March 3, 1982

********** ("Company") is a Massachusetts distributor of motor vehicle paint and auto parts. You inquire whether the Massachusetts sales tax applies to the Company's sales of paint and parts to the following purchasers, all of which are registered Massachusetts vendors:

(1) automobile body shops that claim to separately state charges for paint and parts on their customer invoices and to collect and pay over sales taxes on such charges;

(2) taxicab companies that claim to use the paint and parts in the maintenance of cabs that are rented to drivers; and

(3) truck dealers that claim to use the paint and parts in the renovation of trucks to be sold.

Massachusetts General Laws Chapter 64H, Section 2 imposes an excise on sales at retail of tangible personal property in Massachusetts. "Sales at retail" do not include sales for resale in the regular course of business (G.L. c. 64H, s. 1(13)).

Section 1(13)(c) of Chapter 64H excludes from the definition of "sale at retail"

"personal service transactions which involve no sale or which involve sales as inconsequential elements for which no separate charges are made."

Sales and Use Tax Regulation 64H.03 explains the application of the Massachusetts sales and use taxes to service enterprises. It provides in Subsection (2) that a service transaction is not subject to the sales tax where:

(1) the real object of the transaction is the service itself, and no transfer of tangible personal property occurs; or

(2) the real object of the transaction is the service itself, and an consequential transfer of tangible personal property occurs, and the service enterprise does not separately state the purchase price of the property on the bill to the customer.

Regulation 64H.03 further provides that a service enterprise that separately states the charge for the property on the bill to the customer must collect and pay over the sales tax, based on the amount charged for the property, whether or not the value of the property is inconsequential.

Chapter 64H, Section 6(r) exempts from tax sales of materials, tools and fuel, or any substitute therefor, which become an ingredient or component part of tangible personal property to be sold. Leases and rentals are "sales" for purposes of the sales tax (G.L. c. 64H, s. 1(12)(a)).

Under Chapter 64H, Section 8, all gross receipts of a vendor from the sale of tangible personal property are presumed to be from sales subject to tax until the contrary is established. The burden of proving that a sale is not at retail is on the vendor unless he takes a resale certificate in good faith from a purchaser who is himself a registered Massachusetts vendor and who, at the time of purchase, intends to sell the purchased property in the regular course of business or is unable to ascertain at the time of purchase whether the property will be sold or will be used for some other purpose (G.L. c. 64H, s. 8).

Based on the foregoing, it is ruled that:

1. The sales tax does not apply to the Company's sales of paint and parts to an auto body shop that separately states charges for the paint and parts on its customer invoices.

2. The sales tax does not apply to the Company's sales of paint and parts to taxicab companies that use the items in the maintenance of cabs that are exclusively rented. If the cabs are operated by the cab company as well as rented, or if the cab company's drivers are not bona fide renters but employees of the cab company, the Company's sales of paint and parts to the cab company are subject to tax.

3. The sales tax does not apply to the Company's sales of paint and parts to truck dealers that use the items exclusively in the renovation of trucks to be sold.

If the Company has reason to believe that a purchaser will consume the items purchased rather than reselling them or using them for an exempt purpose, the Company must collect and pay over a tax on the sale to the purchaser and may not accept a resale or exempt use certificate. For example, the Company must collect and pay over the tax when it knowingly sells paint to (1) an auto body shop that does not charge separately for paint on its bills to customers; (2) a cab company that uses the paint in the maintenance of cabs that it operates itself; or (3) a truck dealer that uses the paint to repair trucks owned by others and that does not separately charge for paint on its repair bills.

I am enclosing a copy of Letter Ruling 81-93, in which I ruled that the sales tax applied to a sale of auto paint more typical than the ones about which you inquire, namely, sale to an auto body shop that used the paint in the repair of damaged vehicles but did not separately state the charge for paint on its customer invoices.

Very truly yours,

/s/L. Joyce Hampers

L. Joyce Hampers
Commissioner of Revenue

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LR 82-22