June 8, 1981
********** ("Seller") acquired ********** ("Manufacturer"), a machinery manufacturing corporation organized in Maine, by purchasing all of its stock.
The Manufacturer will file with the Secretary of State a certificate of merger with the Seller, after which neither the Seller nor the Manufacturer will do business under the Manufacturer's corporate name.
Your client, ********** will form a Massachusetts corporation ("Purchaser") with a name similar to that of the Maine corporation. The Purchaser will acquire from the Seller the assets that were held by the Manufacturer. The assets sold will comprise (1) real estate; (2) office equipment and furnishings (copy machines, adding machines, typewriters, furniture, draperies and other items); (3) machine tools, including milling, grinding and drilling machines, lathes and saws; (4) patents and customer information; and (5) inventory consisting of machines that cut rubber stock into soles for shoes, and their replacement parts (the machines are integrated units that effect a direct and immediate physical change upon the rubber stock).
The Seller is a major tire manufacturer. You state that the Seller has not sold and will not sell office equipment or furnishings, machine tools, or shoe-manufacturing machinery except in the transaction about which you inquire. It is also assumed for purposes of this ruling that the Seller does not regularly acquire and dispose of other businesses.
You inquire whether the sales tax will apply to the Seller's transfer to the Purchaser of any of the Manufacturer's assets, and whether the Purchaser's subsequent sales of sole-cutting machines and their replacement parts for exclusive use in manufacturing shoes will be subject to tax.
General Laws Chapter 64H, Section 2 imposes an excise on sales at retail of tangible personal property. "Sale at retail" does not include sales for resale in the regular course of business (G.L. c. 64H, s. 1(13)), but the gross receipts of a vendor from sales of tangible personal property are presumed to be from sales subject to tax except where the vendor takes a resale certificate in good faith from a purchaser who is himself a registered Massachusetts vendor (G.L. c. 64H, s. 8).
Chapter 64H, Section 6(c) and Sales and Use Tax Regulation 830 CMR 16.01, promulgated thereunder, exempt from taxation casual and isolated sales of tangible personal property acquired for use or consumption by a seller and not sold in the regular course of business engaged in by such seller.
Section 6(s) of Chapter 64H provides that sales of machinery or replacement parts thereof, used directly and exclusively in an industrial plant in the actual manufacture, conversion or processing of tangible personal property to be sold, are exempt from the sales tax. It further provides that machinery is deemed to be used directly and exclusively in the actual manufacture, conversion or processing of tangible personal property to be sold where it is used solely during a manufacturing, conversion or processing operation to effect a direct and immediate physical change upon tangible personal property to be sold.
Based on the foregoing, it is ruled that:
(1) the sales tax will not apply to the transfer of the real estate, patents and customer information;
(2) the transfer of the office equipment and furnishings and the machine tools will be exempt from tax as a casual and isolated sale;
(3) the transfer of the inventory will be exempt from tax if the Purchaser registers as a Massachusetts sales tax vendor and presents a resale certificate in connection with the transfer; and
(4) the Purchaser's subsequent sale of the sole-cutting machines for exclusive use in manufacturing shoes will be exempt under Chapter 64H, Section 6(s)
Nothing in this ruling may be construed as a certificate under Section 44 or Section 52 of Chapter 62C that the Seller has no outstanding Massachusetts tax liability, or as a waiver of the lien provided for in Section 51 of Chapter 62C.
Very truly yours,
/s/L. Joyce Hampers
L. Joyce Hampers
Commissioner of Revenue