July 19, 1985

You request a ruling regarding the application of the Massachusetts sales tax to sales of products manufactured by ("Company"). The Company is engaged in business in Massachusetts and is registered as a vendor.

The Company intends to enter into a purchase and sale agreement with a wholesale distributor ("Distributor"), which intends to resell the Company's products to federally-chartered and state-chartered credit unions in Massachusetts. These credit unions will place their orders with the Company's local sales offices. The Company will invoice and receive payment from the Distributor and will also make drop shipments via common carrier to the credit unions.

The Distributor is not registered as a vendor in Massachusetts. For the purposes of this inquiry, we will assume that the Distributor is indeed not engaged in business in Massachusetts.

You inquire whether sales to federally-chartered and state-chartered credit unions are subject to the sales tax. You also inquire whether the Company may accept a resale certificate from the Distributor in lieu of collecting the sales tax.

1. Massachusetts General Laws Chapter 64H, Section 2 imposes a five percent sales tax on retail sales of tangible personal property. Section 6(a) of Chapter 64H exempts from the sales tax "[s]ales which the commonwealth is prohibited from taxing under the constitution or laws of the United States."

Sales to credit unions chartered under the Federal Credit Union Act ("Act") are exempt from the sales tax because the Act provides that "[t]he federal credit unions organized hereunder, their property" their franchises, capital, reserves, surpluses, and other funds, and their income shall be exempt from all taxation now or hereafter imposed by the United States or by any State, Territorial, or local taxing authority...." 12 U.S.C. S 1768; see also Central Credit Union of Maryland v. Comptroller, 243 Md. 175, 184-86, (1966); Tabco Federal Credit Union v. Comptroller, St. Tax Rep. (CCH) 1 200-411 (Baltimore County Cir. Ct. June 22, 1964). The Distributor's sales to credit unions organized under the Federal Credit Union Act, then, are not subject to the sales tax.

All retail sales of tangible personal property in Massachusetts are subject to sales tax, unless otherwise exempted. No exemption applies to sales made to state-chartered credit unions. See G.L. c. 64H, § 6; accord Central Credit Union v. Comptroller, 243 Md. at 184-86. Therefore, the Distributor's sales of the Company's products to state-chartered credit unions are subject to the sales tax.

2. All gross receipts of a vendor from the sale of tangible personal property are presumed to be retail sales subject to tax until the contrary is established. G.L. c. 64H, § 8(a). The acceptance of a resale certificate relieves the vendor of his burden of proof only if a series of requirements are met. Among these is the requirement that the purchaser who presents the certificate must be a vendor registered in Massachusetts under Chapter 64H, Section 7. See G.L. c. 64H, § 8(b). The Distributor is not registered as a vendor in Massachusetts. Therefore, the Company may not accept a resale certificate from the Distributor.

Section 1(13) of Chapter 64H provides that

The delivery in the commonwealth of tangible personal property by an owner or former owner thereof , or by a f actor, or agent of such owner, former owner or factor, if the delivery is to a consumer or to a person for redelivery to a consumer, pursuant to a retail sale made by a retailer not engaged in business in the commonwealth, is a retail sale in the commonwealth by the person making the delivery. He shall include the retail selling price of the property in his gross receipts.

The Company is engaged in business in Massachusetts and is registered as a Massachusetts vendor, but the Distributor is not registered as a vendor in Massachusetts. Under Chapter 64H, Section 1(13), if the Company makes delivery on behalf of the Distributor, the Company is liable for the collection and payment of the sales tax on all non-exempt sales made in Massachusetts. The tax is based on the retail selling price to the ultimate consumer. See Letter Rulings 84-33; 84-37.

Very truly yours,
Commissioner of Revenue
IAJ:JES:loc
LR 85-60