Facts: Acme Corporation is a manufacturer registered as a Massachusetts vendor. Baker Corporation, a retailer in another State, purchases property from Acme, and resells it to Charlie, a consumer in the Commonwealth. Acme ships the property directly to Charlie.

For purposes of this Directive, it is assumed that Baker Corporation is not engaged in business in the Commonwealth within the meaning of G.L. c. 64H, § 1(5).

Issue: What are the sales tax consequences of Acme's drop shipment to Charlie, a Massachusetts consumer, made pursuant to the retail sale by Baker, a retailer not engaged in business in the Commonwealth?

Discussion: The sales tax is imposed upon sales at retail of tangible personal property in the Commonwealth by any vendor. G.L. c. 64H, § 2. The definition of "sale at retail" provides, in pertinent part, that:

The delivery in the Commonwealth of tangible personal property by an owner or former owner thereof, . . . if the delivery is to a consumer . . . pursuant to a retail sale made by a retailer not engaged in business in the Commonwealth, is a retail sale in the Commonwealth by the person making the delivery.

G.L. c. 64H, § 1(13). Under this provision, the deliver must include the retail selling price charged by the foreign retailer in its gross receipts. Id. The deliver must collect the tax from the retailer to whom it sells the property, and that tax is a debt from the retailer to the deliverer, recoverable at law in the same manner as other debts. G.L. c. 64H, § 3(a).

In this case, the drop shipment is a retail sale by Acme under the provisions of G.L. c. 64H, § 1(13). Acme, the deliver, is an owner or former owner of the property it has delivered in the Commonwealth. Baker is a retailer that is not engaged in business here. Baker's sale to Charlie is a retail sale, since no further resale in the regular course of business is involved, and Charlie is a consumer in the Commonwealth.

Directive: The drop shipment by Acme is a retail sale by it under the provisions of G.L. c. 64H, § 1(13). Acme must include the retail selling price charged by Baker Corporation in its gross receipts and must collect the tax imposed from Baker. The tax is a debt from Baker to Acme, recoverable in the same manner as other debts.

Reference: G.L. c. 64H, §§ 1(15), (13); 2.

/s/Ira A. Jackson
Ira A. Jackson
Commissioner of Revenue

20 August 1986

DOR-D 86-21

This Directive represents the official position of the Department of Revenue on the application of the law to the facts as stated. The Department and its personnel will follow this Directive, and taxpayers may rely upon it, unless it is revoked or modified pursuant to 830 CMR § 62C.01(5)(e). In applying this Directive, however, the effect of subsequent legislation, regulations, court decisions, Directives, and TIRs must be considered, and Department personnel and taxpayers may rely upon this Directive only if the facts, circumstances and issues presented in other cases are substantially the same as those set forth in this Directive.