830 CMR: DEPARTMENT OF REVENUE
830 CMR 64H.00 SALES AND USE TAX
830 CMR 64H.00 is amended by adding the following section:
830 CMR 64H.3.1: Direct Payment Program
830 CMR 64H.3.1: Direct Payment Program
830 CMR: DEPARTMENT OF REVENUE
Table of Contents
(1) Statement of Purpose, Effective Date, Outline of Topics
(a) Statement of purpose. The purpose of this regulation, 830 CMR 64H.3.1, is to explain the requirements for receiving direct payment authority, the requirements for presentation and acceptance of direct payment certificates for sales of tangible personal property and taxable services, and the reporting and payment requirements for participating purchasers. The direct payment program is intended to allow certain large volume purchasers to purchase items without paying sales or use tax to the vendor at the point of sale and instead allowing the purchaser to pay the sales/use tax directly to the Department of Revenue on a monthly basis for all purchases made within that month. This program is intended to streamline the administration of these taxes for these large volume purchasers and for the Department of Revenue.
(b) Effective date. This regulation, 830 CMR 64H.3.1, is effective as of January 1, 2001 and authorizes the use of direct payment certificates (Form ST-14) as of that date.
(c) Outline of topics. This regulation, 830 CMR 64H.3.1, is organized as follows:
1. Statement of Purpose, Effective Date, Outline of Topics
3. General Rule
4. Purchaser Qualification
5. Bond Requirements
6. Use of Direct Payment Certificates (Form ST-14)
7. Monthly Reporting and Payment of Tax
8. Audit and Recordkeeping Requirements
9. Term and Renewal
10. Revocation, Termination and Penalties
For the purpose of this regulation, 830 CMR 64H.3.1, the following terms have the following meanings, unless the context requires otherwise:
Commissioner. The Commissioner of Revenue or the Commissioner's duly authorized representative.
Purchases For Business Purposes. Purchases that are made by a qualified purchaser and used by the qualified purchaser in connection with the active conduct of a trade or business and not for any household or consumer use.
Qualified Purchaser. A purchaser that operates a business and acquires tangible personal property or services subject to sales/use tax, and has been granted direct payment authority under the requirements of this regulation, 830 CMR 64H.3.1.
Sales Tax, Use Tax or Tax. The sales tax imposed by M.G.L. c. 64H and/or the use tax imposed by M.G.L. c. 64I.
Vendor. A retailer or other person selling tangible personal property or taxable services the gross receipts from the retail sale of which are required to be included in the measure of the tax imposed by M.G.L. c. 64H or c. 64I.
(3) General Rule
(a) Collection of Tax. Vendors are generally required to collect tax on the retail sale of all tangible personal property and taxable services and to remit that tax to the Commissioner under the provisions of M.G.L. c. 64H, §3(a). Under the direct payment program, the burden of proving that the vendor was not required to collect the tax is on the vendor unless the vendor takes a direct payment certificate (Form ST-14) from a qualified purchaser in good faith. The Form ST-14 is a two-part form issued by the Commissioner to qualified purchasers. The upper portion of the form is the direct payment permit, signed by the Commissioner, certifying that the holder of the permit has direct payment authority. The lower portion of the form is the direct payment certificate that is to be completed by the qualified purchaser for transactions with specific vendors. A qualified purchaser may reproduce the Form ST-14 as needed for transactions with vendors, but must retain the original in its possession. Once a Form ST-14 is accepted, in good faith, by a vendor, the liability for the payment of the sales or use tax and for the filing of all related returns is placed upon the qualified purchaser. The qualified purchaser will be required to file sales/use tax returns with and pay the appropriate tax directly to the Department of Revenue.
(b) Conditions of Use. The use of Form ST-14 will in no way affect the amount of tax due from any transaction. Form ST-14 may only be used for purchases for business purposes. Form ST-14 may not be presented for the purchase of motor vehicles, boats, airplanes, meals, alcoholic beverages, or any other goods or services specifically excluded by the Commissioner upon the Form ST-14.
(4) Purchaser Qualifications
Any purchaser meeting the qualification criteria listed below may apply to the Commissioner for direct payment authority on the form prescribed by the Commissioner (Form DPP-1). Interested purchasers should send a completed Application for Direct Payment Authority, including all other required information, to the Audit Support Unit.
