I. Introduction

The purpose of this Directive is to amplify the rules set forth in TIR 04-26 which, in part, summarized a 2004 legislative amendment pertaining to the sales tax exemption in G.L. c. 64H, § 6(ff) for certain direct and cooperative direct mail promotional advertising materials (“‘materials”).

II. Issue

What requirements must be met in order for certain printed matter to qualify for exemption from Massachusetts sales tax as “direct and cooperative direct mail promotional advertising materials” under G.L. c. 64H, § 6(ff)?

III.  Directive

In order to qualify for exemption from Massachusetts sales tax as "direct and cooperative direct mail promotional advertising materials,” the materials must meet all of the following criteria:

1.    The materials are discount coupons or promotional advertising materials or leaflets incorporating coupons.  For purposes of this Directive, a “coupon” is defined as (a) a piece of printed paper, (b) a scan card[1], or (c) a code or other identifier, that, upon presentation to a vendor, allows a retail customer to receive a service or product for free or at a lower price;[2]

2.    The materials must be no greater than six pages in length as described in TIR 04-26;

3.    The materials must qualify as direct mail advertising[3] and be distributed by U.S. mail (or other common carrier).  The materials may be part of a package of materials promoting one or more than one business;

4.    The materials are distributed at no charge to the potential customer; and

5.    The materials must not be “mixed use publications”, as described in TIR 04-26, and in Part IV, Example 3 of this Directive.

III.  Discussion

Massachusetts imposes an excise of 6.25% on sales at retail in Massachusetts by any vendor, unless otherwise exempt. G.L. c. 64H, § 2. The exemptions from the Massachusetts sales tax are found in G.L. c. 64H, § 6.  Section 6(ff) exempts the following:
 

(ff) Sales of printed material which is manufactured in the commonwealth to the special order of a purchaser, to the extent the material is delivered to an interstate carrier, a mailing house or a United States Post Office for delivery or mailing to a purchaser located outside the commonwealth or a purchasers designee located outside the commonwealth, including sales of direct and cooperative direct mail promotional advertising materials which are manufactured both inside and outside the commonwealth and which are distributed to residents of the commonwealth from locations both inside and outside the commonwealth. For the purpose of this paragraph, "direct and cooperative direct mail promotional advertising materials'' shall mean individual discount coupons, or advertising leaflets incorporating the coupons within the promotional advertising materials no greater than 6 pages in length, and including any accompanying envelopes and labels. In order to be exempt hereunder, the promotional advertising materials shall be distributed as a part of a package of materials promoting 1 or more than 1 business, each operated at separate and distinct locations, and directed in a single package to potential customers, at no charge to the potential customer, of the businesses paying for the delivery of such material. For the purpose of this paragraph, "direct and cooperative direct mail promotional advertising materials'' shall not include mail order catalogs, department store catalogs, telephone directories, or similar printed advertising books, booklets or circulars greater than 6 pages in total length.
 

The most recent amendment to G.L. c. 64H, § 6(ff) in St. 2004, c. 262, § 50, adds the requirement that advertising leaflets also must incorporate coupons.  The Legislature did not, however, provide a definition of “coupon.” In the absence of a statutory definition, general principles of statutory construction require that words and phrases generally must be construed according to the common and approved usage of the language at the time of the provision's adoption, unless such words and phrases have acquired a peculiar and appropriate meaning in law.  See G.L. c. 4, § 6.

The Massachusetts Supreme Judicial Court has indicated that "[s]tatutes are to be interpreted in connection with their development, their progression through the legislative body, the history of the times, prior legislation, contemporary customs and the system of positive law of which they are a part."  Vining v. Commonwealth, 828 N.E. 2d 257, 445 Mass. 1103 (2005).  Massachusetts authorities and the Commissioner have adhered to this principle by examining various words' usual and accepted meanings that are consistent with statutory purpose, including their use in other legal contexts and dictionary definitions. [4]

Applying these principles of statutory construction and examining the common and ordinary usage of the term “coupon”, the Commissioner notes that a "coupon" has been defined as “a form surrendered in order to obtain an article, service, or accommodation: as one of a series of attached tickets or certificates often to be detached and presented as needed, … , a part of a printed advertisement to be cut off to use as an order blank or inquiry form or to obtain a discount on merchandise or services.”  See Merriam Webster Dictionary, www.merriam-webster.com/dictionary/couponFor purposes of this Directive, the retail customer must either (1) be required to present the coupon to the vendor at the time of purchase or (2) otherwise identify the special offer to the vendor at the time of redemption to receive the free item or discounted price.  Printed materials that merely make a general announcement of a sale price available to all customers or the availability of a free estimate do not qualify as a coupon for purposes of this Directive.

