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Sales and Use Tax
A recently enacted statute provides for a Massachusetts "sales tax holiday," i.e., a single day during which most purchases made by individuals for personal use will not be subject to Massachusetts sales or use taxes. St. 2003, c. 141, §§ 55-59 ("the Act"). The Act provides that the sales tax holiday will occur on August 14, 2004 and on that day, all non-business sales at retail of single items of tangible personal property costing $2,500 or less are exempt from sales and use taxes. However, under that Act all sales of motor vehicles, boats, meals, telecommunications services, gas, steam, electricity, and of any single item whose price is in excess of $2,500, do not qualify for the sales tax holiday exemption and remain subject to tax. The Act charges the Commissioner of Revenue with issuing instructions or forms and rules and regulations necessary to carry out the purposes of the Act.
II. Purchases Qualifying for the Exemption
The exemption applies to sales of tangible personal property bought for personal use only. Purchases by corporations or other businesses and purchases by individuals for business use remain taxable. Purchases exempt from the sales tax under G. L. c. 64H are also exempt from use tax under G.L. c. 64I. Therefore, eligible items of tangible personal property purchased on the Massachusetts sales tax holiday from out-of-state retailers for use in Massachusetts are exempt from the Massachusetts use tax.
III. Specific Rules
The following rules are to be applied by retailers in administering the Massachusetts sales tax holiday exemption:
Exception - Under G.L. c. 64H, § 6(k) there is no sales tax on any article of clothing unless the sales price exceeds $175; in that case, only the increment over $175 is subject to tax. If, on the sales tax holiday, the price of an article of clothing exceeds the threshold, the first $175 may be deducted from the amount subject to tax. The threshold amount is not increased by $175.
Example - A customer buys a suit for $2,550. Tax is due on $2,375 ($2,550 - $175).
Items that are priced separately and are to be sold as separate articles will qualify for the sales tax holiday exemption if the price of each article is $2,500 or less. For example, a customer purchases a personal computer for $3,000, and a computer printer for $200, each of which is priced separately. The purchase of the personal computer will not qualify for the exemption because the sales price ($3,000) is in excess of the sales tax holiday threshold amount of $2,500. However, since the sales price of the computer printer ($200) is less than $2,500, the printer would be exempt from tax.
Example - A furniture store customer has a coupon for 20% off her entire bill. She purchases a dining room table for $1,800, and a sofa for $3,500. The total discount available is $1,060 ($5,300 x .20), of which $360 is attributable to the table ($1,800 x .20), and $700 is attributable to the sofa ($3,500 x .20). No tax is due on the sale of the table. Tax of $140 is due on the purchase of the sofa, $2,800 ($3,500 - $700), as even its discounted price exceeds the $2,500 threshold.
If the customer has been charged tax on each payment, any tax paid should be credited or returned to the customer when the final payment for merchandise is made. If the vendor has already paid over tax previously collected, the vendor may seek an abatement within 3 years of filing the return for such tax. The vendor must produce satisfactory evidence showing that the vendor has credited or refunded the tax to the purchaser.
Example --- A customer purchases a computer for $2,300. With tax, the total purchase price would be $2,415. The customer agrees to pay for the merchandise in 10 installments of $ 241.50, each of which includes $11.50 in tax. Prior to the sales tax holiday, the customer has paid 9 installments totaling $2,173.50, which includes $103.50 in tax. When the customer pays the final installment on the sales tax holiday, the amount charged is $126.50. ($241.50 - $103.50 - $11.50)(installment due - tax paid - tax included in final installment).
If a vendor sells tangible personal property to a customer who will receive a rebate after the sale ( e.g. by mailing a coupon to the manufacturer), the full purchase price of the property determines whether the sales price is within the sales tax holiday price threshold of $2,500 or less, and tax must be charged on the full purchase price.
If a vendor offers a customer a cash discount upon the purchase of tangible personal property and the customer also receives a rebate from the manufacturer of the property after the sale, only the cash discount given by the retailer is excluded from the sales price for purposes of the sales tax holiday exemption. The amount of the manufacturer's rebate is not deducted from the sales price.
IV. Responsibilities of Retailers
"I, _____ ____________________, certify that the item(s)
listed on the attached receipt are being purchased for
personal use and not for any business use."
Purchaser's Signature Purchaser's Telephone Number
Example -- A customer buys twenty-five items, each costing $40. Since the transaction totals $1,000, the retailer must document the transaction by obtaining and keeping a Massachusetts Sales Tax Holiday Purchaser's Certification of Nonbusiness Use, signed by the purchaser of the items.
/s/ Alan LeBovidge
Commissioner of Revenue
May 25, 2004
 For purposes of the sales tax, the term "Motor vehicle" means "a motorized, self-propelled vehicle which is constructed and designed for transportation or travel over a land surface; but not including mopeds, motorized bicycles, or vehicles incapable of speeds in excess of twelve (12) miles per hour [that] are used other than for transporting persons or property, and are either used exclusively for highway building, repair, or maintenance, or are especially designed for use other than on public highways." The term "Motor vehicle" also means "snow vehicle" and "recreation vehicle" as defined in section 20 of chapter 90B. See 830 CMR 64H.25.1 and G.L. c. 64H, § 26.
 "Boat" is defined as "a small vessel with or without a deck propelled by oars or paddles or by sail or power." (Webster's Third New International Dictionary, Unabridged, 1986 edition.) For purposes of the sales tax, the term "Boat" includes a canoe or a kayak.
 "Meals" are defined in c. 64H as "any food or beverage, or both, prepared for human consumption and provided by a restaurant, where the food or beverages is intended for consumption on or off the restaurant premises, and includes food or beverages sold on a "take out'' or "to go'' basis, whether or not they are packaged or wrapped and whether or not they are taken from the premises of the restaurant." G.L. c. 64H, § 6(h); 830 CMR 64H.6.5.
 "Telecommunications Services" are defined in G.L. c. 64H as "any transmission of messages or information by electronic or similar means, between or among points by wire, cable, fiberoptics, laser, microwave, radio, satellite or similar facilities but not including cable television." G.L. c. 64H, § 1.
 The term "gas" here applies to natural gas; sales of gasoline are not subject to the sales tax under G.L. c. 64A.