September 7, 1984

You request a, ruling regarding the application of the Massachusetts sales tax on purchases made by * * * ("Company").

You state that the Company operates restaurants in sixteen states. The Company maintains a large warehouse in Massachusetts and a smaller warehouse in another state. Almost all products used by the Company's restaurants are delivered to the two warehouses and then later shipped to restaurants in and outside Massachusetts.

The Company purchases many products from registered vendors located in Massachusetts and from vendors located outside Massachusetts but registered as Massachusetts vendors. All such registered vendors collect the Massachusetts sales tax on the Company's purchases. You do not state where the transfers of title or possession take place.

The Company has in the past claimed the Massachusetts sales tax paid on such purchases as credits against use taxes imposed by other states on the goods that are subsequently shipped to and used in the Company's restaurants in other states. The state of New York has challenged such credits and has claimed no Massachusetts sales tax was due on the purchases.

1. Chapter 64H, Section 2 of the Massachusetts General Laws imposes a five percent sales tax on retail sales of tangible personal property made in Massachusetts. A retail sale takes place in Massachusetts if title or possession of the tangible personal property is transferred in Massachusetts. (See G.L. c. 64H, §§ 1(12)(a), 2).

Chapter 64H, Section 7 requires that no person may engage in business in Massachusetts as a vendor unless that person is registered as a vendor in accordance with the requirements of Chapter 62C, Section 7. Many vendors located in other states register as vendors in Massachusetts because they meet the jurisdictional definition of "[e]ngaged in business in the commonwealth." (See G.L. c. 64H, § 1(5)).

Where a particular sale of tangible personal property takes place determine s whether the Massachusetts sales tax is due on the sale, not whether the seller is a registered Massachusetts vendor. Therefore, the Company's purchases in which title or possession are transferred in Massachusetts are subject to the Massachusetts sales tax, regardless of where the goods are ultimately used. The Company's purchases made outside Massachusetts are not subject to the Massachusetts sales tax.

2. General Laws Chapter 64I, Section 2 imposes a five percent use tax on the storage, use, or other consumption in Massachusetts of tangible personal property purchased for storage, use, or other consumption in Massachusetts. The use tax does not apply to sales upon which the sales tax has been collected under Chapter 64H. (G.L. c. 64H, § 7(a)).

The term "storage" as used in Chapter 64I does not include "the keeping, retaining, or exercising any right or power over tangible personal property for the purpose of subsequently transporting it outside the commonwealth." (G.L. c. 64I, § 1).

The Massachusetts use tax does not apply to goods kept or retained for the purpose of subsequently transporting them outside Massachusetts for use outside Massachusetts. Therefore, the Massachusetts use tax does not apply to the Company's purchases outside Massachusetts which are kept in Massachusetts and subsequently transported outside Massachusetts for use by the Company outside Massachusetts.

Very truly yours,

Commissioner of Revenue

IAJ:JES:mf

LR 84-64