Code of Massachusetts Regulations
830 CMR - DEPARTMENT OF REVENUE
Title 830 CMR 64H.00 - Sales and Use Tax
Section 64H.1.1 - Service Enterprises
Current through Register 1531, September 27, 2024
(1) Definition of Inconsequential. As a general guideline, the term "inconsequential", wherever it appears in 830 CMR 64H.1.1, means a value of less than 10% of the total charge, and the term "not inconsequential" means a value of greater than 10% of the total charge. This definition serves only as a guideline, and varies depending on the facts and circumstances of the transaction.
(2) General Application. 830 CMR 64H.1.1, applies to a transaction which a service enterprise undertakes. Some examples of a service enterprise are: repairers of motor vehicles, airplanes, boats, watches, televisions, radios, machinery, musical instruments or jewelry; a barber, beauty shop operator, launderer, cleaner, plumber, linen service, reupholsterer, or draper.
In 830 CMR 64H.1.1(2)(b)1., the service enterprise collects a sales tax from its customer based on the amount charged for the property; in 830 CMR 64H.1.1(2)(b)2., the service enterprise collects a sales tax from the customer based on the total amount charged.
Example 1: A sewing machine repair service, in the course of cleaning and overhauling a sewing machine for a customer, replaces a worn belt, worth approximately $1.00. The sewing machine repairer charges $21.00, which includes both the charge for labor and for the belt. Since, under 830 CMR 64H.1.1(2)(a)2., the value of the belt is inconsequential in relation to the total charge, and the charge for the belt is not separately stated on the bill to the customer, the service enterprise collects no tax from the customer.
Instead, the sewing machine repair service pays the sales or use tax on the belt when it purchases it from its vendor.
Example 2: A plumber replaces a faucet on a sink for a customer, and separately states the charge for labor and the charge for the faucet on the bill to the customer. The cost of the faucet is $15.00, and the labor charge is $20.00. Since the charge for the faucet is stated separately on the bill to the customer, under 830 CMR 64H.1.1(2)(b)1., the sales tax applies to the charge for the faucet. The plumbing enterprise collects the tax from the customer, and may give a resale certificate to its own vendor when it purchases the faucet. Under 830 CMR 64H.1.1(2)(b)2., if the plumber does not state separately the charge for the faucet, the entire combined charge is taxable to the customer because the value of the property is not inconsequential in relation to the total charge.
(3) Fabrication. Any change in the form or substance of tangible personal property, or any substantial alteration in the form or shape of an existing article of tangible personal property where either party to the transaction furnishes the material, is a fabrication under 830 CMR 64H.1.1. A fabrication is a sale and is subject to the sales tax. Reupholstered furniture and custom made draperies are examples of a fabrication.
(4) Use of Resale Certificates. If, in addition to rendering a service, a service enterprise sells tangible personal property in the regular course of business, it is a retailer with respect to such sales and shall collect the sales tax from the customer. A service enterprise may give a resale certificate to its vendor when the service enterprise puchases property which it intends to resell, or when it is unable to ascertain at the time of purchase whether it will sell the property separately or use it in a service transaction.
If a service enterprise gives to a vendor a resale certificate for tangible personal property, subsequently uses the property in a service transaction or under a service contract (See830 CMR 64H.1.1(5)(g)), and does not state separately to its customer the charge for the property, the service enterprise shall pay to the Commissioner a sales or use tax based upon the cost of the property to the service enterprise.
If a service enterprise pays the sales tax upon the purchase of the property and subsequently resells the property in the regular course of business, the service enterprise shall collect the tax from the customer. The service enterprise may then supply its vendor with a resale certificate and request that the vendor refund the sales tax paid on that property. The vendor may seek an abatement of the sales tax previously collected and remitted within the time limitations of M.G.L. c. 62C, § 37. With respect to sales or use tax paid on or after January 1, 2001, the service enterprise may not recover the tax by making an adjustment to its gross sales on its next sales tax return.
(5) Specific Applications.
If the value of the property used in repair work is inconsequential and the repairer makes no separate charge for such property, the repair service enterprise is the consumer and pays the sales tax when it purchases the property. The repairer does not collect a tax from the customer. (See830 CMR 64H.1.1(2)(a)1.) For example, a watch or a jewelry repair service enterprise pays a sales tax when it purchases a repair part such as a crystal, finding, or chain link.
A repairer is also a retailer of property which it sells in the regular course of business. Thus, when a watch repairer sells a wristwatch strap, metal band, watch or clock, the sale is taxable. In this case, the repairer gives a resale certificate to the vendor and collects the sales tax from the customer.
A business which contracts to sell and install draperies, including drapery hardware such as brackets, rods and tracks, and other items, is a retailer of the items which it furnishes and installs. The tax applies to the entire contract price, including the charge for installation, unless the customer receives a separate statement of the installation charge.
A service enterprise is the consumer of parts, material and other tangible personal property which it purchases for use primarily under a service contract and such enterprise shall pay the sales tax upon its purchase of such property. A service enterprise does not collect the sales tax from its customer on property which the service enterprise provides under a service contract.
A service enterprise shall collect the sales tax on any tangible personal property which the original contract price does not include and for which the service enterprise makes a separate charge. This is true even though the service enterprise pays the sales tax when it purchases the property. In this case, the service enterprise may then supply its vendor with a resale certificate and request that the vendor refund the sales tax paid on that property. The vendor may seek an abatement of the sales tax previously collected and remitted within the time limitations of G.L. c. 62C, § 37. With respect to sales or use tax paid on or after January 1, 2001, the service enterprise may not recover the tax by making an adjustment to its gross sales on its next sales tax return.
If a service enterprise purchases tangible personal property which is primarily for resale, or if such enterprise customarily makes a separate charge for such property to its customer, the service enterprise may give a resale certificate to its vendor. If a service enterprise purchases any property under a resale certificate, such property is subject to the sales or use tax if the service enterprise subsequently uses the property under a service contract, and makes no separate charge for such property to the customer.
