February 8, 1985

You ask whether the charge for rustproofing an automobile is subject to the Massachusetts sales tax.

Massachusetts imposes an excise on sales at retail of tangible personal property in Massachusetts by a vendor. (G.L. c. 64H, § 2). Excluded from the definition of "sale at retail" are personal service transactions which involve no sale or which involve sales as inconsequential elements for which no separate charges are made. (G.L. c. 64H, § 1(13)(c)).

Sales and Use Tax Regulation 64H.03 (Service Enterprises) explains the application of the Massachusetts sales and use tax to service enterprises. The Regulation specifically includes a repairer of automobiles as an example of a service enterprise. Similarly, a rustproofing business is considered a service enterprise.

For purposes of Regulation 64H.03 the term "inconsequential" generally means a value of less than ten percent of the total charges.

Regulation 64H.03 provides in pertinent part that:

(1) A service transaction is not subject to the sales tax where the real object of the transaction is the service itself and no transfer of tangible personal property takes place.

(2) If the real object of a service transaction is the service itself and an inconsequential transfer of tangible personal property takes place and the service enterprise does not separately state the purchase price of the property on the bill to the customer, the total charge which includes the service and property is exempt from the sales tax.

(3) If the transfer of tangible personal property occurs and the value of the property is not inconsequential in relation to the total charge (for service and property) and the charge for the property is not separately stated on the bill to the customer then the service enterprise must collect a sales tax from the customer on the total amount charged (for service plus property).


(4) If the transfer of tangible personal property occurs and the charge for the property is separately stated from the charge for service on the bill to the customer then the service enterprise collects a sales tax from its customer based only on the amount charged for the property whether or not the value of the property is inconsequential in relation to the total charge.

Generally, the real object of rustproofing an automobile is the service itself. If the value of the property transferred (material used to rustproof) is inconsequential in relation to the total charge for rustproofing and the rustproofer does not separately state the purchase price of the materials on the bill to the customer, then the total charge for rustproofing is exempt from the Massachusetts sales tax. In this situation the rustproofer is the consumer of the material used to rustproof and must pay the sales tax upon the purchase of the material.

Very truly yours,

/s/Ira A. Jackson

Ira A. Jackson

Commissioner of Revenue

IAJ:SFR:loc

LR 85-18