830 CMR: DEPARTMENT OF REVENUE
830 CMR 62C.00: STATE TAX ADMINISTRATION
830 CMR 62C.00 is amended by adding the following section:
830 CMR 62C.66.1: Bond Requirements for Transient Vendors

(1) General.

(a) The Commissioner will require a transient vendor, as defined below, to post and maintain a bond to ensure the payment of tax due under M.G.L. c. 64H, 64I, in either of the following circumstances:

1. The transient vendor solicits sales subject to tax under M.G.L. c. 64H, 64I, without having first properly registered as a vendor; or

2. The Commissioner issues a notice of assessment to the transient vendor and the transient vendor fails to pay the assessed amount, including any related interest, additions to tax, or penalties, within thirty days of the mailing of the notice, or within such shorter period (including immediate payment upon demand) as may be specified by the Commissioner in cases of jeopardy assessment.

(b) The size and terms of the bond shall be determined according to this regulation.

(c) If a transient vendor is required to post a bond under this regulation, 830 CMR 62C.66.1, the bond requirement is separate from the obligation of the transient vendor to pay any outstanding sales and use tax, including interest, additions to tax, or penalties, that it may owe.

(d) The Commissioner will revoke or suspend the registration of any transient vendor that attempts to sell tangible personal property in the Commonwealth without posting or maintaining a bond required by this regulation and will, as necessary, use all available powers of jeopardy assessment and collection.

(e) Any bond required by this regulation, 830 CMR 62C.66.1, must be posted before the Commissioner will permit the affected transient vendor to solicit or to continue to solicit sales in Massachusetts.

(f) This regulation, 830 CMR 62C.66.1, is organized as follows:

(1) General
(2) Definitions
(3) Amount of Bond
(4) Type of Bond
(5) Application of Bond
(6) Release of Bond
(7) Commissioner's Authority Unaffected

(2) Definitions.

Authorized Officer, an officer of a corporation who is authorized to sign tax returns on behalf of the corporation.

Commissioner, the Commissioner of the Department of Revenue, or the Commissioner's duly authorized representative.

Engaged in Business in the Commonwealth, as defined in M.G.L. c. 64H, § 1(5); M.G.L. c. 64I, §1(1).

Fixed Place of Business, a published business location, such as a store, office, studio, or other immobile location in Massachusetts, where a vendor maintains a substantial quantity of its business equipment, inventory, or other business property and where the vendor is registered as a vendor. A vendor's residence may be a fixed place of business if it meets the requirements listed above.

Notice of Assessment, the notice issued pursuant to M.G.L. c. 62C, §31, and 830 CMR 62C.26.1(6)(f)‑(i).

Registration, the registration of vendors under M.G.L. c. 64H, § 7, M.G.L. c. 64I, § 19, and M.G.L. c. 62C, §67.

Transient Vendor, any vendor that engages in business in the Commonwealth using trucks, stands, carts, or other movable merchandising devices, or that is engaged in business in the Commonwealth at fairs, shows, flea markets, or other temporary events, unless that vendor simultaneously maintains a fixed place of business in the Commonwealth. The definition and use of the term "transient vendor" in this regulation, 830 CMR 62C.66.1, are not related to the definition and use of the same term in M.G.L. c. 101.

Vendor, any vendor as defined by M.G.L. c. 64H, § 1; 64I, §1; and any corporation or other entity owned or controlled by such a vendor.

(3) Amount of Bond. The actual value of the bond posted under this regulation, 830 CMR 62C.66.1, must equal the transient vendor's average sales and use tax liability, as estimated by the Commissioner, for a six month period during the twelve months following the posting of the bond. The Commissioner will determine a transient vendor's anticipated sales and use tax liability as follows.

(a) As a general rule, the Commissioner will calculate a transient vendor's anticipated sales and use tax liability by using the period(s) of assessment covered in the most recent written notice of assessment sent to the transient vendor. The required bond will be six times the average monthly liability during the period(s) covered, including taxes paid and any deficiency, but not including interest, additions to tax, or penalties.

(b) If, in the Commissioner's opinion, a particular transient vendor does not have an adequate filing history from which to calculate the amount of a bond under the provisions of 830 CMR 62C.66.1(3)(a), above, (because, for example, the transient vendor has not been properly registered), the Commissioner will estimate the transient vendor's anticipated sales and use tax liability, in the manner described below, based on the taxable inventory displayed by the individual transient vendor.

