Current through Register 1531, September 27, 2024
(1)
Scope of Regulation; Background; Outline of Topics; Effective
Date.
(a)
Scope of
Regulation. 830 CMR 64H.1.8 sets forth the rules for the exemption
from the sales and use tax on retail sales of certain tangible personal
property for the annual sales tax holiday.
(b)
Background.
M.G.L. c. 64H, § 6A provides for a Massachusetts "sales tax holiday
weekend,"
i.e., two consecutive days during which most
purchases made by individuals for personal use will not be subject to
Massachusetts sales or use taxes. The legislation provides that the sales tax
holiday will occur annually, on a two-day weekend designated by the general
court by joint resolution no later than June 15th.
If the general court fails to adopt such a joint resolution, the Commissioner
of Revenue shall, no later than July 1st, designate
a two-day weekend in August of that year as the annual sales tax holiday.
For the purposes of the annual sales tax holiday, tangible
personal property shall not include telecommunications services, tobacco
products subject to the excise imposed by M.G.L. c. 64C, marijuana or marijuana
products, as defined in M.G.L. c. 94G, § 1, alcoholic beverages, as
defined in M.G.L. c. 138, § 1, gas, steam, electricity, motor vehicles,
motorboats, meals or a single item the price of which is in excess of
$2,500.
(c)
Outline of Topics. 830 CMR 64H.1.8 is organized as
follows:
1. Scope of Regulation; Background;
Outline of Topics; Effective Date;
2. Definitions;
3. Transactions Qualifying for the Sales Tax
Holiday;
4. Excluded
Sales;
5. Transactions Occurring
Prior To or After the Sales Tax Holiday;
6. Internet Sales;
7. Responsibilities of Vendors;
8. Penalties.
(d)
Effective Date.
830 CMR 64H.1.8 is effective for sales tax holidays occurring on or after
January 1, 2019.
(2)
Definitions. For the purposes of 830 CMR 64H.1.8, the
following terms have the following meanings:
Commissioner. The Commissioner of
Revenue or the Commissioner's duly authorized representative.
Retail Sale. Retail sale as defined in
M.G.L. c. 64H, § 1.
Sale. Sale as defined in M.G.L. c.
64H, § 1.
Sales Price. Sales price as defined in
M.G.L. c. 64H, § 1.
Sales Tax. The sales tax imposed
pursuant to M.G.L. c. 64H, § 2 or the use tax imposed pursuant to M.G.L.
c. 64I, § 2.
Sales Tax Holiday. A Saturday and
Sunday occurring concurrently in August, during which most purchases of
tangible personal property made by individuals for personal use or consumption
will not be subject to Massachusetts sales or use taxes.
Tangible Personal Property. Tangible
personal property as defined in M.G.L. c. 64H, § 1.
Vendor. Vendor as defined in M.G.L. c.
64H, § 1 and M.G.L. c. 64I, § 1.
(3)
Transactions Qualifying for
the Sales Tax Holiday.
(a)
General Rule. During the sales tax holiday, most
purchases by individuals of single items of tangible personal property costing
$2,500 or less are exempt from sales and use taxes, subject to certain
exclusions as explained in 830 CMR 64H.1.8. For all purchases of tangible
personal property eligible for the sales tax holiday exemption, transfer of
possession of or original payment in full for the property must occur on one of
the designated days of the sales tax holiday. The following transactions shall
be ineligible for the purposes of the annual sales tax holiday:
1. transactions where a deposit, prepayment
or binding promise to pay is made before the designated days of the sales tax
holiday;
2. prior sales;
and
3. layaway sales.
Purchases exempt from the sales tax under M.G.L. c. 64H are
also exempt from use tax under M.G.L. c. 64I. Therefore, eligible items of
tangible personal property purchased on the sales tax holiday from out-of-state
vendors for use in Massachusetts are exempt from M.G.L. c.
64I.
(b)
Non-business Sales. The sales tax holiday exemption
applies to sales of tangible personal property bought by individuals for
personal use or consumption only. Purchases by corporations or other businesses
and purchases by individuals for business use remain taxable.
(c)
Sales Price Threshold for
Exemption Eligibility. When the sales price of any single item is
greater than $2,500, sales tax is due on the entire price charged for the item.
The sales price is not reduced by the threshold amount. For example, if an item
is sold for $3,000, the entire sales price of the item is taxable, not just the
amount that exceeds $2,500.
1.
Clothing Exception. Under M.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
$2,500 threshold amount is not increased by $175.
Examples:
a. A customer buys a suit on the sales tax
holiday for $600. No tax is due.
b.
A customer buys a wedding dress during the sales tax holiday for $2,550. Tax is
due on $2,375 ($2,550 - $175).
2.
