August 8, 1983

__________ ("Contractor") purchases modular homes from a Vermont manufacturer. The manufacturer delivers each home in two sections to the Contractor's Massachusetts job site, and places it on a foundation erected by the Contractor. The Contractor then connects the plumbing and electric fixtures of the homes, finishes the shingling, siding and interior trim, and otherwise prepares the homes for sale to its customers.

You ask who is responsible for paying the tax on the Contractor's purchase of the homes, and whether the manufacturer's delivery charges are part of the sales price of the homes on which the tax is based.

You state that the manufacturer of the homes pays a sales tax to Vermont on its purchases of materials that become part of the homes. You also inquire whether Massachusetts allows a credit against the sales tax on the Contractor's purchase of the homes for this tax paid to Vermont by the manufacturer.

The sales and use taxes are imposed with respect to sales of tangible personal property (G.L. c. 64H, § 2; G.L. c. 64I, § 2). Sales of realty are not subject to the sales or use tax.

The sales price of property on which the sales tax is based generally is the total amount charged by the vendor (G.L. c. 64H, § 1(14)). In determining the sales price, no deduction may be taken on account of the cost of materials used, labor or service cost, interest charges, losses or other expenses, but separately-stated transportation charges for transportation of property after its sale are excluded (G.L. c. 64H, § 1(14)).

General Laws Chapter 64I, Section 7(c) provides a qualified exemption from the use tax for sales upon which the purchaser has paid a tax or made reimbursement therefor to a vendor or retailer under the laws of another state. There is no exemption from or credit against the Massachusetts sales or use tax for taxes that a vendor has paid to another state on his purchases of materials that become part of the property he sells.

Based on the facts you state, the modular homes are tangible personal property at the time they are sold to the Contractor. Therefore, the Contractor's purchases of the modular homes are subject to the sales tax. The sales price of the homes on which the tax is based includes any amount broken out by the manufacturer for taxes it has paid on purchases of materials that become part of the homes; the sales price does not include separately-stated delivery charges set in good faith.

The manufacturer of the homes must register as a Massachusetts vendor and pay the Massachusetts sales tax on its sales of homes that are delivered to Massachusetts (G.L. c. 64H, §§ 1(5), 2, 7). If the manufacturer does not collect the sales tax from the Contractor, the Contractor must pay a Massachusetts use tax with respect to such sales (G.L. c. 64I, § 3).

Very truly yours,

/s/Ira A. Jackson

Ira A. Jackson
Commissioner of Revenue

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LR 83-68