Introduction

The purpose of this Technical Information Release (TIR) is to explain a recently enacted amendment to G.L. c. 64I, § 4, which may affect the amount of tax due when a motor vehicle is purchased in a casual or isolated sales transaction. The tax is still calculated with reference to the "sales price," but under the new legislation, "sales price" is defined as either the actual amount paid by the purchaser or the average trade-in value as listed in the most recent edition of the applicable National Automobile Dealers Association (NADA) used vehicle guide, whichever amount is greater.

Discussion

A Massachusetts 5% sales tax is imposed upon the sale at retail of tangible personal property in Massachusetts by any vendor. G.L. c. 64H, § 2. A Massachusetts 5% use tax is imposed on the storage, use or other consumption of tangible personal property in Massachusetts. G.L. c. 64I, § 2. A purchaser of a motor vehicle must pay a sales or use tax to the Registrar of Motor Vehicles in the manner prescribed by the Commissioner. As enacted by St. 1991, c. 6, § 21, solely for purposes of casual and isolated sales transactions, the definition of the "sales price" of a motor vehicle is 1) the actual amount paid by a purchaser, or 2) the average trade-in value of the motor vehicle as listed in the most recent edition of the applicable National Automobile Dealers Association used vehicle guide, whichever of those two figures is greater. G.L. c. 64I, § 4.

A casual and isolated sale occurs when a person buys a motor vehicle from someone other than a motor vehicle dealer registered in Massachusetts. Thus, the typical motor vehicle sales transaction between private parties is a casual and isolated sale. In all such instances the new law provides that the tax due from the purchaser must be calculated using the higher of the NADA value or the actual amount paid by the purchaser for the vehicle. For purposes of determining the NADA value, the new law requires the use of the most recent editions of the used vehicle pricing guides issued by NADA.

/s/ Mitchell Adams
Mitchell Adams
Commissioner of Revenue

TIR 92-1

March 10, 1992