangible personal property or services sold to the § 501(c)(3) organization will be used to further its exempt purpose;

2. The § 501(c)(3) organization has obtained a certification (i.e. Form ST-2) from the Commissioner stating that it is entitled to the exemption. Organizations subject to the mandatory exceptions of the Internal Revenue Code § 508(c) are exempt from this requirement. Nonprofit organizations that have applied for, but not yet received, a certification from the Internal Revenue Service establishing their status as a § 501(c)(3) organization may be eligible for exemption for their purchases if they have obtained temporary certification from the Commissioner in accordance with the requirements of Technical Information Release 96-9;

3. The § 501(c)(3) organization gives the vendor a properly completed Exempt Purchaser Certificate (Form ST-5) certifying that the property purchased is for an exempt use. A copy of the organization's Form ST-2 must accompany the Form ST-5 given to the vendor;

4. The vendor keeps a record of the sales price of each separate sale, the name of the purchaser, the date of the sale, and the number of the Certificate of Exemption; and

5. The § 501(c)(3) organization in all other respects complies with the provisions of 830 CMR 64H.8.1: Resale and Exempt Use Certificates.

(e) Sales to persons, groups, or organizations not described in 830 CMR 64H.6.1(3)(c) or (d) are generally taxable, regardless of whether the property is to be used for fundraising, unless exempt under some other provision of law.

(f) Sales to persons, groups, or organizations acting through or on behalf of entities described in 830 CMR 64H.6.1(3)(c) or (d) are also exempt from taxation on purchases made through or on behalf of the exempt entity, provided that the substantiation requirements of 830 CMR 64H.6.1(6)(b) or (d) are met.

(4)Special Rules For Fundraising Activities.

(a) Sales of tangible personal property by a government organization for fundraising purposes are exempt from sales tax as casual and isolated sales if the organization does not make sales in the regular course of business of the same type of property. Sales of tangible personal property by a nonprofit organization for fundraising purposes are exempt from sales tax as casual and isolated sales if:

1. the organization does not make sales in the regular course of business of the same type of property; and

2. amounts derived from such casual and isolated sales are used to further the organization's exempt purpose. If these tests are met, the number of casual and isolated sales in a calendar year is immaterial.

(b) The Commissioner will generally presume that amounts derived from the sale of tangible personal property purchased for fundraising activities are used to further the organization's exempt purpose.

(5)Sales in the Regular Course of Business. In general, whether a nonprofit or governmental organization conducts sales in the regular course of business is a question of fact, to be determined from an examination of the facts and circumstances surrounding the transactions and overall operations of the organization. The Commissioner will consider the following factors in deciding whether a sale is made in the regular course of an organization's business:

(a) Whether the organization conducts sales from a retail establishment that it operates, as defined in 830 CMR 64H.6.1.

(b) Whether the organization is required to hold a vendor's registration certificate pursuant to M.G.L. c. 64H, § 7, and is ordinarily engaged in making sales of the same type of property that it sells in its fundraising events.

(c) Whether the proceeds from sales of meals or tangible personal property constitute unrelated business income within the meaning of applicable Internal Revenue Code provisions and the regulations promulgated thereunder.

(6)Special Substantiation Requirements.

(a)Sales Directly to Government Organizations. Government organizations are encouraged to obtain a Certificate of Exemption (Form ST-2) and submit to the vendor a properly executed Exempt Purchaser Certificate (Form ST-5) and a copy of its Form ST-2, if available, when making exempt purchases. Vendors must retain forms in the same manner as other sales tax records. See830 CMR 62C.25.1: Record Retention for further recordkeeping requirements. If the government organization does not present Form ST-5, the vendor must maintain other adequate documentation verifying that the purchaser is exempt, e.g., a copy of the organization's check or credit card.

(b)Sales to Entities Purchasing through or on Behalf of Government Organizations. Entities purchasing through or on behalf of government organizations must certify that they are doing so by presenting a properly executed Form ST-5 when making such purchases. Form ST-5 may be made out by the exempt organization or the purchaser, but must contain the name, address, and, if available, the exemption number of the government organization on whose behalf purchases are made, as well as a description of the property purchased. At the time of purchase, the purchaser must attach to the Form ST-5 submitted to the vendor, a copy of the government organization's Form ST-2 if it is available. Vendors must retain forms in the same manner as other sales tax records. See830 CMR 62C.25.1: Record Retention for further recordkeeping requirements.

(c)Sales Directly to Organizations Exempt under I.R.C. § 501(c)(3). A § 501(c)(3) organization must first obtain a Form ST-2 (or temporary certification: see TIR 96-9) from the Commissioner certifying that it is entitled to exemption under M.G.L. c. 64H, § 6(e). When making purchases these organizations must submit to the vendor a copy of their Form ST-2 attached to a properly executed Form ST-5. Vendors must retain both forms in the same manner as other sales tax records. See830 CMR 62C.25.1: Record Retention for further recordkeeping requirements.

(d)Sales to Entities Purchasing through or on Behalf of Organizations Exempt under I.R.C. § 501(c)(3). Entities purchasing property through or on behalf of organizations exempt under I.R.C. § 501(c)(3) must submit to the vendor a copy of the organization's Form ST-2 attached to a properly executed Form ST-5 from the organization on whose behalf it is making purchases. Vendors must retain both forms in the same manner as other sales tax records. See830 CMR 62C.25.1: Record Retention for further recordkeeping requirements.

