830 CMR, § 64H.6.7

Current through Register 1533, October 25, 2024

Section 64H.6.7 - Out-of-State Sales and Deliveries

(1)Statement of Purpose, Outline.

(a)Statement of Purpose. 830 CMR 64H.6.7 explains the sales tax treatment of sales of tangible personal property by a Massachusetts vendor to be delivered outside of Massachusetts.

(b)Outline. 830 CMR 64H.6.7(1)(b) lists the sections contained in 830 CMR 64H.6.7.

1. Statement of Purpose, Outline.

2. Definitions.

3. Sales of Tangible Personal Property for Delivery Out of State.

4. Compliance.

(2)Definitions. For the purposes of 830 CMR 64H.6.7 the following definitions apply:

Commissioner, the Commissioner of Revenue or the Commissioner's duly appointed representative.

Interstate carrier, a carrier in the business of delivering goods across state lines, including the United States Postal Service.

Sale, any transfer of title to or possession of tangible personal property as defined in M.G.L. c. 64H, § 1(12)(a) through (f).

Sales tax, the excise imposed by M.G.L. c. 64H.

Use tax, the excise imposed by M.G.L. c. 64I.

Vendor's own truck, a vehicle owned by the vendor or operated for the vendor by one not in the business of transporting goods for the public at large.

(3)Sales of Tangible Personal Property for Delivery Out of State.

(a)General Rules. In general, whether a sale of tangible personal property to be delivered out of state is subject to sales or use tax depends upon the following principles. It is assumed for purposes of 830 CMR 64H.6.7 that the sale is not exempt under any other provision of Massachusetts law.

1. If the purchaser or the purchaser's agent takes possession of the property within Massachusetts, whether or not for redelivery or use outside Massachusetts, the sale is taxable.

2. Where the property sold is not in Massachusetts at the time a contract for its sale is made and the only contact with Massachusetts is the mere execution of the contract, the sale is exempt under M.G.L. c. 64H, § 1(13)(d).

3. If the vendor is obligated by an agreement to deliver the property to its purchaser outside Massachusetts (whether by interstate carrier or in the vendor's own truck), the sale is exempt under M.G.L. c. 64H, § 6(b).

4. If the vendor is obligated by an agreement to deliver the property to the purchaser's designee outside Massachusetts, the sale will be exempt if the purchaser of the property is outside of Massachusetts at the time the order for the property is placed. M.G.L. c. 64H, § 6(b). Please note that absent any evidence as to the location of the purchaser, the Commissioner will presume that the purchaser is inside Massachusetts at the time the order for the property is placed.

5. If the vendor is obligated by an agreement to deliver the property to the purchaser's designee outside Massachusetts and the purchaser is within Massachusetts when the order for the property is placed, the sale will generally be taxable unless both title to and possession of the property pass outside Massachusetts. Under the Uniform Commercial Code, passage of title depends upon the following circumstances:

a. Title specified in contract. If a contract specifies where title will pass, title passes in accordance with the terms of the contract.

b. Contract silent on passage of title.

i. If the contract is silent on the passage of title, title passes in Massachusetts when the property is delivered to an interstate carrier for redelivery to the purchaser's designee and the sale is taxable.

ii. If the contract is silent on the passage of title and if the property is to be delivered to the designee by the dealer (for example, in the dealer's own truck), title will not pass until delivery is completed. Under this circumstance, there is no sale in Massachusetts, and no sales tax is imposed.

(b)Use Tax.

1. Reports to other States. If property purchased in Massachusetts is delivered out of state, a use tax may be due in the other jurisdiction. The Department of Revenue and the tax authorities of other states routinely share tax information.

2. Property returned to Massachusetts. If property purchased in Massachusetts is delivered out of state but is later returned to Massachusetts for use, storage, or other consumption in Massachusetts and no sales tax was paid on the property, the use tax will apply if the property was originally purchased with the intent to use, store, or otherwise consume it here. M.G.L. c. 64I, §§ 2, 8(f). The use tax statute presumes that personal property brought into Massachusetts within six months of the date of purchase was purchased for use here. M.G.L. c. 64I, § 8(f).

3. Property stored in Massachusetts. If property purchased outside Massachusetts is brought into Massachusetts the use tax will apply, unless the property was brought here solely to be kept or retained for the purposes of subsequent transportation outside Massachusetts. M.G.L. c. 64I, § 1. The sales tax does not apply to the purchase of property outside Massachusetts and brought into Massachusetts.