Coupons and
Discounts. If a store coupon or discount provided by a vendor
reduces the sales price of the property, the discounted sales price determines
whether the sales price exceeds the sales tax holiday price threshold of
$2,500. If a store coupon or discount applies to the total amount paid by a
purchaser rather than to the sales price of a particular item and the purchaser
has purchased both eligible property and taxable property, the vendor should
allocate the discount on a pro rata basis to each article
sold. Example: A furniture store customer has a coupon
for 20% off his or her entire bill. He or 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 $175 is due on the sales price of the sofa, $2,800 ($3,500
-$700), as even its discounted price exceeds the $2,500 threshold.
3.
Rebates. A rebate
is a refund of an amount of money by the manufacturer of a product to the
retail purchaser of the product. If a vendor sells tangible personal property
to a customer who applies a manufacturer's rebate to reduce the sales price at
the time of the sale, the rebate is generally treated as a cash discount and is
excluded from the sales price. The discounted sales price determines whether
the sales price exceeds the sales tax holiday price threshold of $2,500.
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 exceeds the sales tax holiday price threshold of
$2,500, and tax must be charged on the full purchase price if it exceeds
$2,500.
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 vendor 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.
4.
Multiple Items on One Invoice. Where a customer is
purchasing multiple items in a single transaction on the sales tax holiday,
separate invoices do not need to be prepared for each item. As long as each
individual item is $2,500 or less, there is no limit on the number of items
each customer may purchase that will be entitled to the sales tax holiday
exemption. However, any individual item purchased for $2,500 or more is subject
to the sales tax.
Example: In a single transaction on
the sales tax holiday, a customer purchases a television costing $1,500, a
stereo receiver costing $1,200, and a computer costing $2,000. The three
separate items can be rung up together, all tax-free.
5.
Bundled
Transactions. When several items are offered for sale at a single
price, the entire package is exempt if the sales price of the package is $2,500
or less. Items that are priced separately and are sold as separate articles
will qualify for the sales tax holiday exemption if the price of each article
is $2,500 or less.
Example 1: A computer package
including a CPU, keyboard, monitor, mouse, and printer with a single sales
price of $3,500 would not qualify for the sales tax holiday exemption because
the single sales price of the package ($3,500) exceeds the sales tax holiday
price threshold of $2,500.
Example 2: In a single transaction
during the sales tax holiday, 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 sales tax holiday
exemption because the sales price ($3,000) is in excess of the sales tax
holiday threshold amount of $2,500. Since the sales price of the computer
printer ($200) is less than $2,500, the printer would be exempt from
tax.
Articles normally bundled together and sold as a single unit
cannot be priced separately and sold as individual items in order to be
eligible for the sales tax holiday exemption.
(d)
Rentals.
Generally, rentals for 30 days or less of tangible personal property other than
motor vehicles and motorboats are eligible for the sales tax holiday exemption,
even if the rental period covers days before or after the sales tax holiday,
provided that payment in full in an amount less than $2,500 is made during the
sales tax holiday. The sales tax holiday does not apply to rentals or leases of
tangible personal property of any type if the term of the rental or lease
contract is longer than 30 days.
(4)
Excluded Sales.
All sales of motor vehicles, motorboats, meals, telecommunications services,
gas, steam, electricity, tobacco products, marijuana or marijuana products,
alcoholic beverages 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,
as further provided in 830 CMR 64H.1.8(4)(a) through (h).
(a)
Motor Vehicles.
Sales of motor vehicles are not eligible for the sales tax holiday exemption. A
"motor vehicle" means a motorized, self-propelled vehicle which is constructed
and designed for transportation or travel over a land surface, including "low
speed vehicles" and "limited use vehicles", but not including motorized
bicycles. See M.G.L. c. 90. A "motor vehicle" also means "snow
vehicle" and "recreation vehicle" as defined in M.G.L. c. 90B, § 20.
See
830 CMR 64H.25.1:
Motor Vehicles, and M.G.L. c. 64H, § 26. Rentals of motor vehicles are
also not eligible for the sales tax holiday exemption; see830
CMR 64H.1.8(3)(d).
(b)
Motorboats. Sales of motorboats, including jet skis,
are not eligible for the sales tax holiday exemption. A "motorboat" is any
vessel or watercraft propelled by machinery, such as an inboard or outboard
motor, whether or not such machinery is the principal source of propulsion.
See M.G.L. c. 90B, § 1. Rentals of motorboats are also
excluded from the sales tax holiday exemption; see830 CMR
64H.1.8(3)(d). Generally, the sales tax holiday exemption will apply to
purchases of canoes, kayaks, rowboats, and other types of watercraft with no
mechanical propulsion, provided that the sales price is $2,500 or
less.
(c)
Meals. Sales of meals are not eligible for the sales
tax holiday exemption. "Meals" are defined in M. G.L. 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". M.G.L. c. 64H, § 6(h);
830 CMR
64H.6.5: Sales Tax on Meals.
