The Mobile Home Commission asked for an explanation of the application of the Massachusetts sales tax to sales of used mobile homes. For the purposes of this ruling, the term "mobile home owner" or "owner of a used mobile home" means a person who has title to and has occupied a mobile home for a length of time as the person's principal or secondary residence 1 Three sets of circumstances are typical.
Situation I: An owner of a used mobile home sells the mobile home to another person, with no assistance or intervention from any third party. We conclude that sales of used mobile homes by the owners with no assistance from a third party are exempt from sales tax.
Situation II: An owner of a used mobile home sells the mobile home to another person, with the assistance of a real estate broker, who receives a commission for brokering services. We conclude that sales of mobile homes by the owners with the assistance of real estate brokers, generally known as commission sales, are exempt from sales tax.
Situation III: A third party engaged in the business of selling mobile homes sells a used mobile home to another person on consignment and on behalf of the owner. The third party has the authority to transfer title to and possession of the mobile home to the seller. We conclude that sales of mobile homes by third parties, generally known as consignment sales, are subject to sales tax.
Before we discuss the three fact settings and the applicable law, we must discuss two preliminary issues: whether a mobile home is real property or tangible personal property, and whether a mobile home is a trailer. If a mobile home is real property, the mobile home is not subject to the sales tax. See G.L. c. 64H, § 2. If a mobile home is a trailer, the sale is not exempt as a casual and isolated sale. See G.L. c. 64H, § 6(c).
Whether a Mobile Home is Tangible Personal Property
The Massachusetts sales tax is imposed only on sales of tangible personal property. See G.L. C. 64H, § 2. The Supreme Judicial Court held that if a mobile home acquires the characteristics of a conventional home, the mobile home ceases to be tangible personal property and becomes real estate. Ellis V. Board of Assessors, Acushnet, 358 Mass. 473, 474-75 (1970). In Ellis, the three-bedroom prefabricated structure rested on a ten-inch concrete foundation with a full cellar, which included a heating furnace and a separate 275-gallon oil storage tank. The dwelling had no wheels, axle, or hitching post. Id. According to the Appellate Tax Board, the structure looked like and served the purpose of a conventional home. The Supreme Judicial Court agreed with the Board that the structure had become real property. Id. at 475. Such structures are taxed as real property under chapter 59 of the General Laws. Id.
Letter Ruling 82-120 applied the principle in Ellis under the sales tax law. The ruling concluded that sales of used mobile homes permanently affixed to a site, so as to become real estate, are not subject to Massachusetts sales tax. We also conclude that used mobile homes similar to the mobile home described in Ellis become real estate. Their sales are not subject to sales tax.
Whether the Sale of a Used Mobile Home Is the Sale of a Trailer
The law imposes a five percent sales tax on all retail sales of tangible personal property, unless otherwise exempted. G.L. c. 64H, §§ 2, 6. It exempts from the sales tax 'casual and isolated sales, by sellers who are not engaged in the business of selling tangible personal property. But casual and isolated sales of motor vehicles and trailers are subject to sales and use tax. G.L. c. 64H § 6(c). If a mobile home is a trailer, then, its sale is subject to tax even if the sale is "casual and isolated."
A statutory definition of the term "mobile home" can be found in chapter 140 of the General Laws, which includes a series of provisions that regulate mobile home parks. Chapter 140 defines a mobile home as "a dwelling unit built on a chassis and containing electrical, plumbing and sanitary facilities and designed to be installed on a temporary or a permanent foundation for permanent living quarters." G.L. C. 140, § 32Q. The mobile home industry uses the federal statutory definition of "manufactured home,o which is similar to the Massachusetts statutory definition of "mobile home." "'[M]anufactured home' means a structure, transportable in one or more sections, ... which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained therein .... I 42 U.S.C.A. § 5402(6) (1983).
