|Organization:||Massachusetts Department of Revenue|
|Referenced Sources:||Massachusetts General Laws|
If a taxpayer makes a mail order purchase, an Internet purchase,[ 1] or a purchase in another state or another country that would be subject to Massachusetts sales tax if purchased in the Commonwealth, and pays no sales or use tax or pays a sales tax rate less than the 5 percent Massachusetts rate, then the taxpayer is responsible for paying a use tax to the Commonwealth on that purchase. This applies to purchases that are used, consumed or stored in Massachusetts and includes items that are rented or leased.
The purpose of this Technical Information Release ("TIR") is to announce an alternative reporting method for individual taxpayers to comply with their use tax obligations. This TIR applies only to individual nonbusiness taxpayers who are not registered vendors and are not required to be registered vendors for sales and use tax. All other taxpayers with use tax obligations are required to follow the provisions of the Department's regulation on Sales and Use Tax Returns and Payments at 830 CMR 62C.16.2.
I. Individual Liability for Use Tax
With certain statutory exceptions, General Laws c. 64I, § 2, imposes a tax on the storage, use or other consumption in the Commonwealth of tangible personal property purchased from any vendor for storage, use or consumption within the Commonwealth. The tax rate is 5 percent of the sales price of the property. Id. Every person who stores, uses or otherwise consumes such tangible personal property is liable for the tax. G.L. c. 64I, § 3. The use tax established in G. L. c. 64I, along with the sales tax created in G. L. c. 64H, are complementary components of a unitary taxing program designed to reach all transactions (unless specifically exempted) in which tangible personal property is sold inside or outside the Commonwealth for storage, use, or other consumption within the Commonwealth. Commissioner of Revenue v. J.C. Penney Company, Inc., 431 Mass. 684 (2000) (other citations omitted). The use tax is not applicable to: sales on which Massachusetts sales tax has been paid; sales exempt from the Massachusetts sales tax; and sales on which tax is due and paid in another State or territory of the United States to the extent the tax of the other State or territory equals the tax that would be imposed in Massachusetts. G.L. c. 64I, § 7.
Tangible personal property need not be used exclusively or even primarily within Massachusetts for the use tax to apply. Property delivered, shipped, or brought into Massachusetts within six months after purchase is presumed to be purchased for use in Massachusetts until the contrary is established. G.L. c. 64I, § 8(f). A taxpayer can rebut this statutory presumption by presenting sufficient evidence to establish that the property shipped or brought into Massachusetts was not purchased for use in Massachusetts. See DD 87-3, Property Purchased for Use in Massachusetts; Burden of Proof.
Under certain circumstances, an out-of-state vendor engaged in business in the Commonwealth who makes sales that are subject to the use tax is required to collect the tax and give the purchaser a receipt in the manner and form prescribed by the Commissioner.[ 2] G.L. c. 64I, § 4. The purchaser, however, is also liable for the tax until the tax is paid to the Commissioner of Revenue or the vendor gives him a receipt for the tax. G.L. c. 64I, § 3; see also LR 82-104. Such a receipt relieves the purchaser from further liability for the tax to which the receipt refers. G.L. c. 64I, § 3. If the Massachusetts sales or use tax due is not collected by the vendor, a purchaser owes use tax on the use of the tangible personal property in Massachusetts and must pay this directly to the Commissioner.[ 3]
II. Methods of Filing Individual Use Tax Returns
Individual Use Tax Return. Under existing law and regulations, if the vendor has not collected the sales or use tax, the purchaser owes use tax on the storage, use or consumption of the tangible personal property in Massachusetts and must file a use tax return with the Commissioner and pay the tax imposed. G.L. c. 64I, §§ 2,3. Individual purchasers, who are not themselves vendors or businesses, must file an Individual Use Tax Return, Form ST-11, and pay the tax due on such purchases on an annual basis.[ 4] The individual use tax return and payment is due on or before April 15 of the year following the calendar year of purchase. G.L. c. 62C, § 16(i); 830 CMR 62C.16.2(5)(e).
