December 11, 1985

You request a ruling regarding the application of the Massachusetts sales and use taxes to purchases made by * * * * ("Retail Chain"). You state that the Retail Chain is a wholly-owned subsidiary of * * * * ("Company") which is in turn the wholly-owned subsidiary of * * * * ("Parent Corporation").

The Retail Chain is a Massachusetts corporation, with its home office in Massachusetts; it operates retail jewelry stores in a number of states. The Retail Chain purchases most of the equipment and fixtures used in its stores from Massachusetts manufacturers. The Parent Corporation acts as purchasing agent for the Retail Chain, but the Chain actually purchases the goods directly from the manufacturers. As evidence of this fact, insurance proceeds in case of loss are intended for the benefit of the Retail Chain.

After the goods are manufactured, the Parent Corporation hires a common carrier to pick up the. goods from the manufacturers. According to the terms of the agreement with the carrier and the manufacturers, title to the goods passes to the Retail Chain when the goods are loaded onto the carrier. The common carrier is then obligated to deliver the goods to the Retail Chain's warehouse in Massachusetts, as spelled out in bills of lading. Upon delivery to the warehouse, a representative of the Retail Chain inspects the goods, additional merchandise is added to the shipment, and new bills of lading are prepared to ship the goods to retail jewelry stores outside Massachusetts. For the reasons described below, we conclude that the Retail Chain's purchases from Massachusetts manufacturers are subject to Massachusetts sales tax.

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 sale takes place in Massachusetts if title to or possession of the tangible personal property is transferred to the purchaser in Massachusetts. See G.L. c. 64H, SS 1(12)(a), 2. Section 6(b) of Chapter 64H exempts from the sales tax sales of tangible personal property which the vendor is obligated under the terms of any agreement to deliver to an interstate carrier for delivery to a purchaser outside the Commonwealth or to a designee outside the Commonwealth of a purchaser outside of the Commonwealth.

The sales of tangible personal property take place in Massachusetts because title to the goods is transferred in Massachusetts. The Retail Chain's purchases are not exempt from the sales tax under Section 6(b) because the vendor's only obligation is to deliver the merchandise to a carrier for delivery to the Retail Chain's warehouse located in Massachusetts. The vendor is under no obligation to transport the goods by carrier from the warehouse in Massachusetts to the Retail Chain's stores located in other states. The Retail Chain's purchases are also not exempt under Section 6(b) because the Retail Chain is not a purchaser outside the Commonwealth. Therefore, the Retail Chain's purchases of goods manufactured in Massachusetts are subject to the Massachusetts sales tax.

Very truly yours,
Commissioner of Revenue
JES/afp
LR 85-70