May 7, 1992

You request a letter ruling on behalf of the [government agency] and its various divisions ("the Agency") on the applicability of the Massachusetts sales tax, G.L. c. 64H, to sales of miscellaneous tangible property by the Agency, including the Bookstore, the Museum, and the Tours Division. In particular, you ask whether sales of items such as flags, state seal decals, postcards, Freedom Trail videotapes, framed and unframed photographs of art objects located in and around the State House, mugs, buttons, T-shirts, hats, posters ("souvenir items") and a publication entitled [the Publication] (through a consignment arrangement), are exempt from sales tax.

For the reasons stated below, we rule that sales of state seal decals, postcards, Freedom Trail videotapes, framed and unframed photographs of art objects, mugs, buttons, posters, and [the Publication] by the Agency or its consignees are subject to the sales tax. Sales of the United States flag, T-shirts and hats are not subject to sales tax.

Facts

The Agency historically has sold official government publications such as compilations of statutes and regulations. Currently, the Agency is making other items available for sale to the public through its various divisions. Some items may be sold directly by the Agency while other items may be sold by other vendors that have accepted the items from the Agency on a consignment basis. You indicate that the total receipts from the sales of these various items represents a small percentage of total receipts of the Agency.

Discussion

Massachusetts imposes a five percent sales tax on all retail sales of tangible personal property in Massachusetts, unless otherwise exempt. See G.L. c. 64H, § 2. A complementary use tax is imposed on tangible personal property purchased for storage, use or consumption in Massachusetts, unless otherwise exempt. See G.L. c. 64I, § 2. Generally, the sales tax is collected by the vendor from the purchaser, and the vendor then remits the sales tax to the Department of Revenue. See G.L. c. 64H, §§ 2, 3. A "retail sale" is defined as a sale of tangible personal property for any purpose other than resale in the regular course of business. G.L. c. 64H, § 1.

1. Government Agencies

The exemptions to the sales tax are found in G.L. c. 64H, § 6. Section 6(d) exempts sales of tangible personal property to the United States, the Commonwealth or any political subdivision thereof, or their respective agencies. However, there is no corresponding general exemption for sales of tangible personal property by the Commonwealth, its agencies, or its political subdivisions. In fact, the definition of "retailer" in Chapter 64H specifically includes the commonwealth, or any political subdivision thereof, or their respective agencies when such entities are engaged in making retail sales of a kind ordinarily made by private persons. G.L. c. 64H, § 1. A "vendor" is a retailer or other person selling tangible personal property that is subject to the sales tax. Id. The sale of the souvenir items you describe are sales of items that are ordinarily made by private persons. Therefore, the Agency is a retailer or vendor within the meaning of G.L. c. 64H, § 1, and must register and file returns with the Commissioner as such. Sales of the souvenir items described are subject to tax as discussed below.

2. Casual and Isolated Sales

Massachusetts General Laws Chapter 64H, § 6(c) provides an exemption for casual and isolated sales by a vendor who is not regularly engaged in the business of making retail sales. The Massachusetts regulation governing this provision, 830 CMR 64H.6.1, defines casual and isolated sales as those sales of an "[i]nfrequent, non-recurring nature made by a person not engaged in the business of selling tangible personal property," as well as "[s]ales of items of tangible personal property which were acquired for use or consumption by a seller and not sold in the regular course of business by a seller." 830 CMR 64H.6.1.

You suggest that the Agency's sales of souvenir items may qualify for exemption as casual and isolated sales under G.L. c. 64H, § 6(c) because such sales represent a miniscule fraction of the Agency's total receipts. However, the test for the exemption is not whether the total receipts received from the sale of these various items represents a small percentage of total receipts of the agency, but rather whether such sales are sufficiently limited in number and character to qualify as casual and isolated. See generally 830 CMR 64H.6.1; DOR Directive 91-5. Based on the facts presented, sales of the souvenir items described above by the Agency or other retail outlets and pushcart vendors are sold on a recurring basis in the regular course of business. Therefore, they do not qualify as casual and isolated sales within the meaning of G.L. c. 64H, § 6(c) and 830 CMR 64H.6.1.