Alternative Individual Use Tax Return: New Line Item on Personal Income Tax Return. An alternative method of filing an individual use tax return will be available starting with taxable purchases made in 2002. As most individuals file their income tax on a calendar year basis, both income tax and use tax returns and payments are due each April 15 for the prior year. Beginning with taxable year 2002, an individual nonbusiness purchaser may now file a use tax return and pay his or her use tax by completing a new line item on Form 1, the Massachusetts Resident Income Tax Return, or Form 1-NR/PY, the Nonresident/Part-Year Resident Individual Income Tax Return. An individual purchaser can still report and pay any Massachusetts use tax due by filing a separate Form ST-11, but the line item added to the income tax return makes the reporting easier and more convenient. Taxpayers must prepare and retain with their records a list of their purchases that are subject to the Massachusetts use tax. The instructions to Form 1 and Form 1-NR/PY will contain a worksheet to calculate the use tax.
III. Tax Paid To Other States or Territories of the United States
A transaction is exempt from the use tax if a tax is legally due and paid in another state or territory of the United States on the sale of the property purchased for use here, but only to the extent the tax paid in the other state equals or exceeds the tax that would be imposed in Massachusetts. G.L. c. 64I, § 7(c). This exemption only applies, however, if the other state or territory allows a corresponding exemption for sales or use taxes paid to the Commonwealth. Id. For taxpayers reporting use tax on the personal income tax return, the adjustment for any tax paid in other states is claimed on the worksheet contained in the instructions. See TIR 03-1 (number reserved) for additional information on the use tax exemption for sales upon which tax was paid under the laws of another state.
IV. Extension of Time to File Massachusetts Income Tax Return
Form M-4868 is used by individuals to request an automatic six-month extension of time to file their Massachusetts income tax returns. Beginning with tax year 2002, Form M-4868 also extends the time to file the alternative individual use tax return (line item on the personal income tax return).[ 5] To obtain an extension of time to file, a taxpayer must complete Form M-4868, file it on or before the due date of the return (April 15 for both income tax and individual use tax returns), and pay the amount of income tax and use tax estimated to be due. The extension will be considered void if 80% of the total income tax and use tax liability is not paid on or before the original due date of the return. See G.L. c. 62C, § 19. Interest accrues from the original due date on any unpaid income tax or use tax liabilities, and void extensions are subject to penalty and interest charges from the original due date.
1. The Internet Tax Freedom Act (P.L. 105-277, as amended by P.L. 107-75) bars states and their political subdivisions during the period beginning October 1, 1998 and ending on November 1, 2003 from imposing any tax on Internet access charges, unless such tax was generally imposed and actually enforced prior to October 1, 1998, and bars multiple or discriminatory taxes on electronic commerce. The Internet Tax Freedom Act does not bar the imposition of a sales or use tax on the sale of tangible personal property purchased over the Internet if such sale is otherwise subject to tax. [ return to text]
2. Some out-of-state vendors, although not so required, collect and remit the Massachusetts tax as a convenience to Massachusetts customers. [return to text]
3. The fact that an individual purchaser self-assesses and pays use tax on a purchase does not relieve the vendor of its responsibility to collect and remit the tax. (The Department's regulation whereby certain business purchasers enroll in the Direct Pay Program, present to the vendor a direct payment certificate, and pay the use tax directly to the Department relieving those vendors of the duty to collect sales/use tax does not apply to individual nonbusiness taxpayers. See G.L. c. 64H, § 3(b); 830 CMR 64H.3.1.) [ return to text]
4. Business purchasers who are not registered vendors and are not required to be registered vendors must file a use tax return, Form ST-10, and pay the tax due on an annual basis. See 830 CMR 62C.16.2(5)(f). Registered vendors are required to report use tax on their sales and use tax returns. See 830 CMR 62C.16.2(5)(f) - (h). [ return to text]
5. This TIR does not change the procedures for taxpayers who choose to file and pay their use tax on Form ST-11. Form M-4868 does not extend the time to file Form ST-11 which is due on April 15 following the year of purchase. For rules concerning extension of time to file Form ST-11, see 830 CMR 62C.19.1(7). [ return to text]
Commissioner of Revenue
January 2, 2003