Direct mail promotional advertising material must be delivered to an interstate carrier, a mailing house or a United States Post Office for delivery or mailing directly to potential customers at their home address or places of business free of charge.  Promotional advertising to be distributed by any means other than such a mailing directly to the potential customer will not qualify for exemption.  Accordingly, sales of coupons delivered to a vendor and then re-delivered to a mailing house to be included in a cooperative mailing effort will not be exempt.  Advertising distributed by bulk mailing to all residents of a zip code or other geographical area is also not exempt as it does not qualify as direct mail.

The following examples illustrate the types of materials that generally will be treated by the Commissioner as either taxable or exempt under G.L. c. 64H, § 6(ff).  Note that this exemption continues to be limited in the manner described in TIR 04-26, Section IVC. Thus, for example, in addition to the “mixed use” publications described in Part IV, Example 3, below, sales or use of product samples or other items included with direct mail promotional advertising are not exempt under G.L. c. 64H, § 6(ff). 
 

IV. Examples

Example 1:  A supermarket’s (or other retailer’s) circular of six pages or less advertising weekly sale prices of merchandise will not be exempt under G.L. c. 64H, § 6(ff) when sent by US mail addressed to individual customers unless it contains one or more manufacturer’s or retailer’s coupons, as defined in 830 CMR 64H.1.4, that must be presented to the vendor to claim the discount.  The “coupon” requirement is satisfied if the customer must present a scan card to receive the discount.

Example 2:  Mail order catalogs, department store promotional/sale catalogs, telephone directories, or similar advertising books, booklets or circulars greater than six pages in total length are not exempt from sales tax under G.L. c. 64H, § 6(ff).

Example 3:  Other printed materials that may comprise less than six pages which do not qualify for this exemption[5] include, but are not limited to:
 

  • Mixed use publications (i.e., newsletters, reference guides, resource directories, campaign or fundraising literature, educational publications, and any similar materials that contain advertising along with other information, even where the principal purpose of such material is advertising);
  • Letterhead stationary for a business; business cards; business announcements that do not advertise a product or service;
  • Debt collection letters;
  • Invitations to an event, such as an open house, grand opening or awards ceremony;
  • Property valuation reports;
  • Printed materials, such as menus and flyers, regardless of length and whether the materials contain a coupon, that are distributed by a method other than delivery by the U.S. Postal Service or a common carrier; and
  • Credit card, insurance, loan, refinancing or membership solicitations.
  • Bulk mailings that are not addressed to a specific customer or street address, but are distributed by the U.S. Postal Service or common carrier to all residents in a particular zip code.

Amy Pitter
Amy Pitter
Commissioner of Revenue

AP:MTF:wrd

October 20, 2014

DD 14-3



[1]  The Department has previously ruled that a scan card is a coupon.  See LR 97-3.
[2]  Accompanying labels and envelopes are also covered by the exemption.
[3]  See Bloomingdale's Inc. v. Commissioner of Revenue A.T.B. Docket No. C258696 (2003), aff’d. 63 Mass. App. Ct. 1110, 825 N.E.2d 115 (2005) (where the ATB found that, in contrast to newspaper advertisements which are “indirect” advertising, materials mailed directly to specific customers or prospective customers on a mail list compiled from the taxpayer’s extensive database of customer information constituted “direct” mail advertising.  See also Verizon Yellow Pages v. Commissioner of Revenue, A.T.B. Docket No. C26242 (2004) (to qualify as direct mail, materials must be targeted to certain customers within a market).
[4] See, e.g., Bloomingdale's Inc. v. Commissioner of Revenue, Id., (looking, in part, to dictionary definitions, industry classifications, and legislative intent surrounding the enactment of a predecessor version of G.L. c. 64H, § 6(ff) in construing various terms such as "promotional", "advertising," and "leaflets", for purposes of determining whether certain proposed advertising materials qualified for exemption); Verizon Yellow Pages v. Commissioner (2004) (citing the New Lexicon Webster's dictionary of the English Language 12 (encyclopedia ed. (1909) in concluding that certain telephone directories did not qualify as direct and cooperative direct mail promotional advertising materials  under G.L. c. 64H, § 6(ff); aff'd Mass. App Ct. 1113; 849 N.E. 2d 924 (2006)); Stanley Home Products, Inc. v. Commissioner of Revenue, A.T.B. Docket No. 120842 (1986); Robert  Welch, Inc., v. State Tax Commission, A.T.B. Docket No. 9965 (1977) (construing  the term "magazine" as defined in Webster's New World Dictionary, Second College Edition (1972) for purposes of determining whether the exemption found in G.L. c. 64H, § 6(m) applied to sales of certain printed materials).
[5] Other exemptions, however, may apply. See, e.g., G.L. c.64H, § 6(m).  Printed materials which are inserted into and sold as part of a newspaper are generally exempt, even if they would have been taxable if distributed by US mail or otherwise.