June 26, 1984

You inquire about the application of the sales and use taxes to a sales promotion program to be undertaken by your client ("Company"). Under the program, the Company will offer a camera, free of charge, to each customer who makes a purchase of $100 or more. In addition, it will offer cameras to customers who make purchases of at least $50 but less than $100, for an additional charge of $5.

The promotion will be offered to customers within and without Massachusetts. The Company will purchase the cameras in Massachusetts for $8.95 each.

The sales tax is imposed on retail sales of tangible personal property (G.L. c. 64H, § 2). "Retail sale" is defined as a sale of tangible personal property for any purpose other than resale in the regular course of business (G.L. c. 64H, § 1(13)). A Massachusetts registered vendor may give a resale certificate (Form ST-4) in lieu of paying the sales tax if, at the time he purchases tangible personal property, he intends to sell it in the regular course of business or is unable to ascertain whether the property will be sold or used for some other purpose (G.L. c. 64H, § 8(b)). Section 8(d) of Chapter 64H provides:

If a purchaser who gives a certificate makes any use of the property other than retention, demonstration or display while holding it for sale in the regular course of business, the use shall be deemed a retail sale by the purchaser as of the time the property is first used by him, and the cost of the property to him shall be deemed the gross receipts from such retail sale.

In determining the sales price on which the sales tax is based, cash discounts allowed and taken on sales are excluded (G.L. c. 64H, § 1(14)(c)(i)).

General Laws Chapter 64H, Section 6(b) exempts from the sales tax sales of tangible personal property which the vendor is obligated under the terms of any agreement to deliver (1) to a purchaser outside the Commonwealth or to a designee outside the Commonwealth of a purchaser outside the Commonwealth or (2) to an interstate carrier for delivery to a purchaser outside the Commonwealth or to a designee outside the Commonwealth of a purchaser outside the Commonwealth.

Based on the foregoing, it is ruled that:

1. The Company may give a resale certificate in lieu of paying the sales tax on its purchase of the cameras.

2. The Company is the consumer of the cameras that it will give away free of charge to customers who have made purchases of $100 or more, whether the customers to whom they will be given are located in Massachusetts or elsewhere. The Company must include the cost to it of such cameras in its gross receipts for the period during which the cameras are given away.

3. The Company must pay the tax on its sales of cameras for $5 in Massachusetts, except for any sales that are exempt under Chapter 64H, Section 6(b).

Each sales promotion involving sales by a retailer for less than cost will be addressed on its own facts; this ruling should not be construed as representing the Commissioner's position on all such promotions.

Very truly yours,

/s/Ira A. Jackson

Commissioner of Revenue

IAJ:JXD:mf

LR 84-48