January 4, 1982

********** ("Company") is engaged in Massachusetts in the business of designing, fabricating and selling structural steel for use by building contractors.

You inquire

(1) whether the Company may pay the sales tax on its purchases of materials, in lieu of collecting and paying over the tax on its sales of structural steel to building contractors;

(2) whether the sales tax applies to the Company's charges for fabrication of structural steel for building contractors who supply the steel and other materials used in the fabrication; and

(3) whether the "sales price" of structural steel sold to building contractors includes charges for

(a) "drafting labor" and "direct labor," that is, labor associated with the Company's design and fabrication of structural steel;

(b) overhead;

(c) "trucking labor;" and

(d) profit.

Massachusetts General Laws Chapter 64H, Section 2 imposes an excise on sales at retail of tangible personal property in Massachusetts by any vendor. "Sale" is defined in Chapter 64H, Section 1(12) as including any transfer of title or possession of tangible personal property for a consideration, as well as

"[t]he producing, fabricating, processing, printing or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing or imprinting."

Sales for resale in the regular course of business, and sales of materials that become an ingredient or component part of tangible personal property to be sold, are not subject to the sales tax (G.L. c. 64H, ss. 1(13), 6(r)).

In determining the sales price on which the tax is based, no deduction is allowed for "the cost of materials used, labor or service cost, interest charges, losses or other expenses" (G.L. c. 64H, s. 1(14)(a)(ii)), but separately-stated charges for transportation of property after its sale are excluded from the sales price (G.L. c. 64H, s. 1(14)(c)(v)).

Based on the foregoing, it is ruled that

(1) The Company's sales of structural steel to building contractors are retail sales subject to tax;

(2) The Company's purchases of materials for resale in the regular course of business and its purchases of materials to be incorporated in structural steel to be sold are not subject to tax;

(3) The sales tax applies to the Company's charges for fabrication of structural steel for building contractors who supply the steel or other materials used in the fabrication;

(4) The sales price of structural steel sold to building contractors includes amounts representing "drafting labor," "direct labor," overhead and profile, whether or not such amounts are separately stated; and

(5) Separately-stated charges for transporting structural steel after its sale are not subject to tax.

Very truly yours,

/s/L. Joyce Hampers

L. Joyce Hampers
Commissioner of Revenue

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LR 82-6