Whether a mobile home, as defined above, is also a trailer depends on the statutory and administrative definitions of the term "trailer." The definition of the term "trailer" for the purposes of the casual and isolated sale exemption comes from chapter 90 of the General Laws, which regulates the registration of motor vehicles. Chapter 90, section 1, defines a trailer as "any vehicle or object on wheels and having no motive power of its own, but which is drawn by, or used in combination with, a motor vehicle." 2 The definition in chapter 90 does not settle the issue of whether a mobile home is a trailer, and we must look elsewhere for an answer.
The Department's Sales and Use Tax Regulation on Motor Vehicles defines "trailer" as "a vehicle which is not self-propelled, which must be towed by a motor vehicle, and which is constructed and designed for use upon the public highway." 830 CMR 64H.02(2) (1986). This definition of the term "trailer" seems to exclude "mobile homes" as that term is generally understood today. Reading the definition of "trailer" in the Regulation on Motor Vehicles in conjunction with the statutory and the trade group's definitions of "mobile home," we conclude that a mobile home, as that term is commonly used and understood, is not a trailer. 3 It follows that the casual and isolated sale exemption may apply to the sale of a used mobile home.
Most commonly, used mobile home sales involve a mobile home that is neither real property nor a trailer. Accordingly, our analysis of the fact situations you ask about, which involve used mobile homes that are not real property or trailers, follows.
Situation I: Whether the Sale of a Used Mobile Home by the Owner Is a Casual and Isolated Sale
As stated above, all retail sales in Massachusetts of tangible personal property are subject to tax, unless otherwise exempted. See G.L. c. 64H, §§ 2, 6. Casual and isolated sales by a vendor who is not regularly engaged in the business of making sales at retail are exempted from the sales tax. If the sale of a used mobile home is a casual and isolated sale, it is exempt from the sales tax.
The Sales and Use Tax Regulation on Casual and Isolated Sales explains the scope of this exemption:
[c]asual and isolated sales are those of an infrequent, non-recurring nature made by a person not engaged in the business of selling tangible personal property. They also include sales of items of tangible perso~nal property which were acquired for use or consumption by a seller and not sold in the regular course of business engaged in by such seller.
830 CMR 16.01 (copy enclosed). The Regulation provides examples of exempt casual and isolated sales: a person selling his own household furniture, a grocer selling the grocery cash register, or an insurance agent selling the typewriter used by the agent. 830 CMR 16.01(l)(a).
The term "engaged in business" used in the Regulation means "commencing, conducting or continuing in business." G.L. c. 64H, § 1(4). The term "business" is defined as "any activity engaged in by any person or caused to be engaged in by him with the object of gain, benefit or advantage, either direct or indirect." G.L. c. 64H, § l(l). where a person is selling a used mobile home which that person has owned and occupied for a length of time and where the person is not otherwise conducting a business of selling mobile homes, the seller is not engaged in the business of selling mobile homes. Under Situation I, the sale of a used mobile home is exempt from the sales tax as a casual and isolated sale.
Situation II: Whether the Commission Sale of a Used Mobile Home Completed with the Assistance of a Broker Is Exempt from Tax
Mobile home owners often ask a real estate broker to help find a buyer for the mobile home in return for payment of a commission from the proceeds of. the sale. A real estate broker typically locates prospective buyers, obtains offers from the buyers, and conveys the offers back to the owner for final approval and acceptance. A real estate broker does not usually have possession of the property or the authority to transfer title to or possession of the property. Such sales are generally known as commission sales.
The involvement of a real estate broker in what is otherwise a casual and isolated sale does not change the character of the sale so as to make the sale taxable. For example, Letter Ruling 83-39 dealt with a piano tuner who occasionally helped his customers find buyers for their pianos. The piano tuner's activities included locating a buyer for a piano, obtaining an offer from the prospective buyer, and conveying the offer to the owner of the piano. The piano tuner did not have possession of the piano or the authority to transfer title to the buyer. Letter Ruling 83-39 concluded that the piano tuner was not required to collect and pay sales tax on the owners' sales of pianos. The owners' sales of the pianos were exempt casual and isolated sales.