The provisions of 830 CMR 64H.6.1(6)(b) and (d) are illustrated by the following example:

Every year, the parent teacher organizations (PTO) at two different high schools conduct a "Spring Fling" for fundraising purposes to benefit their school. Each PTO hires a band, purchases flowers, and contracts with a local hotel for a banquet hall and the provision of 100 meals. Additionally, the PTO reserves a block of 30 rooms at the hotel for parents.

One high school in this example is a public school in Boston (Public High). The PTO for Public High holds no exemption itself, but would like to avail itself of the exemption which would be available to Public High under M.G.L. c. 64H, § 6(d) had Public High purchased the property directly. In order to substantiate a claim of exemption under M.G.L. c. 64H, § 6(d), Public High PTO must submit to the vendor a properly executed Form ST-5 and must attach a copy of Public High's Form ST-2 if the Form ST-2 is available. If Public High does not present these forms to PTO, the PTO may itself fill out the appropriate sections of Form ST-5 and submit the form to vendors when making purchases through or on behalf of Public High.

The other high school is a local non-governmental high school (Private High) that has § 501(c)(3) status. The PTO for Private High does not itself have § 501(c)(3) status, but would like to avail itself of the exemption which would be available to Private High under M.G.L. c. 64H, § 6(e) had Private High purchased the property directly. In order to substantiate a claim of exemption under M.G.L. c. 64H, § 6(e), Private High PTO must submit to the vendor a properly executed and signed Form ST-5 and must attach a copy of Private High's Form ST-2 or temporary Form ST-2. If the PTO itself has applied for and received § 501(c)(3) status, the substantiation requirements in 830 CMR 64H.6.1(6)(c) apply.

Generally, if a customer rents a room for the purpose of serving a meal and the meal is provided by the operator of the room, the charge for the room is subject to sales tax whether or not the charge for the room is separately stated from the charge for the meal. See830 CMR 64H.6.5(7)(b)2. Here, however, the rental of the banquet hall is exempt as a sale to an entity purchasing through or on behalf of an organization exempt under I.R.C. § 501(c)(3) or an entity purchasing through or on behalf of a government organization.

The rental of the 30 rooms in this example for sleeping and living purposes is subject to the Room Occupancy Excise under M.G.L. c. 64G, § 1. There is no exemption for room rentals under M.G.L. c. 64G corresponding to the exemption under the sales tax statute for purchases by governmental and § 501(c)(3) organizations and entities purchasing through or on their behalf.

(e) The substantiation requirements of 830 CMR 64H.6.1(6) are in addition to any other recordkeeping requirements imposed by law.

(7)Examples. Since the existence of a casual and isolated sale is a question of fact, the examples in 830 CMR 64H.6.1 are for illustrative purposes only.

(a) Exempt casual and isolated sales by persons, groups, or organizations.

1. A person selling his household furniture, a grocer selling his cash register, or an insurance agent selling his typewriter;

2. Sales by executors, administrators, trustees, receivers, and other fiduciaries, except when they continue the operation of a business as sellers;

3. Legal sales or executions pursuant to a court order or a court officer;

4. Sale of a business in its entirety by the owner, other than the sale of any motor vehicle, trailer, boat or airplane included therein;

5. Sales of used machinery, fixtures, equipment and like items by an owner who is engaged in a business or occupation such as manufacturing or farming, but who is not engaged in the selling of such items as a business;

6. Fundraising sales by nonprofit organizations. When a nonprofit organization uses an auctioneer to facilitate its fundraising sales the auctioneer's sales are casual and isolated only if the auctioneer receives no fee or other consideration in exchange for the auctioneer's services.

(b) Sales that are not casual and isolated.

1. Auctioneer sales, except as provided in 830 CMR 64H.6.1(7)(a)6.;

2. Sales of motor vehicles, trailers, boats or airplanes by any person other than the spouse, parent, brother, sister, or child of the purchaser;

3. Retail sales by manufacturers, wholesalers, processors, and jobbers even though such sales are infrequent and only comprise an insignificant fraction of their total business;

4. Sales that constitute an integral part of a business, such as the sale of repossessed fixtures or other property by a finance company, even though the sale of tangible personal property is not the primary function of such business;

5. Sales by a manufacturer who liquidates his business and sells his machinery, equipment, and other tangible property in a number of sales over a period of time to either the same or to different purchasers;

6. Sales of motor vehicles, trailers, boats, or airplanes in connection with the organization, reorganization, dissolution or partial liquidation of a business entity, except where the seller is the spouse, parent, brother, sister, or child of the purchaser; and

7. Sales by a museum shop of postcards, books, jewelry, games, chinaware, etc.

(8)Vendor Registration Requirements.

(a) Any person, group, or organization, including § 501(c)(3) organizations certified by the Commissioner as exempt, making sales of tangible personal property in the regular course of business must register as a Massachusetts vendor and collect and remit sales taxes whether or not the property is to be sold at fundraising events. The person, group, or organization should present a resale certificate to its vendors when it purchases property for resale.

(b) Nonprofit organizations and government organizations making sales of tangible personal property for fundraising purposes in casual and isolated sales need not register as vendors with the Commissioner and collect sales tax.

(9)Revocation of Prior Policies, Rulings and Agreements. 830 CMR 64H.6.1 supersedes any and all prior policy statements, Letter Rulings, Directives and Technical Information Releases addressing the sales and use tax treatment of casual and isolated sales. All such prior policy statements, Letter Rulings, Directives and Technical Information Releases are hereby revoked in their entirety. This includes, without limiting the foregoing, Directive 91-1.

830 CMR, § 64H.6.1

Amended by Mass Register Issue 1348, eff. 9/22/2017.

Amended by Mass Register Issue 1406, eff. 12/13/2019.