Introduction: This Directive clarifies the application of the sales and use tax statutes, G.L. c. 64H and 64I, to sales of motor vehicles by auctioneers in Massachusetts. Auctioneers are licensed pursuant to the provisions of General Laws Chapter 100 and are generally required by G.L. c.100, § 8 to report and collect sales and use taxes on sales made by them.

Issue 1: What are an auctioneer's responsibilities with respect to sales and use tax on a motor vehicle sold to a Massachusetts resident?

Directive 1: The auctioneer is not required to collect sales or use tax on a motor vehicle sold to a Massachusetts resident. In determining if the purchaser is a Massachusetts resident, the auctioneer may rely on the address listed on the purchaser's driver's license. Sales tax on a motor vehicle purchased by a Massachusetts resident from an auctioneer is paid directly by the purchaser to the Registry. The auctioneer must furnish the purchaser with completed RMV-1 form. [1] The "gross sales price" is the final bid and sold price at the auction.

Issue 2: What are an auctioneer's responsibilities with respect to sales tax on a motor vehicle sold at an auction in Massachusetts to an out-of-state resident?

Directive 2a - Delivery Out-of-State: If an auctioneer delivers a motor vehicle purchased at an auction in Massachusetts to the purchaser outside of Massachusetts, no Massachusetts sales tax is due. Auctioneers making out-of-state deliveries of vehicles purchased at auction in Massachusetts must keep the records described in footnote 4, below.

Directive 2b - Delivery in Massachusetts: An auctioneer may not make an in-state delivery of a motor vehicle purchased at an auction in Massachusetts to an out-of-state purchaser without first receiving evidence that the required sales tax has been paid by the purchaser to the Registry or to a Department of Revenue office [2], or that no sales tax is due. [3] The auctioneer must retain such evidence for review by the Department in connection with an audit.

For purposes of DD 02-3, Directives 2a and 2b, "delivery" means physical surrender of the signed title and the vehicle by the auctioneer to the buyer.

Issue 3: When the bid and sold price on a motor vehicle is less than the average trade-in value listed in the National Automobile Dealer's Association used car guide, which price should be used in calculating the Massachusetts sales tax by the Registry?

Directive 3: The actual bid and sold price of a motor vehicle purchased through a licensed auctioneer should be used in calculating the Massachusetts sales tax, even if that price is lower than the average trade-in value listed in the National Automobile Dealer's Association Used Car Guide. A licensed auctioneer is a registered vendor regularly engaged in the business of making sales at retail of motor vehicles. A sale of a motor vehicle by an auctioneer is, therefore, not a casual and isolated sale and the provisions of G.L. c. 64I, § 4 relating to NADA Used Car Guide trade-in values in calculation of use tax are not applicable.

Discussion of Law:

Massachusetts imposes an excise upon all retail sales of tangible personal property and telecommunications services in Massachusetts by a vendor unless otherwise exempt. A complementary use tax is imposed on tangible personal property and telecommunications services purchased from any vendor for use, storage or consumption in Massachusetts. G.L. c. 64H, §§ 1, 2. G.L. c. 64I, §§ 1, 2.

The definition of retailer required to collect sales and use tax includes "every person . . . in the business of making sales at auction of tangible personal property whether owned by such person or others for storage, use or other consumption. " G.L. c. 64H, § 1. Auctioneers are required to be licensed by the Department of Consumer Affairs and must register as vendors with the Department of Revenue. G.L. c. 100. Also see DD 88-6 and DD 88-12.

Generally, if the purchaser of taxable tangible personal property or the purchaser's agent takes possession of the property in Massachusetts, the sale is taxable regardless of whether the purchaser subsequently intends to use the property out-of-state. However, if the vendor is obligated by an agreement to deliver the property to its purchaser outside of Massachusetts, the sale is exempt under G.L. c. 64H, § 6(b). [4] See the Department's Out-of-State Sales and Deliveries Regulation, 830 CMR 64H.6.7(3)(a).

In most cases, the vendor of taxable tangible personal property is required to collect tax from the retail purchaser, where applicable. However, G.L. c. 64H, § 3(c) provides that "(t)he excise imposed . . . on sales at retail of motor vehicles or trailers shall be paid by the purchaser to the registrar of motor vehicles . . . . The vendor thereof shall not add the tax to the sales price and shall not collect the tax from the purchaser." A similar provision in G.L. c. 64I, § 4, provides that a use tax, where applicable, shall be paid to the registrar of motor vehicles and not the vendor. That section also provides that, except for sales of motor vehicles by a registered vendor regularly engaged in the business of selling motor vehicles, which includes a licensed auctioneer, the taxable sales price upon which the use tax is calculated is the higher of the actual amount paid by the purchaser or the average trade-in value of the vehicle listed in the National Automobile Dealers Association Used Car Guide. Therefore, the taxable sales price of a motor vehicle purchased through an auctioneer is the actual bid and sold price, even if the NADA Used Car Guide price is higher.

Because registered vendors are not required to collect sales or use tax on sales of motor vehicles or trailers, different rules apply to the delivery of a motor vehicle by a vendor to an out-of-state purchaser in order to ensure compliance with the sales tax statute. A vendor may not deliver a vehicle to an out-of-state purchaser in Massachusetts without first obtaining proof that the purchaser has paid the applicable tax to the Registry or a Department of Revenue Office. See LR 77-13.

/s/Alan LeBovidge
Alan LeBovidge
Commissioner of Revenue

AL:DMS:ecl

April 5, 2002

DD 02-3



[1] When completing the RMV-1 Form, the auctioneer should complete the lines asking for the Dealer's signature and tax identification number.

[2] Since the vehicle will not be titled or registered in Massachusetts, the tax is paid with Form ST-7R. The auctioneer should complete the portion of Form ST-7R titled "Sale by Dealer" and, in the section for information about the seller, the auctioneer should strike through the word "seller" and write "sale by auctioneer" and complete his/her firm name, signature, title, address and sales and use tax registration number on the lines below. Form ST-7R is available from the Department's website at www.mass.gov/dor or by calling the DOR Customer Service Bureau at (617) 667-6100.

[3] No tax is due if the auctioneer accepts a resale certificate, Form ST-4, from a registered Massachusetts dealer or Massachusetts lessor, or if the auctioneer accepts an exempt purchaser certificate, Form ST-5, from an exempt organization such as a religious, charitable or educational organization. G.L. c. 64H, §§ 6 (d), 6(e), and 8.

[4] Recordkeeping requirements for out-of-state deliveries: Records for transactions exempt because the property will be delivered out-of-state must substantiate that the vendor was obligated to deliver the item out-of-state, contain the name and address of the purchaser, and state the place and manner of delivery. In the case of motor vehicles driven or towed out-of-state, the records should specify the name of the person driving or towing the property and the means by which that person returned to Massachusetts. Where applicable, the records should also indicate the name and address of any designee to receive the property. See 830 CMR 64H.6.7(4)(a)2.