FACTS: Acme Co., an out-of-state manufacturer, makes highly specialized widgets. Acme advertises its products only through national business periodicals and in national trade journals. Acme has no exclusive sales people in Massachusetts, and is not registered or required to be registered as a Massachusetts vendor.

Bell Co. is registered as a Massachusetts vendor. Bell is an independent retailer selling a variety of products. Although Bell does not stock Acme's widgets, from time to time it acts for Acme in sending orders and deposits from Massachusetts customers to Acme's headquarters for acceptance. When the customer pays Bell the balance of the purchase price, Bell forwards it to Acme; Acme then ships the product directly to the customer. Bell never takes title to, nor possession of the goods but is paid a commission once a transaction is completed.

ISSUE: Must Bell collect a Massachusetts sales or use tax on the sale of the products it distributes for Acme in Massachusetts?

DISCUSSION: Massachusetts imposes an excise upon sales at retail of tangible personal property by any vendor. G.L. c. 64H, § 2. Massachusetts also imposes a complementary use tax on the storage, use or other consumption in the Commonwealth of tangible personal property purchased from a vendor for storage, use or other consumption here. G.L. c. 64I, § 2. These taxes together are designed to tax any non-exempt transaction in which property is sold for use here, whether or not the sale takes place in the Commonwealth. Towle v. Commissioner of Revenue, 397 Mass. 599, 604 (1986).

Every vendor engaged in business in the Commonwealth must add the sales tax to the sales price of property he sells and must collect the tax from the purchaser. G.L. c. 64H, § 3. In addition, every vendor engaged in business here selling tangible personal property for storage, use or other consumption here must, when a sale is made, either collect the tax or, if the tax cannot then be collected, collect the use tax when the use becomes taxable. G.L. c. 64I, § 4.

A "vendor" is a retailer or other person selling tangible personal property of a kind the gross receipts from which are required to be included in the measure of the sales tax. G.L. c. 64H, § 1(18); G.L. c. 64I, § 1(1). A "retailer" in turn is (in pertinent part) every "salesman, representative or canvasser" who, for the efficient administration of the tax, must be regarded as the agent of the dealer under whom he operates." G.L. c. 64H, § 1(9)(d); G.L. c. 64I, § 1(1).

In this case, the property bought from Acme is clearly purchased for use, storage or other consumption in Massachusetts. Thus a sales or use tax is due. For the efficient administration of the tax, the Commissioner will regard Bell as Acme's agent "jointly responsible with his principal . . . for the collection and payment of the tax imposed by this chapter." G.L. c. 64H, § 1(9)(d); G.L. c. 64I, § 1(1). It does not matter that Bell never had title to, nor possession of the property. As the agent of a vendor selling property subject to the sales or use tax, Bell must collect the tax due. The Commissioner need not seek payment of the tax from the individual purchasers of the equipment. National Geographic Society v. California State Board of Equalization, 430 U.S. 551, 555 (1977).

DIRECTIVE: Because Bell acts for an out-of-state vendor not registered or required to be registered in the Commonwealth but making sales here subject to tax, the Commissioner will hold Bell responsible for the collection of the tax due. Accordingly Bell must collect and pay over the sales or use tax on sales it arranges on behalf of Acme in Massachusetts.

REFERENCE: G.L. c. 64H, §§ 1(9)(d), 1(18), 2, 3; G.L. c. 64I, §§ 1(1), 2, 4; National Geographic Society v. California State Board of Equalization, 430 U.S. 551 (1977); Towle v. Commissioner of Revenue, 397 Mass. 599 (1986).

/s/Stephen W. Kidder
Stephen W. Kidder
Commissioner of Revenue

December 31, 1988

DD 88-14

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.