August 30, 1982

You inquire as to the Massachusetts income tax treatment of interest earned on certificates of deposit purchased in a Massachusetts bank by a funeral director who is a resident of a neighboring state. The certificates would be purchased by the funeral director with funds given the director by customers for prepayment of funeral expenses.

Massachusetts General Laws Chapter 62, Section 5A taxes income received by non-residents from sources within the Commonwealth which is defined as income "derived from or effectively connected with any trade or business, including employment carried on by the taxpayer in the commonwealth or derived from the ownership of any interest in real or tangible personal property located in the commonwealth."

Income from a certificate of deposit or bank account in a Massachusetts bank is income from intangible personal property and is not taxable to non-residents except when received in connection with a trade or business conducted by the non-resident in the Commonwealth.

Based on the foregoing it is ruled:

1. If the funeral director is not engaged in business in Massachusetts, the interest received by him from a Massachusetts bank is not subject to Massachusetts taxation.

2. If the non-resident funeral director is engaged in business in Massachusetts, the interest received by him on the certificates of deposit purchased in connection with his business is subject to Massachusetts income taxation.

Very truly yours,

/s/Daniel B. Breen

Daniel B. Breen
Acting Commissioner of Revenue

DBB:JJW:mf

LR 82-81