4. Payment of use tax. If a use tax is due, the purchaser must file an Individual Use Tax Return, Form ST-11, with the Commissioner and pay the tax imposed. M.G.L. c. 64I, §§ 2, 3. This return and payment are due on or before the 20th day of the month following the month in which the property is first used here. Failure to file a return and pay the use tax when due will subject the taxpayer to interest and penalties calculated from the due date of the return or payment. M.G.L. c. 64I, § 2; M.G.L. c. 62C, § 16(i). See830 CMR 62C.16.2.

These provisions are illustrated by the following. In all of these examples, a use tax may be due if property delivered out of state is returned to Massachusetts for use, storage, or other consumption in Massachusetts. See Example 12.

Example 1: Adams buys a boat at a boatyard in Massachusetts and takes delivery of the boat there. The boat is then sailed to Delaware and docked. When Adams takes possession of the boat in Massachusetts, the sale in Massachusetts is complete; the sales tax applies even though Adams sails the boat to Delaware for use there. See 830 CMR 64H.6.7(3)(a)1.

Example 2: Bean goes to a computer store in Massachusetts and buys a personal computer that she then takes to her home in Maine. When Bean takes possession of the computer in Massachusetts, the sale in Massachusetts is complete; the sales tax applies even though Bean transports the computer to Maine for use there. See 830 CMR 64H.6.7(3)(a)1.

Example 3: Carter while in Massachusetts orders a chair sent to his daughter in Maine. The chair will be sent there from the Massachusetts vendor's out-of-state warehouse. This sale is exempt from tax because the chair was not in Massachusetts at the time the contract for its sale was made and the chair is to be delivered out of state for use there. See 830 CMR 64H.6.7(3)(a)2.

Example 4: Donaldson goes to a furniture dealer in Massachusetts and orders a couch to be delivered from the store to her summer home in Maine. Since the vendor is obligated to have the couch delivered to its purchaser outside Massachusetts, the sale of the couch is exempt regardless of the delivery method used. See 830 CMR 64H.6.7(3)(a)3.

Example 5: Evans buys a car from a dealer in Massachusetts who agrees to deliver the car to Evans's residence in Connecticut. Since the dealer is obligated to deliver the car to its purchaser outside Massachusetts, the sale of the car is exempt from sales tax. See 830 CMR 64H.6.7(3)(a)3. The dealer should retain proof that delivery of the car was made in Connecticut.

Example 6: Foster writes to a Massachusetts antique dealer from his home in Vermont and orders a china platter sent to his daughter in Michigan. Where the purchaser of the property is located outside of Massachusetts at the time of the sale and the property will be delivered out of state to the purchaser's designee, the sale is exempt, regardless of the delivery method used. see 830 CMR 64H.6.7(3)(a)4.

Example 7: Graham goes to a shop in Massachusetts and orders a vase sent to her daughter in New Hampshire. The contract for the sale of the vase specifies that title to the vase will not pass until it is delivered in New Hampshire. This sale is exempt because by the terms of the contract title will pass outside Massachusetts. See 830 CMR 64H.6.7(3)(a)5.a. Note that the rationale of Example 6 does not apply here, since the purchaser of the property was within Massachusetts at the time of sale.

Example 8: Harrison goes to a shop in Massachusetts and orders a vase sent to his daughter in New Mexico. The contract is silent on the passage of title. The vase will be delivered by interstate carrier. This sale is taxable because title to the property passes in Massachusetts. Where the contract is silent on the passage of title, title passes when the property is delivered to the interstate carrier. See 830 CMR 64H.6.7(3)(a)5.b.i. Once again, the rationale of Example 6 does not apply.

Example 9: Irons while in Massachusetts orders an antique from a Massachusetts vendor sent to her son in Rhode Island. The antique will be delivered to Rhode Island in the dealer's truck. Here, too, the rationale of Example 6 is inapplicable because Irons was in Massachusetts when he ordered the antique. The antique is to be delivered to Rhode Island in the dealer's own truck, and title to it will not pass until delivery is completed there. See 830 CMR 64H.6.7(3)(a)5.b.ii. This sale is, therefore, exempt from sales tax.

Example 10: Joiner Corp., a Massachusetts corporation with laundromats in several states, orders washers and dryers from another Massachusetts corporation to be delivered to its new units in New Jersey. The sale of the washers and dryers is exempt from Massachusetts tax because the washers and dryers are to be delivered to their purchaser outside Massachusetts. See 830 CMR 64H.6.7(3)(a)3. The parties must consider the New Jersey sales and use tax treatment of this transaction.

