September 24, 1982

You inquire whether materials and supplies purchased by ********** ("Contractor"), a Massachusetts corporation, for use in the construction of a housing project are subject to the Massachusetts sales tax. The project will ultimately be used by the ********** Housing Authority ("Housing Authority") to provide housing for low-income tenants.

The project was undertaken by the Contractor pursuant to a "turnkey" contract. Under the contract, ********** ("Developer") engaged Contractor to construct the project. After the project is completed, the Developer will transfer ownership to the Housing Authority.

General Laws Chapter 64H, Section 6(f) exempts from tax sales of building materials and supplies to be used in the construction, reconstruction, alteration, remodeling or repair of any building owned by or held in trust for the benefit of the United States, the Commonwealth or any political subdivision thereof, or their respective agencies and used exclusively for public purposes.

In Northgate Construction Company, Inc. v. State Tax Commission, 377 Mass. 205, 385 N.E. 2d 967 (1979), the Supreme Judicial Court held that a contractor was subject to the Massachusetts sales tax on materials purchased and used in the construction of a turnkey project for a local housing authority. The Court stated that the exemption provided in Section 6(f) of Chapter 64H was inapplicable, because the local housing authority did not own the project under construction and the developer did not hold the property in trust for the authority.

Based on the foregoing, it is ruled that sales of materials and supplies to the Contractor, which are used to construct a housing project for the Housing Authority under a turnkey contract with the Developer, are subject to the Massachusetts sales tax.

Very truly yours,

/s/L. Joyce Hampers

L. Joyce Hampers
Commissioner of Revenue

LJH:JD:mf

LR 82-89