December 16, 1982

You inquire about the application of the Massachusetts sales tax in the following circumstances.

********** ("Company") has entered into an agreement with a customer requiring the Company to remodel the customer's office on a "turnkey" basis. Under the agreement, the Company will perform certain conceptual design and engineering services, and will purchase and incorporate into the remodeled office wall-to-wall carpeting, construction materials (including lumber, paint and nails), heating, ventilating and air conditioning equipment ("HVAC equipment"), and a "superscreen" television that will be built into one wall of the office; the Company will also supply office furniture under the agreement.

The agreement sets forth a single contract price, but the Company will issue separate bills in the course of the remodeling for "progress payments." one such bill will state a separate charge for the furniture to be provided by the Company; the charge will represent the cost of the furniture to the Company plus an allowance for profit.

The Company will also send the customer a final invoice setting forth an amount representing the contract price less progress payments made.

The sales tax is an excise on sales at retail of tangible personal property in Massachusetts for a consideration (G.L. c. 64H, s. 2). "Sale at retail" is defined as a sale of tangible personal property for any purpose other than resale in the regular course of business (G.L. c. 64H, s. 1(13)).

A contractor who purchases materials from a retailer for use in building construction is generally considered the consumer of the materials and not a purchaser for resale for sales and use tax purposes. Seltzer and Co., Inc. v. State Tax Commission, ATB Docket Nos. 68886, 68887 (1975), aff'd sub nom. Ace Heating Service, Inc. v. State Tax Commission, 371 Mass. 254 (1976); Salem Glass Co. v. State Tax Commission, ATB Docket No. 60903 (1974); State v. J. Watts Kearny & Sons, 181 La. 554 (1935); see Town of Saugus v. B. Perini & Sons, Inc., 305 Mass. 403 (1940).

Based on the foregoing, it is ruled that:

1. The Company is the retailer of the furniture that it will transfer to its customer under the agreement. The Company must collect and pay over the sales tax on the entire amount charged the customer for the furniture; it may give a resale certificate (Form ST-4) to its supplier in lieu of paying the sales tax on its purchase of the furniture.

2. The Company is the consumer of the carpeting, the construction materials, the HVAC equipment, and the superscreen television to be built into the office wall. The Company must pay the sales or use tax on its purchase of these items. Except for the separate charge for the furniture, the contract price charged by the Company is not subject to the sales tax.

Very truly yours,

/s/Daniel B. Breen

Daniel B. Breen
Acting Commissioner of Revenue

DBB:JXD:mf

LR 82-121