G.L. c. 64H permits the Department of Revenue to collect from sales tax vendors five percent of the non-exempt gross receipts and not the actual amount of the tax collected. A sales tax vendor is not required to pay over "breakage" to the Commonwealth.

G.L. c. 64H, § 2, imposes a sales tax at the rate of five percent of the non-exempt gross receipts of the vendor. A five percent tax imposed on a 50 cent sale would result in a 2½ cent tax. To overcome the practical problem of one half cent taxes, G.L. c. 64H, § 4, provides a formula for the collection of tax based on the amount of the sale. The formula fixes the tax on sales from 50 cents to 69 cents at 3 cents. "Breakage" is the one half cent difference between the 2½ cent tax at the five percent rate and the 3 cents collected.

G.L. c. 64H, § 2, provides that the sales tax is imposed at the rate of five percent of gross receipts of the vendor. "Gross receipts" is defined as "the total sales price received by vendors as consideration for retail sales." G.L. c. 64H, § 1(6). "Sales price" is defined as "the total amount paid by a purchaser to a vendor as consideration for a retail sale . . . ." G.L. c. 64H, § 1(14). G.L. c. 64H, § 3, provides that the vendor "shall add to the sales price and shall collect from the purchaser the full amount of the tax imposed by this chapter [chapter 64H], or an amount equal as nearly as possible or practical to the average equivalent thereof . . . ." Under this language, five percent of the gross receipts is the full amount of tax imposed and the full amount of tax due to the Commonwealth from the vendor under G.L. c. 64H.

Any sales tax forms that provide space and/or instructions requiring vendors to pay over to the Commonwealth the tax collected, rather than 5 percent of the non-exempt gross receipts, are incorrect and will be corrected as soon as possible. Vendors who have paid over breakage may apply for an abatement for any tax period which is open for an abatement under G.L. c. 62C, § 37, by filing form CA-6.

/s/Stephen W. Kidder
Stephen W. Kidder
Commissioner of Revenue

September 29, 1987

TIR 87-11