October 21, 1982

Your client ("Corporation") is a manufacturer of high-technology machine tools with its headquarters and manufacturing facilities in Virginia. You inquire whether the Corporation must register as a Massachusetts vendor and collect the Massachusetts use tax on its sales of machine tools for use in Massachusetts. You state that most of the Corporation's sales are to manufacturers for use in manufacturing tangible personal property, or to educational institutions for use in research.

The Corporation maintains no place of business in Massachusetts. It will have no employees working predominantly in Massachusetts, but on occasion employees who reside in Virginia will come into Massachusetts to promote the Corporation's products, and to install, assemble and service products after their sale.

Orders will be solicited in Massachusetts by an independent sales representative, resident in Massachusetts, who will represent other manufacturers as well as the Corporation and who will be compensated by commission only. Orders will not be binding until approved by corporate officers in Virginia.

Deliveries to Massachusetts customers will be made by independent carrier, f.o.b. Virginia.

Every person engaged in business as a vendor who makes sales of tangible personal property for storage, use or other consumption in Massachusetts must register as a Massachusetts vendor and collect the use tax on such sales (G.L. c. 64I, ss. 4, 9). General Laws Chapter 64H, Section 1(5) defines "engaged in business in Massachusetts" for sales and use tax purposes as:

"having a business location in the commonwealth; regularly soliciting orders for the sale of tangible personal property by salesmen, solicitors, or representatives in the commonwealth, unless such activity consists solely of solicitation by direct mail or advertising via newspapers, radio or television; or regularly engaging in the delivery of property in the commonwealth other than by common carrier or United States mail. A person shall be considered to have a business location in the commonwealth only if such person (a) owns or leases real property within the commonwealth; (b) has one or more employees located in the commonwealth; (c) regularly maintains a stock of tangible personal property in the commonwealth for sale in the ordinary course of business; or (d) regularly leases out tangible personal property for use in the commonwealth. For the purposes of this paragraph,...an employee shall be considered to be located in the commonwealth (a) if his service is performed entirely within the commonwealth; or (b) if his service is performed both within and without the commonwealth, but in the performance of his service he regularly commences his activities at, and returns to, a place within the commonwealth..."

Based on the foregoing, it is ruled that the Corporation must register as a Massachusetts vendor and collect the use tax on the storage, use or other consumption of tangible personal property it sells for use in Massachusetts.

You also inquire (1) when a vendor becomes liable for the use tax; and (2) whether a vendor's use tax liability may be shifted to the purchaser.

Chapter 64I, Section 4 provides that a vendor making sales for storage, use or other consumption in Massachusetts

"shall at the time of making the sales, or, if the storage, use or other consumption of the tangible personal property is not then taxable hereunder, at the time the storage, use or other consumption becomes taxable, collect the tax from the purchaser...The tax required to be collected by the vendor shall constitute a debt owed by the vendor to the commonwealth..."

In determining the "sales price" of property on which the use tax is based, any amount for which credit is given to the purchaser by the vendor must be included (G.L. c. 64H, s. 1(14)(b)(ii); G.L. c. 64I, s. 1(1)).

Accordingly, a vendor's use tax liability arises when the property sold by him is first stored, used, or otherwise consumed in Massachusetts (ordinarily, when the property is delivered in Massachusetts). The vendor is liable whether or not the purchaser ever reimburses him for the tax. The vendor's liability may not be shifted to the purchaser. The purchaser, however, is also liable for the tax until the tax is paid to the Commissioner of Revenue or the vendor gives him a receipt for the tax (G.L. c. 64I, s. 3).

Very truly yours,

/s/L. Joyce Hampers

L. Joyce Hampers
Commissioner of Revenue

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LR 82-104