June 16, 1989

You request a ruling on the application of Massachusetts sales tax to sales of supplies to professional photographers by ("Company"). You state that the supplies are chemicals (developers, print washes, and fixers), and set supplies (background materials, gaffer tapes, and props) purchased by a photographer for a particular commissioned shoot. You also ask whether rentals of backdrops to professional photographers are taxable. The Company markets and rents the backdrops on behalf of ("Business"). We conclude that the sales of chemicals to professional photographers are exempt and that sales of set supplies and rentals of backdrops are taxable.

Sales of Chemicals Used to Develop Photographs

Professional photographers purchase chemicals from the Company to develop photographs in their darkrooms and laboratories. The chemicals: developers; print washes; and fixers; are all used in the developing of photographic film. You ask whether sales of these chemicals to professional photographers are exempt.
Massachusetts law imposes a five percent sales tax on all retail sales of tangible personal property, unless otherwise exempted, see G.L. c. 64H, §§ 2,6, and a complementary five percent use tax on the storage, use, or other consumption in Massachusetts of tangible personal property purchased for storage, use, or other consumption in Massachusetts. See G.L. c. 64I, § 2. Section 6(r) of chapter 64H exempts from the sales tax

[s]ales of materials, tools and fuel, or any substitute therefor, which become an ingredient or component part of tangible personal property to be sold or which are consumed and used directly and exclusively...in an industrial plant in the actual manufacture of tangible personal property to be sold....For the purpose of this paragraph, any material, tool or fuel shall be construed to be consumed and used only if its normal useful life is less than one year or if its cost is allowable as an ordinary and necessary business expense for federal income tax purposes...; and the term "industrial plant" shall mean a factory at a fixed location primarily engaged in the manufacture, conversion or processing of tangible personal property to be sold in the regular course of business.

G.L. c. 64H, § 6(r). For sales of photographic chemicals to be exempt from the sales tax, the chemicals must meet the requirements of G.L. c. 64H, § 6(r).
Under G.L. c. 64H, § 8(f), if a person purchases tangible personal property for use in a manner exempt under chapter 64H, that person may give the vendor an exempt use certificate, to certify that the property will be so used. The acceptance of the exempt use certificate relieves the vendor from further liability for the sales tax. See G.L. c. 64H, § 8(g). But if the purchaser makes any use of the tangible personal property other than the use specified in the exempt use certificate, the use is deemed to be a retail sale to the purchaser as of the time of the non-exempt use, at the cost of the tangible personal property to the purchaser. See G.L. c. 64H, § 8(h). The purchaser should pay use tax on the use of the materials. See G.L. c. 64I, §§ 2,3.

The first issue in determining if a material is exempt under G.L. c. 64H, § 6(r), is whether film developers, fixers, and print washers are materials that become ingredient or component parts of tangible personal property to be sold. Such chemicals do not usually become component parts of finished photographs. Sales of such chemicals are not exempt under that part of G.L. c. 64H, § 6(r).

The second issue is whether film developers, print washes, and fixers are materials that are consumed and used directly and exclusively in an industrial plant in the actual manufacture of tangible personal property to be sold. This second issue raises three questions:
  • Are the chemicals consumed and used directly and exclusively in the actual manufacture of tangible personal property?
  • Are the chemicals consumed and used in an industrial plant?
  • Will the manufactured tangible personal property be sold in the regular course of business?



Under G.L. c. 64H, § 6(r), materials are construed to be consumed and used only if their normal useful life is less than one year or if their cost is allowable as an ordinary and necessary business expense for federal income tax purposes. Where the Company's customers show that the normal and useful life of any particular chemical is less than one year or that they deduct the purchases of such chemicals as ordinary and necessary business expenses for federal income tax purposes, their purchases of the chemicals are exempt from Massachusetts sales tax under G.L. c. 64H, § 6(r), if the photographers can meet the other requirements of the exemption, as described below.

An industrial plant is defined in G.L. c. 64H, § 6(r), as a factory at a fixed location primarily engaged in manufacture, conversion, or processing of tangible personal property to be sold in the regular course of business. The Supreme Judicial Court held that "[m]anufacture ordinarily and commonly denotes the process of transforming raw or unfinished materials by hand or machinery, and through human skill or knowledge, into something possessing a new nature and name and adapted to a new use." Commissioner of Corporations and Taxation v. Assessors of Boston, 321 Mass. 90, 94 (1947). The Department concluded in an earlier letter ruling that developing of exposed film into finished photographs is manufacture, conversion, or processing of tangible personal property. See Letter Ruling 85-40. A professional photographer's darkroom and processing lab is engaged in manufacture, but it must also be a factory at a fixed location primarily engaged in the processing of tangible personal property to be sold for the sales of materials to be exempt under G.L. c. 64H, § 6(r).

