ISSUE: What is the effect on the small business exemption of a vendor's failure to obtain the annual exemption certificate either before or at the time of the sale of gas, steam, electricity or heating fuel?
DIRECTIVE: A purchaser claiming the small business exemption should present the appropriate annual exemption certificate before or at the time of its first purchase of gas, electricity, steam, or heating fuel in a new calendar year. A vendor that did not acquire a certificate at the time of purchase, will be given the opportunity to secure in good faith and present the small business exemption certificate within sixty days of the date of the notification by the Commissioner to produce such certificate. The vendor must produce a certificate covering the sales for each year at issue. If no certificate is produced within that time period, the vendor nonetheless is entitled to prove by other evidence that the purchaser was a small business within the meaning of the Qualifying Small Business Regulation, 830 CMR 64H.6.11, at the time of purchase and thus entitled to the exemption.
DISCUSSION OF LAW:
The rules announced in Directive 92-3 strictly construed the availability of the small business exemption. That document states the position that the exemption existed only upon presentation of the certificate. If a certificate was not presented in this fashion a vendor could not otherwise prove an exemption. The Department has reconsidered the effect on the small business exemption of a vendor's failure to obtain the annual exemption certificate either before or at the time of the sale of gas, steam electricity or heating fuel.
To ease the administrative burden for small businesses, the Commissioner has decided to treat small business exemption certificates the same as other exemption certificates and resale certificates. Under G.L. c. 64H, § 8, a vendor has the burden of proving an exemption if he sells taxable tangible personal property tax free. That burden of proof is met if the vendor takes, in good faith, a resale or exempt use certificate from the purchaser and such certificate is received by the vendor and made available to the Commissioner not later than sixty days from the date of notice from the Commissioner to produce such certificate. In addition, the resale or exempt use exemptions can exist and may be proven without the certificates. These same rules now apply to the small business exemption. See 830 CMR 64H.8.1, and DD 92-3. However, the vendor must seek the small business exemption certificate annually.
To the extent that this Directive permits different procedures than those described in DD 92-3, this document supersedes those provisions.
Commissioner of Revenue
June 22, 1994