1. In the case of transient vendors associated with shows, fairs, or other organized events, the amount of bond will be five percent (i.e. applicable sales and use tax rate) of the retail value of all taxable goods displayed, multiplied by the number of shows that the Commissioner has reason to believe the transient vendor attends in Massachusetts in a six month period (and, in the case of transient vendors selling perishable property, multiplied by the number of days for which the event lasts). The Commissioner will generally presume that such transient vendors attend one show per month unless evidence (other than uncorroborated statements of the transient vendor) indicates otherwise.

2. In the case of street vendors or other transient vendors not associated with shows, fairs, or other organized events, the Commissioner will calculate the amount of bond based on whether the transient vendor sells perishable or non‑perishable property. In the case of the sale of perishable property such as food or cut flowers, the Commissioner will presume that the transient vendor sells all inventory displayed daily, and the amount of the bond will be five percent (i.e. applicable sales and use tax rate) of the retail price of the taxable goods displayed, multiplied by 130 (i.e. 26 weeks x 5 working days per week). In the case of the sale of non‑perishable goods, the Commissioner will presume that the transient vendor sells the inventory displayed weekly, and the amount of the bond will be five percent (i.e. applicable sales and use tax rate) of the retail price of the goods displayed multiplied by 26.

(c) If the Commissioner determines that the methods described in 830 CMR 62C.66.1(3)(a) or (3)(b), above, substantially understate the average sales and use tax liability that a particular transient vendor may reasonably be expected to incur in a six month period during the twelve months following the posting of bond, the Commissioner may use other reasonable methods to estimate the transient vendor's anticipated sales and to calculate the amount of bond that the transient vendor must post.

1. Circumstances in which alternate estimation methods may be appropriate include, but are not limited to, transient vendors conducting seasonal businesses whose past period(s) of assessment have not included peak sales periods, and transient vendors that display samples of their products at shows that they attend but that do not carry an inventory from which anticipated sales can reasonably be calculated.

2. Appropriate alternate methods of estimating a transient vendor's anticipated sales and use tax liability for purposes of this subsection may include, but are not limited to, observations of actual sales or orders placed, and comparisons with the anticipated sales and use tax liability of similarly situated vendors.

3. If an alternate estimation method is applied to the sales of a particular transient vendor under the provisions of this subsection, the Commissioner will notify the transient vendor in writing of the method used and the amount of bond required. The amount of bond will be the average sales and use tax liability that the Commissioner anticipates, using the alternate method, that the transient vendor will incur in a six month period during the twelve months following the posting of bond.

(d) If a transient vendor produces evidence that establishes to the Commissioner's satisfaction that the amount of the bond required under 830 CMR 62C.66.1(3)(a), (b), or (c), above, exceeds half of the vendor's sales and use tax liability during the twelve months before the posting of bond, and that the previous twelve months' liability can reasonably be used to estimate the transient vendor's liability after the posting of bond, the Commissioner will calculate the amount of the required bond on the basis of the average liability demonstrated by the vendor. To contest the amount of bond calculated under 830 CMR 62C.66.1(3)(a), (b), or (c), above, a transient vendor should contact the Department's Revenue Enforcement Bureau, at the address stated in 830 CMR 62C.66.1(4)(a), below.

(4) Type of Bond.

(a) A transient vendor that is required to post a bond under this regulation, 830 CMR 62C.66.1, may post with the Commissioner a surety bond, issued by a company authorized to transact business as a surety in Massachusetts, in the amount calculated under 830 CMR 62C.66.1(3), above, or may deposit with the state treasurer negotiable obligations of the United States or the Commonwealth of the same actual value. The surety bond or evidence of obligations deposited with the state treasurer must be directed to:

Massachusetts Department of Revenue
Revenue Enforcement Bureau
215 First Street
Cambridge, MA 02142

(b) In order to facilitate the posting of bond on weekends, holidays, or other times when it is difficult either to post bond with the state treasurer or to obtain a surety bond, the Commissioner will, at the option of the transient vendor, accept cash in the amount of the required bond. The Commissioner will give the transient vendor a written receipt for the cash received and will deposit the cash in the transient vendor's name with the state treasurer as soon as is possible.