Example 11: Kanga Corp., a corporation located in Massachusetts, orders key chains as gifts for its customers from Lockco Co., also located in Massachusetts. Kanga supplies Lockco with lists of the customers, all of whom are located outside Massachusetts. Lockco sends the key chains to these customers by interstate carrier. Here, Lockco is obligated to deliver the property to the purchaser's designees outside of Massachusetts and the sale will be taxable unless title and possession pass outside of Massachusetts. Because title passes in Massachusetts when Lockco delivers the chains to the interstate carrier, the sale is taxable. See830 CMR 64H.6.7(3)(a)5.b(i).

Example 12: Mills buys a pearl necklace and a diamond ring at stores in Massachusetts and has them shipped to her at her winter home in Florida. One month later, Mills returns to her home in Massachusetts, bringing the jewelry with her. Since the items were delivered to Mills out of state, they were exempt from the sales tax. Here, however, Mills bought both items intending to return them to Massachusetts for use, storage, or other consumption here. In these circumstances, the Massachusetts use tax applies. This tax is imposed at the same rate as the sales tax (5%) and must be paid to the Department of Revenue by the 20th day of the month following the month the items were first used here, using Form ST-11 (Individual Use Tax Return). See 830 CMR 64H.6.7(3)(b)1., 2. and 4.

Example 13: Nelson Department Stores, Inc., buys store counters in North Carolina and transports them in Nelson's own trucks to Massachusetts where Nelson has a warehouse. The counters remain in the warehouse for several months. Nelson subsequently ships some of the counters to two Massachusetts stores and ships some of the counters to a Delaware store. The use tax applies to the use of the counters at the two Massachusetts stores, but no use tax and no sales tax applies to the retention of the counters eventually sent to the Delaware store. See 830 CMR 64H.6.7(3)(b)3.

(4)Compliance.

(a)Record-Keeping. The vendor must maintain books and records under M.G.L. c. 62C, § 25, sufficient to substantiate taxable and tax-exempt sales. See830 CMR 62C.25.1.

1. Transactions in which the property is not in Massachusetts at the time of sale (sales exempt under M.G.L. c. 64H, § 1(13)(d)). Records for transactions exempt under M.G.L. c. 64H, § 1(13)(d) and 830 CMR 64H.6.7 (3)(a)2. must substantiate that the property was in fact transferred to the recipient from a location outside Massachusetts. The following are examples of acceptable records of such transactions: the contract for the sale of the property and warehouse records indicating that the property was not in Massachusetts at the time the contract was executed. Similar records substantiating the terms of the contract and the location of the property at the time of sale are also acceptable.

2. Property sold for delivery out of state (sales exempt under M.G.L. c. 64H, § 6(b)). Records for transactions exempt under M.G.L. c. 64H, § 6(b), and 830 CMR 64H.6.7(3)(a)3. through 5. must substantiate that the vendor was obligated to deliver the item out of state, the name and address of the purchaser, and the place and manner of delivery, e.g., "own truck" or "FOB destination." In the case of property driven, towed, or sailed out of state, the records should specify the name of the person driving, towing, or sailing the property and the means by which that person returned to Massachusetts. Where applicable, records should also indicate the name and address of any designee to receive the property. The following records, properly completed, are acceptable records of delivery:

a. Invoices;

b. Bills of lading or freight manifests;

c. Delivery records or receipts signed by the customer;

d. Delivery logs, mail logs, trip or travel logs (including receipts for travel expenses), as applicable; or

e. Other similar records.

(b)Record Retention

1. The vendor must retain copies of the records required by 830 CMR 64H.6.7(4)(a) as records of exempt transactions. Since the burden of proof that a transaction is exempt from tax lies upon the vendor, M.G.L. c. 64H, § 8(a), failure to maintain adequate records will generally mean that the vendor will not sustain this burden of proof. This may result in the assessment of additional tax, plus interest and penalties.

2. The records required by 830 CMR 64H.6.7(4)(a) must be kept, at a minimum, until the statute of limitations for making additional assessments for the tax period for which the return was due has expired. Generally this is three years from the due date of the return or from the actual date the return was filed, whichever is later. See830 CMR 62C.25.1(3); 830 CMR 62C.26.1. The statute of limitations is six years if the vendor omits from the sales tax return an amount greater than 25% of the amount properly includible on it. M.G.L. c. 62C, § 26(h).

830 CMR, § 64H.6.7

Amended by Mass Register Issue 1336, eff. 4/7/2017.

Amended by Mass Register Issue 1386, eff. 12/20/2018.