3. Flags

In general, sales of flags by any vendor in Massachusetts are taxable. G.L. c. 64H, § 2. Section 6(w) of Chapter 64H provides an exemption for "[s]ales of the flag of the United States." This provision, however, does not exempt sales of other flags, including state flags. The Legislature could have, but did not, include sales of other types of flags within this exemption provision. Based on the plain language of the statute, we conclude that sales of flags other than flags of the United States are not exempt from sales tax.

4. [The Publication]

a. Consignment transactions, generally

Transfers of tangible personal property by the Agency on consignment, where no money or other consideration is exchanged are not "sales" subject to the sales tax. Therefore, transfers of tangible personal property from the Agency to retail outlets or pushcart vendors where no money or other consideration is exchanged are not taxable sales.

b. Sales

In some instances, the Agency may sell certain tangible personal property such as [the Publication] through a consignment arrangement with various retail outlets and pushcart vendors. These retail outlets and pushcart vendors will take possession of [the Publication] with full authority to transfer title and possession to ultimate buyers. These retail outlets are vendors who are regularly engaged in the business of making sales at retail. Sales of the consigned goods generally are taxable, and vendors selling on a consignment basis are required to collect and pay over the tax to the Commissioner, unless a particular exemption applies. See, e.g., Sherman v. Commissioner of Revenue, 24 Mass. App. 64 (1987); DOR Directive 88-12; Letter Ruling 87-2.

Exempt from sales tax are "[s]ales of newspapers, magazines, [and] books required for instructional purposes in educational institutions...." G.L. c. 64H, § 6(m). A newspaper is defined as "a paper distributed at stated periodic intervals, and containing news and other matters of interest to a significant segment of the public." See Newspapers regulation, 830 CMR 64H.6.3(1).

The Department of Revenue has issued a number of Letter Ruling that have examined various publications to determine whether they qualify as a newspaper or magazine for sales and use tax purposes. The Department has ruled that a magazine, like a newspaper, must contain news and matters of interest to a significant segment of the public. See Letter Ruling 85-58; 84-8; 84-67. The publication at issue is clearly not a newspaper.

In order to qualify as a magazine, the Department has ruled that according to the common and approved usage of the language, a publication must contain stories, articles, or other features. See DOR Directive 87-6. In Letter Ruling 91-5, the Department reviewed the criteria for determining whether a publication qualifies for exemption as a magazine. There, the Department concluded that a publication containing listings and information about various programs and services within a particular geographical area was not a magazine within the meaning of G.L. c. 64H. Rather, such a publication constitutes a resource directory.

Like the publication at issue in Letter Ruling 91-5, [the Publication] constitutes a directory. Unlike publications that are generally accepted as magazines, it provides biographical information of members of the Massachusetts Legislature and executive branch of state government, rather than news, stories, articles, or other features of the type found in magazines. For these reasons, we conclude that [the Publication] is not a "magazine" within the meaning of G.L. c. 64H, § 6(m). Therefore, sales of [the Publication] are subject to tax.

5. Sales of Freedom Trail videotapes

The Department previously has ruled that videotaped productions are items of tangible personal property. The sale of videotapes, including Freedom Trail videotapes, is subject to the sales tax. See Letter Ruling 89-3. Chapter 64H, section 6(m) sets forth an exemption from the sales tax for sales of motion picture films, but the exemption is limited to sales at motion picture films "for commercial exhibition." See Letter Ruling 82-115.

6. Sales of T-shirts and hats

Section 6(k) of Chapter 64H provides an exemption from sales tax for "[s]ales of articles of clothing, including footwear, intended to be worn or carried on or about the human body up to one hundred and seventy-five dollars of the sales price on any article of clothing." Id. Based on this provision, sales of T-shirts and hats are exempt to the extent that the sales price for each item is $175.00 or less.

7. Sales of miscellaneous tangible personal property

Since G.L. c. 64H, § 2 imposes a five percent sales tax on all retail sales of tangible personal property not otherwise exempt, we conclude that sales of state seal decals, post cards, framed and unframed photographs, mugs, buttons and posters are subject to sales tax.


Very truly yours,
Mitchell Adams
Commissioner of Revenue
May 7, 1992
LR 92-3