Applying this principle to commission sales of mobile homes, under Situation II, we conclude that the commission sale of a used mobile home by the owner is exempt from the sales tax as a casual and isolated sale. If the real estate broker, in addition to the mobile home owner and the prospective buyer, signs the purchase-and-sale agreement for the otherwise exempt sale of a mobile home, and if the sole purpose of the broker's signing the agreement is to protect the broker's right to receive a commission, the sale is also exempt from sales tax.
Situation III: Whether the Consignment Sale of a Used Mobile Home on Behalf of the Owner Is Subject to Sales Tax
A used mobile home owner may seek the help of a person engaged in the business of selling mobile homes. A person engaged in the business of selling mobile homes, hereinafter a dealer, might be a dealer in new and used mobile homes, a mobile home park operator, or a real estate broker. The sale of the used mobile home is a consignment sale if the dealer has full authority from the owner to transfer title to and possession of the mobile home to the buyer. A consignment sale also occurs if the dealer may commit the mobile home owner to the sale, even though a final signature from the owner is required to transfer title to the buyer. A used mobile home is often sold on consignment because of the absence, disability, or death of the owners
The case of Sherman v. Commissioner of Revenue, A.T.B. Docket No. 130486 (Mar. 20, 1986), explained sales tax principles as applied to consignment sales. In Sherman, a person who took possession of household goods at the request of the owners, set up tag sales of the goods, turned the goods over to the buyers, and collected the proceeds on behalf of the owners, was found to be engaged in making retail sales as a vendor. Sherman's activities changed the character of the transactions from exempt casual and isolated sales to taxable retail sales.
If a dealer has authority to transfer or authority to commit the mobile home owner to transfer title to and possession of the mobile home to the seller in a consignment sale, the sale of the used mobile home is no longer an exempt casual and isolated sale. The dealer should collect the sales tax from the buyer, see G.L. c. 64H, § 3, and pay the sales tax to the Department of Revenue. G.L. c. 64H, § 2.
It may be that a dealer in new and used mobile homes, a mobile home park operator, or a real estate broker may make only very few consignment sales of used mobile homes. The number of sales does not affect the dealer's liability for the sales tax if the few sales are consignment sales. Infrequent sales which are nevertheless an integral part of the person's business are not exempt casual and isolated sales. See 830 CMR 16.01(2)(c), (d).
We conclude that consignment sales of used mobile homes, where the dealer has authority to complete the sale or authority to commit and obligate the owner to complete the sale, are not casual and isolated sales. Consignment sales of used mobile homes are subject to sales tax.
Very Truly Yours,
Commissioner of Revenue
February 13, 1987
1 While questions concerning sales of new mobile homes are beyond the scope of the Commission's request, the Commission agrees with us that sales of new mobile homes are subject to sales tax.
2 The rest of the definition of the term "trailer" reads: "[A trailer] shall not include a pole dolly or pole dickey, so called, nor a pair of wheels commonly used as an implement for other purposes than transportation, nor a portable, collapsible or separate two wheel tow dolly limited only to the purpose of transporting or towing a registered vehicle nor farm machinery or implements when used in connection with the operation of a farm or estate, nor any vehicle when towed behind a farm tractor and used in connection with the operation of a farm or estate." G.L. c. 90, § 1.
3 The Attorney General recognized in 1967 that the administrative interpretation of the term "trailer" for purposes of the sales tax law lies properly with the State Tax Commission as the agency charged with the administration of the sales tax. 1967/68 OP. Atty. Gen. No. 27, Rep. A.G., Pub. Doc. No. 12 at 90. The Department of Revenue and the Commissioner have succeeded to the former State Tax Commission's role in administering the sales tax, and we may properly interpret the term.