Background: Pursuant to G.L. c. 90, § 20E, where a car leasing or rental company is the registered owner of a motor vehicle which incurs a parking violation while being operated under lease or rental contract, the registered owner shall not be liable for any unpaid fines, provided the requirements of § 20E are met. These requirements include the payment to the city or town where the lease or rental transaction takes place of a $.60 surcharge per lease or rental transaction. See G.L. c. 90, § 20E(i).
Issue: Is the parking violation surcharge imposed upon motor vehicle lease or rental transactions in Massachusetts pursuant to G.L. c. 90, § 20E(i) properly included in the sales price of the vehicle lease/rental, and therefore subject to Massachusetts sales tax.
Directive: The definition of “sales price” in both G.L. c. 64H, § 1 and the Motor Vehicles Regulation, 830 CMR 64H.25.1(9), require the parking violation surcharge to be included in the sales price subject to tax.
Discussion: The Massachusetts sales tax applies to “any transfer of title or possession, or both, exchange, barter, lease, rental, conditional or otherwise, of tangible personal property….for a consideration, in any manner or by any means whatsoever.” G.L. c. 64H, § 1. The term “sales price” includes “the total amount paid by a purchaser to a vendor as consideration for a retail sale, valued in money or otherwise” and includes the vendor’s cost of materials, labor or services, interest charges, losses or other expenses. Id. With respect to motor vehicle lease or rental transactions, the Department’s Motor Vehicles Regulation specifically provides that “[t]he sales price on which the tax is computed for each period is the total lease or rental charges for that period.” 830 CMR 64H.25.1(9)(a).
We note that the legal incidence of the surcharge provided by G.L. c. 90, § 20E(i) is on the leasing or rental company and, unlike the Convention Center Financing surcharge discussed in LR 99-6, is for the sole benefit of that company. Thus, this surcharge is an overhead expense of the leasing or rental company, whether or not separately stated to the customer, similar to the FCC charges on telecommunications services discussed in DD 00-2 or the federal excise taxes in DD 86-1, both of which were found to be includable in the sales price subject to tax. While G.L. c. 90, § 32E ¾ permits various charges to be separately stated in the rental agreement rather than included in the base price, that provision does not alter the application of “sales price” as defined in G.L. c. 64H, § 1. See also 830 CMR 64H.25.1(9), DDs 04-3, 02-9, and TIRs 05-14, 03-24 for additional guidance concerning sales tax on motor vehicle leases and rentals.
Commissioner of Revenue
October 16, 2012