(c) The bond must be maintained until it is released by the Commissioner, pursuant to 830 CMR 62C.66.1(6), below.

(5) Application of Bond.

(a) The Commissioner may apply the bond posted under this regulation, 830 CMR 62C.66.1, toward any sales or use tax assessment, and any related interest, additions to tax, or penalties, made against the transient vendor, by mailing notice to the transient vendor. Assessments made before the posting of bond generally must be paid in full, independent of the bond, but the Commissioner retains the authority to apply the bond toward any earlier sales or use tax assessments when, in the Commissioner's opinion, such an application is necessary to ensure the collection of tax.

(b) If the bond posted under this regulation is exhausted or reduced by its application to assessed tax under the provisions of 830 CMR 62C.66.1(5)(a), above, the transient vendor must post a new bond or must increase the amount of the remaining bond. The new or increased bond must be in the amount calculated under 830 CMR 62C.66.1(3)(a), above, on the basis of the most recent assessment against that transient vendor.

(c) The failure to maintain a bond in the amount required by this regulation, 830 CMR 62C.66.1, will be treated as a failure to post any bond.

(6) Release of Bond.

(a) A bond posted pursuant to this regulation may be released under any of the following circumstances:

1. the transient vendor establishes to the Commissioner's satisfaction that it has a bona fide fixed place of business in Massachusetts, and that all taxes owed under M.G.L. c. 64H, 64I, and any related interest, additions to tax, and penalties, have been paid in full;

2. the transient vendor establishes to the Commissioner's satisfaction that it is no longer a vendor subject to the jurisdiction of Massachusetts under M.G.L. c. 64H, 64I, and that all taxes owed under these chapters have been paid in full, including any related interest, additions to tax, or penalties. An application for a release of bond under this subsection, 830 CMR 62C.66.1(6)(a)2, must be accompanied by an affidavit, signed by the transient vendor or an authorized officer of the transient vendor under the penalties of perjury, stating that the applicant is no longer registered as a vendor under M.G.L. c. 62C, § 67, and that the applicant is no longer engaged in business in the Commonwealth. The affidavit must specify that the applicant neither makes sales subject to taxation under M.G.L. c. 64H, nor makes sales for shipment to and use in Massachusetts subject to taxation under M.G.L. c. 64I, nor intends to make sales subject to taxation under either M.G.L. c. 64H or M.G.L. c. 64I after the date of the application and within one year of the date on which the applicant last solicited sales in Massachusetts. The making of a willfully false representation in an affidavit submitted under this subsection is a violation of M.G.L. c. 62C, §73(f), and is punishable by a fine of not more than one hundred thousand dollars (or five hundred thousand dollars in the case of a corporation), or by imprisonment for not more than three years, or both, together with costs of prosecution; or

3. the transient vendor timely files proper sales and use tax returns, for a period of at least one year from the posting of bond, and the vendor demonstrates that all taxes owed under M.G.L. c. 64H, 64I, and any related interest, additions to tax, and penalties, have been paid in full. This one‑year proper filing rule will apply only to the first bond that a transient vendor posts under this regulation, 830 CMR 62C.66.1. If, after the first bond posted by a transient vendor is released, the Commissioner requires a new bond from that transient vendor, the new bond will not be released unless and until the requirements of 830 CMR 62C.66.1(6)(a)1. or (6)(a)2., above, are met.

(b) In order to obtain the release of a bond under the circumstances described in 830 CMR 62C.66.1(6)(a), above, a vendor should apply in writing to the Commissioner at the address listed in 830 CMR 62C.66.1(4)(a), above.

(7) Commissioner's Authority Unaffected. This regulation, 830 CMR 62C.66.1, does not limit the authority of the Commissioner to require the posting of bond by vendors that are not transient vendors or by any other person obligated by the General Laws to pay any tax.

The following examples illustrate the provisions of 830 CMR 62C.66.1:

Example 1. George sells knickknacks at an organized flea market that does business every weekend at a certain location in Massachusetts. He has no other place of business. George is a transient vendor.

