Out of State Sales and Deliveries Taxes

In regulation 830 CMR 64H.6.7, UCC title rules are used to determine when the sale occurs in situations involving out of state sales and deliveries and explains the sales tax treatment of such transactions.

In general, whether a sale of tangible personal property to be delivered out of state is subject to sales or use tax depends upon where the purchaser takes possession, where the property is sold at the time a contract is made, obligations to deliver property, location of purchaser when property is delivered, and where title and possession of property pass.

If property purchased in Massachusetts is delivered out of state, a use tax may be due in the other jurisdiction. If property purchased in Massachusetts is delivered out of state but is later returned to Massachusetts for use, storage, or other consumption and no sales tax was paid on the property, the use tax will apply if the property was originally purchased with the intent to use, store, or otherwise consume it in Massachusetts.

If a use tax is due, the purchaser must file an Individual Use Tax Return, Form ST-11, with the Commissioner and pay the tax imposed. Failure to file a return and pay the use tax when due will subject the taxpayer to interest and penalties calculated from the due date of the return or payment.

The vendor must maintain books and records sufficient to substantiate taxable and tax-exempt sales. Records for transactions exempt must substantiate that the property was in fact transferred to the recipient from a location outside Massachusetts and/or the records for transactions exempt must substantiate that the vendor was obligated to deliver the item out of state, the name and address of the purchaser, and the place and manner of delivery. Acceptable records; when properly completed include invoices, bills of lading or freight manifests, delivery records or receipts signed by the customer, delivery logs, mail logs, trip or travel logs as applicable, or other similar records.

The vendor must retain copies of the records required by 830 CMR 64H.6.7(4)(a) as records of exempt transactions. Since the burden of proof lies upon the vendor, failure to maintain adequate records will generally mean that the vendor will not sustain this burden of proof. This may result in the assessment of additional tax, plus interest and penalties.

The records required by 830 CMR 64H.6.7.(4)(a) must be kept, at a minimum, until the statute of limitations for making additional assessments for the tax period for which the return was due has expired. Generally this is three years from the due date of the return or from the actual date the return was filed, whichever is later. The statute of limitations is six years if the vendor omits from the sales tax return an amount greater than twenty-five percent of the amount properly includible on it.

Back to Tax and Business Update Summaries

To contact Feeley & Driscoll, please click here or call us at 1 (800) 392-6192.