February 9, 1999

You request a ruling on behalf of *************** concerning the application of the Massachusetts sales tax. Specifically, in connection with vehicle rental contracts in Boston, you ask whether the $10 convention center financing surcharge ("$10 CCF surcharge") imposed by St. 1997, c. 152, § 9(e), is included in the sales price when calculating the amount of sales tax due on the vehicle rentals. Assuming the rental charge for a vehicle rental contract in Boston is "R," you ask which of the following sales tax computations is correct:

A. (5% x R) + $10 CCF surcharge
$10 CCF surcharge is not included in sales price --results in no additional sales tax

B. 5% x (R + $10 CCF surcharge)
$10 CCF surcharge is included in sales price -- results in additional sales tax of $0.50

I. Discussion of Law

Massachusetts imposes an excise upon all retail sales of tangible personal property and telecommunications services in Massachusetts by a vendor, unless otherwise exempt. G.L. c. 64H, § 2. A sale includes leases and rentals. G.L c. 64H, § 1. The lease or rental of a motor vehicle, trailer, or other vehicle by a lessor in the regular course of business is a sale at retail and is subject to the sales tax. 830 CMR 64H.25.1(9). The sales tax imposed on the lease or rental of a motor vehicle is 5% of the sales price. G.L. c. 64H, § 2, 830 CMR 64H.25.1(5) and (9).

The "sales price" is the total amount or value paid or exchanged by a purchaser as consideration for the transfer of title to or possession of a motor vehicle, trailer, or other vehicle, whether valued in money or otherwise, less any vehicle manufacturer's excise tax imposed by the United States. G.L. c. 64H, § 1, 830 CMR 64H.25.1(2). The sales price on which the tax is computed for each period for which a motor vehicle lease or rental payment is charged is the total lease or rental charges for that period. 830 CMR 64H.25.1(9).

Effective January 1, 1998, the Convention Center Act provides "there shall be an additional surcharge of $10 imposed upon each vehicular rental transaction contract in the city of Boston. . . ." St. 1997, c. 152, § 9(e). All operators of vehicle rental establishments must collect the $10 CCF surcharge on vehicular rental transaction contracts signed or executed in Boston.

A surcharge is an additional tax or cost onto an existing tax, cost, or charge. The $10 CCF surcharge is imposed on the total amount the purchaser would have paid absent the surcharge, i.e. the total amount of the sales price plus the applicable sales tax. Thus, we conclude that the $10 CCF surcharge upon each vehicle rental transaction contract in Boston is imposed separately and after the 5% sales tax. Computation A, above, yields the proper sales tax computation for vehicular rental transaction contracts in Boston: (5% x sales price) = sales tax + $10 CCF surcharge.

II. Ruling

The $10 CCF surcharge on vehicle rental contracts in Boston is not part of the sales price subject to Massachusetts sales tax. For billing purposes, the $10 CCF surcharge must be stated separately from the sales price and the sales tax. Finally, upon collection, the $10 CCF surcharge must be remitted to the Department separately from the sales tax.

Very truly yours,

/s/Bernard F. Crowley, Jr.

Bernard F. Crowley, Jr.
Acting Commissioner of Revenue

BFC:DMS:adh

LR 99-6