(a) Selection Criteria. To be considered for selection for direct payment authority, a purchaser must meet each of the following criteria:
1. The purchaser must operate a business that regularly acquires tangible personal property or taxable services;
2. The purchaser must reasonably expect and demonstrate that its purchases subject to Massachusetts sales/use tax will be of a sufficient dollar volume to allow the Commissioner to find that the purposes of the direct payment statute will be furthered by granting a direct payment permit to the applicant. The Commissioner anticipates that a dollar volume of $1,000,000 of purchases subject to Massachusetts sales/use tax ($50,000 of tax liability) per year or greater will be sufficient to satisfy this criterion;
3. The purchaser must register as a vendor under M.G.L. c. 64H and c. 64I, and must agree to file monthly sales/use tax returns and pay the Department of Revenue monthly on the purchases made;
4. The purchaser shall demonstrate to the satisfaction of the Commissioner that it maintains a viable automated accounting system that can track its taxable purchase transactions, produce written periodic reports, and accurately calculate the sales/use tax due;
5. The purchaser shall identify the names and business addresses of all business locations from which the direct payment certificate, if granted, will be used, or to which goods will be sold and/or delivered. A Form ST-14 will be limited to use by the single legal entity to whom and in whose name the certificate is issued; and
6. The purchaser shall provide all additional information that the Commissioner believes necessary to verify the adequacy of the purchaser's self-assessment, collection and remittance procedures, and any other information necessary to substantiate any aspect of the purchaser's application.
(b) Notification of Acceptance or Rejection. The Commissioner will review the Application for Direct Payment Authority to determine if the selection criteria have been met. If the Commissioner determines that the selection criteria have been satisfied, he will grant direct payment authority to the purchaser. The granting of direct payment authority to a particular purchaser is solely at the discretion of the Commissioner. Notice of acceptance or rejection of a purchaser's request will be made in writing within 90 days of the Commissioner's receipt of a completed application. If the application is rejected, the notice will state the reason(s) for rejection. If no notice of acceptance or rejection is received within 90 days of the receipt of a completed application, the application will then be deemed to be denied and the applicant may appeal such denial pursuant to the provisions of 830 CMR 64H.3.1(4)(c) below. Each qualified purchaser granted direct payment authority will be sent an original Form ST-14 signed by the Commissioner. An applicant denied direct payment authority may re-apply only after a sufficient change in the purchaser's circumstances that would warrant another review. The new request will be treated as a newly filed application and must contain complete documentation as required by this regulation, 830 CMR 64H.3.1. Purchasers seeking direct payment authority may neither represent that they have such authority nor conduct business as if they have such authority while an application is pending.
(c) Appeal Process. A purchaser that has been denied direct payment authority may appeal the decision of denial in writing to the Appeal and Review Bureau. The decision of the Appeal and Review Bureau shall be the final determination of any administrative appeal. Purchasers denied direct payment authority on appeal may reapply as noted in 830 CMR 64H.3.1(4)(b) above.
(5) Bond Requirements
The Commissioner may require a purchaser to post a bond in an amount, and from a surety, acceptable to the Commissioner as a condition of receiving a Form ST-14 if, in the discretion of the Commissioner, it is in the best interest of the Commonwealth to require such security. The amount of the bond must be at least equal to the estimated yearly tax amount that will be due from the purchaser if direct payment authority is granted, but may be higher if the circumstances require.
(6) Use of Direct Payment Certificates (Form ST-14)
(a) Acceptance of Form ST-14. On each and every occasion when a qualified purchaser purchases tangible personal property or taxable services for use in the course of its business, the qualified purchaser must present its Form ST-14 to the vendor to certify that the qualified purchaser has direct payment authority. In lieu of presenting its Form ST-14 on each separate occasion when a qualified purchaser makes a purchase from a vendor, the qualified purchaser and vendor may agree that the delivery of the Form ST-14 shall serve as applying on a "blanket" basis to all sales made by the vendor to the qualified purchaser and covered by the direct payment certificate. A vendor that is presented with a valid Form ST-14 and that accepts same in good faith shall not collect the tax upon the purchaser's purchases and shall not include the sales covered by the Form ST-14 in its gross receipts for the purposes of collecting and remitting tax, and will be relieved of the return and payment obligations of M.G.L. c. 62C with respect to these sales. For each transaction in which the qualified purchaser uses its Form ST-14, all return, payment and other obligations of a vendor under M.G.L. c. 62C, 64H and 64I shall rest with the qualified purchaser. A qualified purchaser shall not transfer, assign, loan or otherwise permit any other person or entity to use or possess its Form ST-14. A qualified purchaser shall not use its Form ST-14 to purchase tangible personal property or taxable services on behalf of any other person or entity. Either practice by a qualified purchaser shall be grounds for revocation and termination of its direct payment permit.
