July 30, 1981

Your client ("Company") sells and installs new and used telecommunications equipment. You ask what constitutes the "sales price" of the equipment upon which the sales tax is based. The Company's charges in connection with each sale comprise (1) a charge for the equipment sold; (2) a charge for installation of the equipment; and (3) a charge for maintaining the equipment after the sale. A purchaser of used equipment may acquire it with or without the maintenance services; a purchaser of new equipment must acquire the maintenance services with the equipment.

It is assumed for purposes of this ruling that the installation charge is set in good faith for business reasons and not to avoid tax.

Massachusetts General Laws Chapter 64H, Section 1(14) defines "sales price" as the total amount paid by a purchaser to a vendor as consideration for a retail sale. It further provides that, in determining the sales price, the cost of property sold, the cost of materials used, labor or service cost, interest charges, losses or other expenses, and the amount paid for any services that are apart of the sale, all are included. However, under Section 1(14)(c)(iii), the amount charged for labor or services rendered in installing or applying the property sold is excluded from the sales price.

Based on the foregoing, it is ruled that the sales price of the telecommunications equipment

(1) includes the Company's entire charge to its customer for the equipment;

(2) does not include the installation charge, if separately stated on the customer's invoice;

(3) includes the charge for the maintenance services in the case of the new equipment, even if separately stated on the customer's invoice;

(4) does not include the charge for the maintenance services in the case of the used equipment, if separately stated on the customer's invoice.

Very truly yours

/s/L. Joyce Hampers

L. Joyce Hampers
Commissioner of Revenue

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LR 81-71