November 27, 1984

You request a ruling regarding the application of the Massachusetts corporate excise and the Massachusetts sales or use tax to the business transactions of your client, a Realtor/Broker licensed in North Carolina.

Your client's company will, for a fee, provide space in its computer bank to home or other real estate sellers to list their property. The property is included in listings compiled for distribution to potential buyers interested in property in the sellers' area. Buyers interested in property in a given area may purchase a listing from the company which includes the real estate placed in the computer system by sellers in that area. You state that the company will not maintain any office or agents in Massachusetts and that all solicitation for property listings will occur -through advertisements in national and regional publications. The operations of the company will be handled by mail or by telephone, and the company will not own or lease real property in the Commonwealth.

(1) You ask whether the sale of computer space to Massachusetts sellers is subject to the Massachusetts sales or use tax.

Massachusetts General Laws Chapter 64H, Section 2 imposes a five percent tax on sales at retail of tangible personal property in Massachusetts. Chapter 64I, Section 2 imposes a complementary use tax on the storage, use or other consumption in Massachusetts of tangible personal property purchased for storage, use or other consumption in Massachusetts.

Chapter 64I, Section 3 of the Massachusetts General Laws provides that "every person storing, using or otherwise consuming in the commonwealth tangible personal property purchased from a vendor shall be liable for... [use tax]."

The Massachusetts customer who purchases a computer listing from your client's company for use in Massachusetts, is subject to and liable for the Massachusetts use tax.

(3) You inquire whether the company will be subject to the Massachusetts corporate excise tax on income derived from doing business in the Commonwealth.

Massachusetts General Laws Chapter 63, Section 39 provides that every foreign corporation, exercising its charter, or qualified to do business or actually doing business in the commonwealth shall pay a Massachusetts corporate excise tax. A "foreign corporation" is defined in Chapter 63, Section 30(2) as every corporation, association, or organization established, organized or chartered under laws other than those of the Commonwealth.

The purpose of Chapter 63, Section 39 is to require payment by foreign corporations for the privilege of doing business in Massachusetts. Federal law however establishes minimum standards of in-state corporate activity below which the imposition of a state net income tax is precluded. 15 U.S.C. Section 381(a)(1976) provides:

No State ... shall have power to impose ... a net income tax on the income derived within such State by any person from interstate commerce if the only business activities within such State by or on behalf of such person during such taxable year are either, or both of the following

(1) the solicitation of orders by such person, or his representative, in such State for sales of tangible personal property, which orders are sent outside the State for approval or rejection, ' and, if approved, are filled by shipment or delivery from a point outside the State;
(2) the solicitation of orders by such person, or his representative,' in such State in the name of or for the benefit of a prospective customer of such person, if orders by such customer to such person to enable such customer to fill orders resulting from such solicitation are orders described in paragraph (1).

In Letter Ruling 80-1 the Commissioner stated that a Connecticut real estate brokerage business, with no offices or employees in Massachusetts acting as broker in connection with the sale of Massachusetts real estate would be subject to the Massachusetts corporate excise.

Your client will not act as broker with respect to the sale of Massachusetts real estate. Your client will have no part in any negotiations or settlements, will receive no commissions and will have no contact with the buyers or sellers other than to collect and distribute information.

Therefore, the Company, which maintains no sales office or agents in the Commonwealth and whose orders are sent to North Carolina, is not subject to the Massachusetts corporate excise on net income derived from its minimal business activities in the Commonwealth.

Very truly yours,

Commissioner of Revenue
IAJ:SFR:loc
LR 84-104