February 8, 1985

You request a ruling regarding the application of the Massachusetts sales tax to purchases for your business, a welding shop. You make and install wrought iron railings, and you also make repairs to trucks and heavy equipment. You inquire whether the purchases of supplies for the welding shop are subject to sales tax.

1. Chapter 64H, Section 2 of the Massachusetts General Laws imposes a five percent sales tax on all retail sales of tangible personal property, unless otherwise exempted.

Chapter 64H, Section 6(r) exempts from the sales tax "[s]ales of materials...which become an ingredient or component part of tangible personal property to be sold…."

Chapter 64H, Section 8(f) provides that "[i]f tangible personal property is purchased by a person who will use such property in a manner which exempts it from the tax imposed by [Chapter 64H], he may give an exempt use certificate to the vendor, certifying that the property being purchased will be so used."

The iron purchased to make railings becomes an ingredient and component part of tangible personal property to be sold. Therefore, your purchase of the iron is exempt from the sales tax, and you may give the vendor an exempt use certificate, ST-12, in lieu of paying the sales tax.

2. The sales tax is imposed on the total sales price of tangible personal property sold at retail. ( See G.L. c. 64H, §§ 1(6), 2). The sales price does not include "the amount charged for labor or services rendered in installing or applying the property sold." (G.L. c. 64H, § 1(14)(c)(iii)).

Sales to your customers are retail sales of tangible personal property. Therefore, your sales of iron railings are subject to the sales tax. Separately stated installation charges are not included in the sales price and are not subject to the sales tax.

3. The Sales and Use Tax Regulation on Service Enterprises states that

(a) Repairers. A repair service shall collect a tax on parts or any materials which it furnishes in connection with repair work, where the value of the parts or materials is not inconsequential. This applies, for example, to the repairer of a motor vehicle, airplane, bicycle, machine, musical instrument, radio, television set, boat, or furniture. If the repair service does not separate on its customer invoices and in its records the fair retail selling price of the parts or materials from the charge of labor, installation, or other services, the Commissioner presumes that the entire charge represents the sales price of the property….

If the value of the property used in repair work is inconsequential and the repairer makes no separate charge for such property, the repair service enterprise is the consumer and pays the sales tax when it purchases the property. The repairer does not collect a tax from the customer. (830 CMR 64H.03(5)(a)).

As a general guideline, an inconsequential transfer of tangible personal property means a value of less than ten percent of the total repair charge. The term "not inconsequential" means a value of equal to or greater than ten percent of the total repair charge. ( See 830 CMR 64H.03(1)).

Your charges for repairing trucks and heavy equipment are subject to sales tax if the value of the parts is equal to or more than ten percent of the total charge and is not separately stated. Your charges for repair work are not subject to sales tax if the value of parts is less than ten percent of the total charge and is not separately stated. If the value of the parts is less than ten percent of and is not separately stated in the charges to your customers, you should pay sales tax on your purchases of the parts.

Very truly yours,

/s/Ira A. Jackson

Ira A. Jackson

Commissioner of Revenue

IAJ:JES:loc

LR 85-16