| Date: | 06/12/2024 |
|---|---|
| Referenced Sources: | Massachusetts General Laws |
You have requested a letter ruling on behalf of ****** (“the Company”) regarding whether sales of the Company’s genetic testing and analysis services are subject to the Massachusetts sales and use taxes imposed under G.L. c. 64H and G.L. c. 64I.
The following is your representation of the facts upon which the Commissioner bases this ruling. The Company is in the business of providing DNA testing and analysis, including ancestral and health history reports, to individual customers located throughout the country and abroad. The Company is based in ****** with a distribution center located in ****** and a specimen-processing laboratory in ******. Customers access the Company’s website, choose a particular package they would like to purchase and pay for it on-line. Package prices may vary and include different types of DNA analysis, which are included in individual reports provided to customers. The cost of the Company’s basic DNA testing and analysis service is generally $99.
Upon the purchase of a package, the Company sends a test kit, which has a value of less than $1, to customers who then submit a saliva sample by using the kit provided and mailing it to the Company’s lab for testing. The Company performs DNA testing and analysis using the saliva specimen provided. Once a DNA analysis and individualized report are complete, customers are notified that their report is available on-line and they may access it through the Company’s website. The Company does not separately state a charge for the test kit on the customers’ sales receipts.
Are charges to Massachusetts customers for processing and analysis of saliva specimens that are personally collected by customers in Massachusetts and sent to the Company’s out-of-state laboratory taxable services under G.L. c. 64H and G.L. c. 64I?
Charges to Massachusetts customers for processing and analysis of saliva specimens that are personally collected by customers in Massachusetts and sent to the Company’s out-of-state laboratory are not taxable services under G.L. c. 64H and G.L. c. 64I.
Massachusetts imposes a 6.25% tax on retail sales of tangible personal property and telecommunications services by any vendor within the Commonwealth. G.L. c. 64H, §§ 1, 2. Any person making sales at retail in Massachusetts is required to first register as a vendor and must collect and remit sales tax on all sales that are not otherwise exempt under G.L. c. 64H, § 6. See G.L. c. 62C, § 67; G.L. c. 64H, § 1, 2. If no sales tax is paid on the purchase of tangible personal property, a use tax is imposed on the storage, use or other consumption of the property in Massachusetts. G.L. c. 64I, § 2.
For purposes of G.L. c. 64H and G.L. c. 64I, the term “services” is generally limited to telecommunications services. G.L. c. 64H, § 1 and G.L. c. 64I, § 1. Additionally, the following terms have the following meanings in both statutes. A "sale at retail" is a sale of services or tangible personal property or both for any purpose other than resale in the regular course of business. Id. Expressly excluded from the definition of “retail sale” and therefore, excluded from the sales and use tax, are “personal service transactions which involve no sale [of tangible personal property] or which involve sales [of tangible personal property] as inconsequential elements for which no separate charges are made.” Id. A “sale” is defined to include any transfer of title or possession, or both, including a lease or rental, of tangible personal property for a consideration. Id.
The term “sale at retail,” does not apply to a service transaction that includes a transfer of taxable property where that tangible property is an inconsequential component of the transaction and the bill to the customer does not separately state the purchase price of the property. See G.L. c. 64H § 1. The Department’s Service Enterprises regulation, 830 CMR 64H.1.1, defines the term “inconsequential” to mean that the value of the property transferred is less than ten percent of the total charge. 830 CMR 64H.1.1(1). In the case of a service enterprise, that regulation provides that a service transaction is not subject to the sales tax where the real object of the transaction is the service itself, and no transfer of tangible personal property occurs. 830 CMR 64H.1.1(2)(a). Also, a service transaction is not subject to the sales tax where the real object of the transaction is the service itself and an inconsequential transfer of tangible personal property occurs, and the service enterprise does not separately state the purchase price of the property on the bill to the customer. Id. In either instance, the service enterprise pays the sales tax when it purchases the property from a vendor. Id.
Additionally, as stated in the Department’s Computer Industry Services and Products Regulation, “the sale of a report of individual information, whether printed or on magnetic media, is not taxable if the report may not be or is not substantially incorporated into reports furnished to other persons.” 830 CMR 64H.1.3(8)(b).
In the present case, the Company is providing customers with a service, namely DNA testing and analysis, which includes on-line individualized ancestral history and health reports that are provided after a package is selected and paid for. To provide the service, the Company transfers tangible personal property, the test kit, to the customer. The purchase price of the test kit is not separately stated on the invoice provided to the customer. The test kit has a value of less than $1, which, regardless of the particular package selected, is less than ten percent of the total charge to the customer. General Laws chapter 64H, § 1 exempts service transactions where the transfer of tangible personal property is an inconsequential element of a service transaction for which no separate charge is made, and the transaction meets this standard.[1] As such, the transaction is a personal service that is not a “sale at retail” subject to the sales tax. However, since the transaction is not subject to sales tax, if the test kits are purchased in Massachusetts, the Company must pay sales tax when it purchases them. G.L. c. 64H, § 2. Alternatively, if the test kits are purchased or manufactured outside of Massachusetts, the Company must pay use tax on the test kits that are ultimately transferred to its customers in Massachusetts. G.L. c. 64I, § 2.
For the foregoing reasons, the Department rules that the Company is providing a personal service that involves an inconsequential sale of tangible personal property for which no separate charge is made. As a result, the Company’s services provided to Massachusetts customers are not taxable under G.L. c. 64H or G.L. c. 64I.
Very truly yours,
/s/Geoffrey E. Snyder
Geoffrey E. Snyder
Commissioner of Revenue
GES:RHF:wm
LR 24-1
