FACTS: Davidson Corporation, a Massachusetts vendor, makes widgets in its production facility in the Commonwealth. In 1975, the taxpayer bought a widget maker on which it paid no sales tax because the machine was exempt under G.L. c. 64H, § 6(s). In 1987, Davidson bought a part, not formerly available, designed to increase the production capacity of the machine. This device is added to and becomes part of the machine.

ISSUE: Is Davidson's purchase of the new part exempt from the sales tax under G.L. c. 64H, § 6(s)?

DISCUSSION: Under G.L. c. 64H, § 6(s), sales of machinery and replacement parts are exempt from sales tax if the machinery is used directly and exclusively in an industrial plant in the actual manufacture, conversion or processing of tangible personal property to be sold.

Any part of a machine which helps it to perform its intended function or which is necessary to control, regulate or operate it receives the same tax treatment as the machine itself. Here, the new part helps the widget maker to perform its intended function by increasing its manufacturing capacity. Since the widget maker is exempt from sales tax under G.L. c. 64H, § 6(s), the part if also exempt. The part need not have been purchased with the machine to qualify for the exemption.

DIRECTIVE: Davidson's purchase of the new part is exempt from the sales tax as machinery used directly and exclusively in the manufacture, conversion or processing of tangible personal property to be sold.

REFERENCE: G.L. c. 64H, § 6(s).

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

June 1, 1988

DD 88-5

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.