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Letter Ruling

Letter Ruling Letter Ruling 82-86: Trade Discounts

Date: 09/10/1982
Organization: Massachusetts Department of Revenue
Referenced Sources: Massachusetts General Laws

Sales and Use Tax

September 10, 1982


*********** Inc. ("Company") allows certain customers a "trade discount" (typically five per cent) on their purchases from the Company, regardless of the amount of the purchase or the time of payment. On its invoice to such a customer, the Company states the price as the usual amount charged for the property, "subject to trade discount of five per cent when paid." You inquire whether such trade discounts are included in the sales price of property on which the sales tax is based.

General Laws Chapter 64H, Section 1(14) defines "sales price" as "the total amount paid by a purchaser to a vendor as consideration for a retail sale, valued in money or otherwise." Section 1(14)(c)(i) of Chapter 64H provides that, in determining the sales price, "cash discounts allowed and taken on sales" are excluded.

Based on the foregoing, it is ruled that, for sales tax purposes, the sales price of tangible personal property sold by the Company does not include the trade discounts allowed and taken by certain customers on their purchases from the Company.

Very truly yours,

/s/L. Joyce Hampers

L. Joyce Hampers
Commissioner of Revenue


LR 82-86

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