(d)
Telecommunications
Services. Sales of telecommunications services are not eligible
for the sales tax holiday exemption. Telecommunications
Services are defined in M.G.L. c. 64H as "any transmission of
messages or information by electronic or similar means, between or among points
by wire, cable, fiber optics, laser, microwave, radio, satellite or similar
facilities, but not including cable television". See M.G.L. c.
64H, § 1. Sales of prepaid calling arrangements and cards are not eligible
for the sales tax holiday exemption. Telecommunications equipment, such as a
telephone or cell phone purchased for nonbusiness use, is eligible for the
sales tax holiday exemption.
(e)
Gas, Steam and Electricity. Sales of gas, steam and
electricity are not eligible for the sales tax holiday exemption.
Gas refers to natural gas and not gasoline.
(f)
Tobacco
Products. Sales of tobacco products are not eligible for the sales
tax holiday exemption. Tobacco Products includes
products subject to the excise under M.G.L. c. 64C such as cigarettes, cigars,
smoking and smokeless tobacco, and electronic nicotine delivery
systems.
(g)
Marijuana
or Marijuana Products. Sales of marijuana or marijuana products
are not eligible for the sales tax holiday exemption.
Marijuana includes all parts of any plant of the genus
Cannabis, with certain exceptions, as defined in M.G.L. c. 94G, § 1.
Marijuana also includes all "marijuana products" as
defined in M.G.L. c. 94G, § 1, and
935 CMR 500.002:
Definitions. Such Marijuana Products
include edible products, beverages, topical products, ointments, oils and
tinctures. See
830 CMR
64N.1.1: Marijuana Retail Taxes.
(h)
Alcoholic
Beverages. Sales of alcoholic beverages, as defined in M.G.L. c.
138, § 1, including alcoholic beverages sold as part of a meal provided by
a restaurant are not eligible for the sales tax holiday exemption.
(i)
Tangible Personal Property
Sold for $2,500 or More. Any single item of tangible personal
property the price of which exceeds $2,500 does not qualify for the sales tax
holiday exemption and remains subject to tax.
(5)
Transactions Occurring Prior
To or after the Sales Tax Holiday.
(a)
Prior Sales and
Orders. A sale of tangible personal property is eligible for the
sales tax holiday exemption only if transfer of possession of or original
payment in full for the property occurs on one of the designated days of the
sales tax holiday. Any transaction where a purchaser places an order and makes
a deposit, prepayment or other binding promise to pay for an item of tangible
personal property prior to the sales tax holiday is not eligible for the sales
tax holiday exemption. A vendor may not rebook a prior sale that has taken
place before the sales tax holiday, either manually or by use of software, in
order to cause the prior sale to be eligible for the sales tax holiday
exemption. If a purchaser pays 100% of the sales price for an item of tangible
personal property on the sales tax holiday, the sale is eligible for the sales
tax holiday exemption even where delivery of the tangible personal property
occurs after the sales tax holiday, provided the provisions of 830 CMR
64H.1.8(5)(c) are met.
Example 1: Jane is shopping for a new
custom sofa at her local furniture store one day before the sales tax holiday.
The cost of the sofa will be $2,400.00. The store requires that the sofa be
paid for in full before they will process the order. However, as an alternative
to paying in full, the store offers Jane the option to pay the store a 20%
deposit with her credit card with the remainder to be paid at a future date.
Jane makes the 20% deposit and then returns the next day on the sales tax
holiday and pays the remainder of the amount due. The custom sofa purchased by
Jane will not qualify for the sales tax holiday exemption because she paid a
deposit on the sofa prior to the holiday.
Example 2: Same facts as above, but
Jane pre-orders the sofa the month before the sales tax holiday begins. As an
alternative to paying in full or putting down a 20% deposit, the store allows
Jane to sign a contract that provides for no down payment in exchange for her
agreement to pay a financial penalty if she cancels the order at any time. Jane
agrees and signs the contract. Since Jane signed a binding promise to pay on a
date prior to the sales tax holiday, the purchase cannot qualify for the sales
tax holiday exemption even if the full amount due on the purchase is paid on
one of the designated days of the sales tax holiday.
(b)
Layaway Sales. A
layaway sale is a transaction in which property is set aside for future
delivery to a customer who makes a deposit, agrees to pay the balance of the
purchase price over a period of time and receives the property when the last
payment is made. Layaway sales that are initiated prior to the sales tax
holiday do not qualify for the exemption, even if the last required payment (or
payments necessary to complete the transaction) is made on the sales tax
holiday.
(c)
Special
Order Items; Transfer of Possession after Sales Tax Holiday.
