July 30, 1981

********** ("Company") is engaged in the business of selling blast cleaning equipment and supplies and replacement parts used in blast cleaning. You inquire whether sales of such items to out-of-state purchasers who take delivery at the Company's Massachusetts warehouse are subject to tax. One such purchaser is purchasing the equipment for resale in New Hampshire, a state with no sales tax. Some purchasers will use the equipment in manufacturing operations.

Massachusetts General Laws Chapter 64H, Section 2 imposes an excise on sales at retail of tangible personal property in Massachusetts. A sale of tangible personal property takes place in Massachusetts if title or possession of the property is transferred in Massachusetts (G.L. c. 64H, s. 1(12)(a)).

Chapter 64H, Section 6(r) exempts from sales taxation sales of materials, tools and fuel, or any substitute therefor, which are consumed and used directly and exclusively in an industrial plant in the actual manufacture of tangible personal property to be sold. By its terms, this exemption applies only to materials, tools and fuel the normal useful life of which is less than one year or the cost of which is allowable as an ordinary and necessary business expense for federal income tax purposes.

Chapter 64H, Section 6(s) exempts from sales taxation 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. To be exempt, machinery must be

(a) used solely during a manufacturing, conversion or processing operation

1. to effect a direct and immediate physical change upon tangible personal property to be sold;

2. to guide or measure a direct and immediate physical change upon such property where the guiding or measuring is an integral and essential part of tuning, verifying or aligning the parts of such property; or

3. to test or measure such property where the testing or measuring is an integral part of the production flow or function; or

(b) used solely in certain other manufacturing, conversion or processing operations not here relevant.

If machinery does not satisfy these criteria, it is not exempt even if its operation, function or purpose is an integral or essential part of a continuous production flow or manufacturing process.

Sales for resale are not subject to the sales tax (G.L. c. 64H, s. 1(13)), but all gross receipts of a vendor are presumed to be from sales subject to tax unless the vendor obtains in good faith from the purchaser a Massachusetts resale certificate (Form ST-4) and the purchaser is a registered Massachusetts vendor (G.L. c. 64H, s. 8).

Based on the foregoing, it is ruled that

(1) The Company's sales of blast cleaning equipment and related items to purchasers who take delivery in Massachusetts are Massachusetts sales subject to tax, unless the sales are exempt under Section 6(r) or (s) or are for resale.

(2) Sales to the New Hampshire purchaser for resale in New Hampshire will be presumed to be subject to tax unless the purchaser registers as a Massachusetts vendor and presents a Massachusetts resale certificate pursuant to the sale. The Company may overcome this presumption by accepting in good faith from the purchaser a notarized statement on the purchaser's letterhead that he is not engaged in business in Massachusetts within the meaning of Chapter 64H, Section 1(5), and that he is purchasing the equipment solely for resale in the regular course of business outside Massachusetts.

(3) The sales to the out-of-state manufacturers will be exempt only if they meet the tests in Section 6(r) and (s) set forth above. To illustrate, a sale of sand blasting machinery to a purchaser who will use it exclusively to blast clean structural steel to be sold by the purchaser as tangible personal property would be exempt under Section 6(s); on the other hand, a sale of such machinery to a purchaser who will use it to blast clean real property or to blast clean personal property to be used by the purchaser in its manufacturing business would be subject to tax. Where a sale is exempt under these principles, the Company will be relieved from liability for the tax if the purchaser presents a Massachusetts exempt use certificate (Form ST-12) in connection with the sale.

I am enclosing a copy of State Tax Administration Regulation 830 CMR 62C.24 ("Record Retention"), which explains what records the Company must keep for sales that are exempt under Section 6(r) or (s) and sales for resale.

Very truly yours

/s/L. Joyce Hampers

L. Joyce Hampers
Commissioner of Revenue

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LR 81-70