Sales/Use Tax Massachusetts : Guidance on 2009 Town Fair Tire case; no use tax collection for out-of state vendors under certain circumstances

Technical Information Release TIR#10-2, Mass. Dept. of Rev. (2/11/10). Responding to the Massachusetts Supreme Judicial Court's 2009 decision in Town Fair Tire Centers, Inc. v. Commissioner, which reversed a controversial 2008 Massachusetts Appellate Board ruling, the department clarifies the scope of the obligation of a registered out-of-state vendor to collect and remit Massachusetts use tax on the sale of tangible personal property to a Massachusetts resident where the sales transaction takes place entirely outside Massachusetts.

In the Town Fair Tire decision, the Court considered whether an outof-state registered vendor that sells tangible personal property to a Massachusetts resident is obligated to collect and remit Massachusetts use tax where a Massachusetts resident purchases and takes possession of the merchandise outside Massachusetts. The Court concluded that the evidence presented in Town Fair Tire was insufficient to establish that the tangible personal property was used in Massachusetts. Accordingly, the out-of-state registered vendor was not required to collect Massachusetts use tax in that case.

Therefore, absent evidence of actual storage or use in Massachusetts, the department will not assess state use tax against an out-of-state registered vendor on sales to a Massachusetts resident where a Massachusetts resident purchases and takes possession of tangible personal property entirely outside Massachusetts. The department states that the Town Fair Tire facts are distinguishable from the Court's 2003 decision in Circuit City Stores, Inc. vs. Commissioner of Revenue, where the retail customer purchased a taxable item at a Massachusetts store and later picked up that item at a New Hampshire branch of that chain store. In this respect, the department clarifies that the Circuit City decision was not overruled or changed by Town Fair Tire.