Special order items such as furniture are eligible for the sales tax holiday
exemption so long as they are ordered and paid in full on the sales tax
holiday, and the cost of an item is $2,500 or less, even if delivery is made at
a later date. Generally, a customer pays for an item when:
1. the vendor receives payment in the form of
cash, a check, or a money order;
2.
the vendor receives payment or authorization for payment through the processing
of a debit card or credit card transaction; or
3. the buyer and vendor enter into financing
arrangements with a third party, including an affiliated entity (but excluding
seller financing where the seller extends credit to the customer).
A prior special order purchase with a deposit paid before the
sales tax holiday will not qualify for the sales tax holiday exemption, even if
the retail customer pays the entire remaining balance due on the sales tax
holiday.
(d)
Rain Checks. When a customer receives a rain check
because an item on sale was not available, property bought with the use of the
rain check will qualify for the sales tax holiday exemption regardless of when
the rain check was issued if the rain check is used on the designated days of
the sales tax holiday weekend. Property purchased after the designated days of
the sales tax holiday using a rain check issued during the sales tax holiday
weekend is not eligible for the sales tax holiday exemption.
(e)
Exchanges. If a
customer purchases an item of eligible property on the sales tax holiday, but
later exchanges the item for an identical or similar eligible item for the same
price ("an even exchange"), no tax is due even if the exchange is made after
the designated days of the sales tax holiday.
(6)
Internet Sales.
If a customer orders an item of eligible property over the Internet, the item
is exempt if it is ordered and paid for on the designated days of the sales tax
holiday Eastern Daylight Time (EDT). A sale is deemed to be ordered and paid
for on the sales tax holiday where the customer orders and pays for an item by
authorizing the purchase on the vendor's website, e.g.,
through the use of a credit card at the time the item is ordered. The actual
delivery of the item can occur after the sales tax holiday.
Example: A customer orders a computer
over the Internet with a sales price of $2,000 and charges the sale to his
credit card at 1:00 P.M. (EDT) on the Saturday of the sales tax holiday. The
computer will be delivered 30 days after the sales tax holiday. The sale is
exempt since the computer was ordered and paid for on the sales tax
holiday.
(7)
Responsibilities of Vendors.
(a)
Participation.
All Massachusetts businesses normally making taxable sales of tangible personal
property and that are open to conduct business on a designated day of the sales
tax holiday must participate in the sales tax holiday. Out-of-state vendors
registered to collect Massachusetts sales and use taxes are also required to
participate in the sales tax holiday. Participation in the sales tax holiday is
not voluntary.
(b)
Erroneous Collection. Any sales or use tax erroneously
or improperly collected by a vendor on a designated day of the sales tax
holiday must be remitted to the Commissioner. Customers who are erroneously
charged sales tax by a vendor for an exempt purchase should take their tax paid
receipt to the vendor to obtain a refund. If the vendor has already remitted
the erroneously collected tax to the Commissioner, the vendor may file an
amended return upon satisfactory evidence that the vendor has credited or
refunded the tax to the purchaser in accordance with the time limitations and
other requirements in
830 CMR 62C.26.2,
Amended Returns.
(c)
Requirement of Nonbusiness Use by the Purchaser. To
qualify for the sales tax holiday exemption, purchases made on the sales tax
holiday must be for nonbusiness use or consumption. Purchasers paying for
tangible personal property with business credit cards or checks must be charged
tax on the items purchased. Vendors are required to maintain normal business
records showing the date of sale, item or items purchased, and selling price
for business purchases.
(d)
Returns. Generally, sales tax may only be refunded to
a retail customer on returns within 90 days of the sale.
See
M.G.L. c. 64H, § 1. For the 90-day period following the designated days of
the sales tax holiday, when a customer returns an item that qualified for the
sales tax holiday exemption, the vendor may not credit or refund sales tax to
the retail customer unless:
1. the customer
provides a receipt or invoice that shows the tax was paid; or
2. the vendor's records show that tax was
paid.
Vendors may set their own return policies. 830 CMR
64H.1.8(7)(d) is not intended to change or extend a vendor's return
policy.
(e)
Recordkeeping. A vendor must maintain books and
records in accordance with M.G.L. c. 62C, § 25, sufficient to substantiate
taxable and tax-exempt sales made on the designated days of the sales tax
holiday. See
830 CMR
62C.25.1: Record Retention.
(8)
Penalties. Vendors that back-date sales occurring
after the sales tax holiday or that forward-date sales that occurred before the
sales tax holiday in order to make those sales appear to qualify for the sales
tax holiday exemption, or otherwise improperly avoid collecting and remitting
sales or use tax, may be subject to the tax evasion penalties of M.G.L. c. 62C,
§ 73. In addition, the Commissioner may apply the sham transaction
doctrine under M.G.L. c. 62C, § 3A when determining whether vendors have
properly followed the rules of 830 CMR 64H.1.8.
