CONSTRUCTION Accounting ARTICLE -
Sales & Use Tax Rate Change

The Massachusetts Legislature recently amended the sales and use tax laws increasing the tax rate on tangible personal property and telecommunications services from 5% to 6.25%.   In general, this change is effective  for taxable purchases on and after August 1, 2009, subject to certain transition rules.  These transition rules  are discussed in the technical information release TIR 09-11 that was recently issued by the Massachusetts Department of Revenue and allow for a continuance of the 5% rate for a limited period of time following the effective date of the rate change in the case of certain contracts entered into before August 1, 2009. For example, in the case of building materials and supplies, TIR 09-11 provides the following:

Sales of building materials and supplies to be used in the construction, reconstruction, alteration, remodeling, or repair of any building or structure will be taxed at 5% if the materials and supplies are to be used pursuant to a qualified contract entered into (1) before August 1,2009, or (2) before October 1, 2009, if the contract is entered into in accordance with a bid that had to be submitted before August 1, 2009.  For purposes of this rule, a qualified contract imposes an obligation on the part of the contractor to perform the work without conditions or escalator clauses with respect to the tax and the sale or use of the property in question must take place before January 1, 2011.  A contractor or subcontractor making a purchase subject to 5% tax must give the vendor a properly completed exemption Form ST-5R and must report and pay use tax on these purchases. 

These transition rules provide for a time-sensitive opportunity in the case of certain contracts entered into before August 1, 2009. 

In addition to expanding the rate the new law also expands the scope of the sales tax to include sales of alcoholic beverages including beer, wine, and liquor, sold at retail effective August 1, 2009.

visit the mass.gov website for more information

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