(b) Good faith requirements for Form ST-14. The burden of demonstrating that the vendor was not obligated to collect a sales/use tax from a purchaser shall rest with the vendor. Acceptance of a Form ST-14 shall relieve the vendor from the requirement of collecting the tax only if the vendor accepts the form in good faith from a qualified purchaser who, at the time of purchasing the tangible personal property or taxable services, intends to use the property or services only for business purposes. A vendor may seek confirmation from the Commissioner prior to accepting a Form ST-14 as to whether the purchaser who tenders the certificate is a qualified purchaser. The vendor may make such inquiries of the qualified purchaser that the use of the Form ST-14 is proper as will reasonably satisfy the vendor that it is given in good faith. Form ST-14 may not be accepted for any types of transactions disallowed by this regulation, 830 CMR 64H.3.1, or specifically disallowed by the Commissioner.
(c) Requirements for proper Form ST-14. Each Form ST-14 must be in the form prescribed by the Commissioner and must contain the following information:
1. Name of qualified purchaser;
2. Address of qualified purchaser;
3. Qualified purchaser's registration number and permit number;
4. Effective date of the Form ST-14;
5. Expiration date of the Form ST-14;
6. Certification that the tangible personal property and services are being purchased only for business purposes; and
7. Any other information the Commissioner may require.
(d) Vendor requirements. All vendors must retain the Forms ST-14 for the period of time required by the provisions of the record retention regulation, 830 CMR 62C.25.1. Upon written notice to a vendor, the Commissioner may require the vendor to produce any and all Forms ST-14 accepted by the vendor during any period for which a tax return has been filed or for which a return is due. The vendor must make the requested Forms ST-14 available for inspection by the Commissioner within sixty days of the date of the Commissioner's request. If the vendor does not produce the requested Form ST-14 within the sixty-day period, the vendor must carry the burden of proving, by other evidence, that the vendor was not required to collect the tax based on the qualified purchaser's direct payment authority.
(7) Monthly Reporting and Payment of Tax
Qualified purchasers are required to file with the Commissioner a monthly sales and use tax return (Form ST-9), accompanied by payment of the tax due, by following each of the applicable provisions of 830 CMR 62C.16.2, Sales and Use Tax Returns and Payments. Each responsible person of a qualified purchaser may be held personally liable under the provisions of G.L. c. 64H, §16, and c. 64I, §17, as applicable for sales/use taxes not remitted to the Department of Revenue.
(8) Audit and Recordkeeping Requirements
Qualified purchasers shall maintain a list of all vendors to whom they have issued Form ST-14, including the date each was issued. Upon the request of the Commissioner a qualified purchaser shall produce this list, the original Form ST-14, or any other information required to verify the qualified purchaser's compliance with the requirements of this regulation, 830 CMR 64H.3.1, or that the proper tax is being paid in a timely manner. All records must be retained for the period of time required by the provisions of the record retention regulation, 830 CMR 62C.25.1.
(9) Term and Renewal
Direct payment authority granted to a particular qualified purchaser will be valid for a term of not greater than five years, and will expire on December 31 st of the final calendar year of the current term. Qualified purchasers must apply for renewal of direct payment authority no later than one hundred and twenty (120) days before the end of the current term. The Commissioner will review the purchaser's participation in the program as well as the selection criteria set forth in 830 CMR 64H.3.1(4)(a) to determine whether a renewal should be granted. Notification of the decision of renewal or termination will be given to the qualified purchaser no later than thirty (30) days before the end of the current term. The qualified purchaser must notify the Commissioner within thirty (30) days of any changes that occur to the form of legal organization of the qualified purchaser that would require a new federal FID number or department of revenue registration number for that purchaser. In such event, the existing direct pay permit (Form ST-14) shall be null and void and the new purchaser shall re-apply for direct payment authority under the new organizational structure following the application process outlined in this regulation, 830 CMR 64H.3.1. If any organizational change occurs, whether by merger, acquisition or otherwise, whereby the qualified purchaser entity no longer conducts an active trade or business or no longer has a legal existence, the direct payment authority shall automatically terminate.
(10) Revocation, Termination and Penalties
(a) Revocation and Termination. Direct payment authority may be revoked by the Commissioner at any time upon thirty (30) days written notice to the qualified purchaser, and may be revoked without notice if the Commissioner determines that the collection of any tax due from the qualified purchaser is in jeopardy. Any qualified purchaser whose direct payment authority is either forfeited voluntarily, revoked by the Commissioner, or has expired shall return the original Form ST-14 to the Commissioner and immediately notify all vendors from whom it has purchased taxable items that its Form ST-14 is no longer valid. In addition, the Commissioner has the discretion to disallow the qualified purchaser from using its direct payment authority for transactions with a particular vendor if in his discretion it is warranted.
(b) Penalties. A qualified purchaser that fails to give such notice shall be fined $1,000 per vendor to which notification was required to have been given.
830 CMR 64H.3.1: M.G.L. c. 14, § 6(1); M.G.L. c. 62C, § 3; M.G.L. c. 64H, § 3(b).
Date of Promulgation: 3/16/01