The term "factory" is defined in G.L. c. 149, § 1, as "any premises where mechanical power is used in aid of any manufacturing process there carried on." The Supreme Judicial Court held that a one-story building used as a drafting room and workshop was a factory under a building code, which defined the term as premises "where steam, water, or other mechanical power is used in aid of any manufacturing there carried on." See Kilgour v. Gratto, 224 Mass. 78, 78-79 (1916). See also Ford Motor Co. v. Director of Division of Employment Security, 326 Mass. 757, 761 (1951) (a factory is a building or buildings, devoted to manufacture). We conclude that a darkroom or other space dedicated to developing photographs is a "factory" under G.L. c. 64H, § 6(r).

The sales tax statute requires that a a factory must be dedicated primarily to manufacture, conversion, or processing of tangible personal property to be sold. Any other use of the location must be secondary to developing photographs to be sold. See G.L. c. 64H, § 6(r).

The exemption for sales of materials consumed and used in the manufacture of tangible personal property requires that the tangible personal property so produced be sold by the manufacturer in the regular course of business. See G.L. c. 64H, § 6(r). The statute does not provide an exemption for sales of materials used by persons not engaged in selling photographs in the regular course of business. The Company's customers should be engaged in selling photographs in the regular course of business 1 for their purchases of chemicals to be exempt from Massachusetts sales tax.

As a vendor, the Company should require its customers who meet the above three requirements to present exempt use certificates, Forms ST-12, certifying that the materials will be consumed and used directly in an industrial plant in the actual manufacture of tangible personal property to be old. The Company's acceptance of an exempt use certificate from its customers relieves the Company from further liability for the sales tax. See G.L. c. 64H, § 8(f),(g). The Company should advise its customers that anyone who presents an exempt use certificate who does not then use the purchased materials in the manner stated on the certificate should pay use tax on the use of the materials, at the cost of the materials to the purchaser. See G.L. c. 64H, § 8(h); G.L. c. 64I, §§ 2,3.

Sales and Rentals of Items for Use on Commissioned Shoots

Professional photographers purchase from the Company background materials, gaffer tapes, and props such as fake ice cubes for particular commissioned shoots. Professional photographers also rent backdrops from the business for use on commissioned shoots. You ask whether sales and rentals of such items are sales for resale not subject to sales tax, because the completed photographs from the shoots are taxable.

Massachusetts imposes a five percent sales tax on all retail sales, including rentals, of tangible personal property unless otherwise exempted. See G.L. c. 64H, §§ 1(12)(a), 2. A retail sale is defined as a sale of tangible personal property for any purpose other than resale in the regular course of business. See G.L. c. 64H, § 1(13).

All of a vendor's gross receipts are presumed to be from taxable sales until the contrary is established. The burden of proving that a particular sale is not taxable is on the vendor unless the vendor takes from the purchaser a resale certificate. But the resale certificate relieves the vendor of the burden of proof only if the vendor takes it in good faith from a purchaser who is engaged in the business of selling the particular tangible personal property, who is registered as a vendor as required by G.L. c. 64H, § 7, and who intends to resell the particular tangible personal property in the regular course of business or is unable to ascertain at the time of sale whether the property will be resold or used for some other purpose. See G.L. c. 64H, § 8(a),(b).

Under G.L. c. 64H, § 8(d), if a person purchases tangible personal property under a resale certificate and then makes any use of the property other than retention, demonstration, or display while holding it for sale in the regular course of business, the use of the property is deemed to be a retail sale to the purchaser as of the time of the first use, at the cost of the tangible personal property to the purchaser.

Professional photographers do not generally sell background materials, gaffer tapes, props, and backdrops to their customers. Purchases by professional photographers of such items are typically not sales for resale, because professional photographers are not engaged in the business of selling background materials, gaffer tapes, props, and backdrops.

We conclude that the Company may not accept resale certificates from professional photographers for sales of background materials, gaffer tapes, props and rentals of backdrops. If the Company accepts resale certificates for sales and rentals of such items from professional photographers who do not intend to resell them in the regular course of business, the Company is liable for sales tax on the sales and the professional photographers are liable for use tax. See G.L. c. 64H, § 8(a),(b); G.L. c. 64I, §§ 2, 3.


Very truly yours,
Stephen W. Kidder,
Commissioner of Revenue
June 16, 1989
LR 89-7

Footnotes:

1 If a person is engaged in selling tangible personal property, that person should be registered as a vendor in accord with G.L. c. 62C, § 67. See G.L. c. 64H, § 7.