FACTS: Daniel buys a car from a New Hampshire dealer not registered as a Massachusetts vendor, trading in another car toward the purchase. He now garages the new car in Massachusetts and must register it here.

It is assumed that the use tax applies to this transaction.

ISSUE: Is Daniel allowed a deduction for the value of the traded car in computing the amount upon which the tax is based?

DISCUSSION: Massachusetts imposes an excise upon the use, storage or other consumption in the Commonwealth of tangible personal property purchased from a vendor for storage, use or consumption here. G.L. c. 64I, § 2. The tax is generally five percent of the sales price. Id.

When a dealer in boats or cars registered as a Massachusetts vendor takes a trade-in, the tax is imposed only on the difference between the value of the trade-in and the sales price of the new boat or car. If the vendor is not registered in Massachusetts, however, the tax is based upon the entire sales price without subtracting the value of the property traded. G.L. c. 64H, § 26; G.L. c. 64I, § 27; 830 CMR 64H.25.1(5).

Had Daniel purchased the car from a dealer registered in Massachusetts, the tax due would have been calculated after deducting the trade-in from the sales price of the new car. Since the New Hampshire dealer was not registered here, the tax in based on the full sales price of the new car. Note that the New Hampshire dealer could have been registered in Massachusetts; any dealer, wherever located, may register as a Massachusetts vendor by filing Form TA-1 with the Commissioner. G.L. c. 62C, § 67.

DIRECTIVE: Because the New Hampshire dealer is not registered in Massachusetts, Daniel must pay tax on the entire sales price of the new car, including any amount allowed for the trade-in.

REFERENCE: Lambeth v. Commissioner of Revenue, 393 Mass. 237 (1984); G.L. c. 62C, § 67; G.L. c. 64H, § 26; G.L. c. 64I, §§ 2, 27; 830 CMR 64H.25.1(5).

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

December 31, 1988

DD 88-16

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.