George is registered as a vendor, but did not collect sales tax from his customers. George was audited by the Department of Revenue in 1989 and was assessed $2,000 in sales and use tax for a twelve month period, including $500 of interest and penalties. However, George neglected to pay or contest the assessment within thirty days. George is therefore required to post bond under this regulation (as well as to pay the outstanding assessment). The amount of the bond is:

6 x $2,000 ‑ $500 = $750
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The bond will not be released until the conditions of 830 CMR 62C.66.1(6)(a), above, are met.

Example 2. Terry sells cut flowers at a street corner stand in Boston. Terry has no other place of business in Massachusetts. He is a transient vendor.

Terry failed to register as a vendor in Massachusetts or to collect sales tax. Upon discovering this fact, the Commissioner will assess Terry for unpaid taxes and will take any appropriate action to collect the assessed amount. Furthermore, the Commissioner will require Terry to post bond, and will not allow Terry to continue to make sales until the bond is posted, Terry properly registers by filing Form TA‑1, and the assessment is paid or properly contested.

The retail value of the flowers in Terry's possession when he was found to be selling without proper registration was $500. Because cut flowers are perishable property, the bond that Terry must post is:

0.05 x $500 x 130 = $3,250.

The bond will not be released until the conditions of 830 CMR 62C.66.1(6)(a), above, are met.

Example 3. Alan sells jewelry at shows throughout the United States. Alan is a resident of New York and has no fixed place of business in Massachusetts. He is a transient vendor.

Alan attends a jewelry show in Massachusetts but fails to register as a vendor before the show begins. Agents of the Commissioner visit the jewelry show on its first day and find that Alan has set up a booth and is soliciting sales, but is not registered. Whether or not Alan has actually made any sales, the Commissioner will require him to close his booth and to stop soliciting sales until he has registered as a vendor and has posted bond.

The retail value of the jewelry in Alan's possession at the show (whether or not displayed publicly) is $200,000. Alan has no written records to demonstrate what shows he has attended in various states. The Commissioner will presume that he attends one show monthly in Massachusetts. Alan must post bond of:

0.05 x $200,000 x 6 = $60,000.

The bond will not be released until the conditions of 830 CMR 62C.66.1(6)(a), above, are met.

Example 4. Kumquat Computers, Inc., (Kumquat), is a foreign corporation that manufactures peripheral devices for personal computers. Kumquat has no offices or outlets in Massachusetts. However, its representatives attend trade shows in various states, including Massachusetts, where they display and demonstrate Kumquat's products and receive retail orders from customers. Massachusetts orders are shipped by common carrier from Kumquat's warehouse, which is located outside of Massachusetts. Apart from attending trade shows, Kumquat has no contacts with Massachusetts. Kumquat is a transient vendor.

Kumquat's representatives attend a trade show in Massachusetts but fail to register Kumquat as a vendor. The Commissioner discovers this fact and requires Kumquat to post bond pursuant to this regulation, 830 CMR 62C.66.1. Kumquat posts bond as required, but applies for release of the bond shortly after the end of the show under the provisions of 830 CMR 62C.66.1(6)(a)2., on the ground that its representatives have left the state and that it is therefore not engaged in business in the Commonwealth.

Because Kumquat's representatives have entered Massachusetts and have systematically solicited sales in this state, Kumquat has engaged in business in the Commonwealth within the meaning of M.G.L. c. 64H, § 1(5); M.G.L. c. 64I, §1(1). Kumquat therefore must collect sales or use tax on all its sales taxable under M.G.L. c. 64H, 64I, including both its sales to Massachusetts customers based on orders placed at the Massachusetts trade show and any other sales for shipment to and use in this state. The Commissioner will not, therefore, release Kumquat's bond under the provisions of 830 CMR 62C.66.1(6)(a)2. unless its application is supported by an affidavit, signed by an authorized officer of Kumquat under penalties of perjury, stating that, after the date of the application for release of bond and within one year of the end of the trade show, Kumquat will not fill orders for shipment to Massachusetts and will not otherwise engage in business in the Commonwealth. Kumquat's application for release of bond must also include copies of Kumquat's sales and use tax returns for the period between the posting of the bond and the date of its application for release of bond, and any further documentation that the Commissioner may require.

REGULATORY HISTORY
Date of Promulgation: 12/22/89