October 9, 1979

You have requested a ruling as to whether purchases of materials and equipment by ********** ("Contractor"), a District of Columbia Joint Venture, or by its subcontractors, under a cost-plus fixed-fee contract with the Federal Railroad Administration of the United States Department of Transportation (FRA), are subject to the Massachusetts sales and use tax.

Contractor is responsible for the engineering, design, construction supervision, management and administration of the Northeast Corridor Improvement Program (NECIP), a program of railroad revitalization authorized under P.L. 94-210. Under the terms of the contract, title to all property purchased will eventually pass to the United States, and many of the cost-reimbursable purchases will be installed on the project. Actual or beneficial title to all real property in Massachusetts which is to be physically altered in the course of the contract is either in Amtrak, a federal agency, or the Commonwealth of Massachusetts or its instrumentalities.

Massachusetts General Laws Chapter 64H, Section 6(f) exempts from sales tax sales of building materials and supplies to be used in the construction, reconstruction, alteration, remodeling or repair of public works owned by or held in trust for the benefit of any governmental body or agency, and used exclusively for public purposes. It also exempts rental charges for construction vehicles, equipment and machinery rented specifically for use on the site of any such tax exempt project or while being used exclusively for the transportation of materials for any such tax exempt project.

Based on the foregoing it is ruled that:

1. Sales of materials and supplies purchased by Contractor or by its subcontractors which are incorporated in improvements or directly consumed in making improvements under its NECIP contract and to which title vests in the United States government will be exempt from Massachusetts sales and use taxes pursuant to General Laws Chapter 64H, Section 6(f).

2. Sales of other materials, supplies and equipment which are used by Contractor or its subcontractors in the administration and performance of its contract with the FRA are subject to the Massachusetts sales and use tax.

3. Sales or leases of construction vehicles, equipment and machinery to Contractor or its subcontractors for use in performing their obligations under the contract with FRA are subject to the Massachusetts sales and use tax, with the exception of such construction equipment and machinery which is rented exclusively for use under the contract, and which is used on-site or for transportation of materials.

Very truly yours,

/s/L. Joyce Hamper

L. Joyce Hampers
Commissioner of Revenue

LJH/JJW/jmcd

LR 79-36