Current through Register 1537, December 20, 2024
(1)
Statement of Purpose, Effective Date, Outline of
Topics.
(a)
Statement
of Purpose. The purpose of 830 CMR 64H.3.1 is to explain the
requirements for receiving direct payment authority, the requirements for
presentation and acceptance of direct payment certificates for sales of
tangible personal property and taxable services, and the reporting and payment
requirements for participating purchasers. The direct payment program is
intended to allow certain large volume purchasers to purchase items without
paying sales or use tax to the vendor at the point of sale and instead allowing
the purchaser to pay the sales/use tax directly to the Department of Revenue on
a monthly basis for all purchases made within that month. This program is
intended to streamline the administration of these taxes for these large volume
purchasers and for the Department of Revenue.
(b)
Effective Date.
830 CMR 64H.3.1 is effective as of January 1, 2001 and authorizes the use of
direct payment certificates (Form ST-14) as of that date.
(c)
Outline of
Topics. 830 CMR 64H.3.1, is organized as follows:
1. Statement of Purpose, Effective Date,
Outline of Topics.
2.
Definitions.
3. General
Rule.
4. Purchaser
Qualification.
5. Bond
Requirements.
6. Use of Direct
Payment Certificates (Form ST-14).
7. Monthly Reporting and Payment of
Tax.
8. Audit and Recordkeeping
Requirements.
9. Term and
Renewal.
10. Revocation,
Termination and Penalties.
(2)
Definitions. For
the purpose of 830 CMR 64H.3.1, the following terms have the following
meanings, unless the context requires otherwise:
Commissioner. The Commissioner of
Revenue or the Commissioner's duly authorized representative.
Purchases for Business Purposes.
Purchases that are made by a qualified purchaser and used by the qualified
purchaser in connection with the active conduct of a trade or business and not
for any household or consumer use.
Qualified Purchaser. A purchaser that
operates a business and acquires tangible personal property or services subject
to sales/use tax, and has been granted direct payment authority under the
requirements of 830 CMR 64H.3.1.
Sales Tax, Use Tax or
Tax. The sales tax imposed by M.G.L. c. 64H and/or the
use tax imposed by M.G.L. c. 64I.
Vendor. A retailer or other person
selling tangible personal property or taxable services the gross receipts from
the retail sale of which are required to be included in the measure of the tax
imposed by M.G.L. c. 64H or M.G.L. c. 64I.
(3)
General Rule.
(a)
Collection of
Tax. Vendors are generally required to collect tax on the retail
sale of all tangible personal property and taxable services and to remit that
tax to the Commissioner under the provisions of M.G.L. c. 64H, § 3(a).
Under the direct payment program, the burden of proving that the vendor was not
required to collect the tax is on the vendor unless the vendor takes a direct
payment certificate (Form ST-14) from a qualified purchaser in good faith. The
Form ST-14 is a two-part form issued by the Commissioner to qualified
purchasers. The upper portion of the form is the direct payment permit, signed
by the Commissioner, certifying that the holder of the permit has direct
payment authority. The lower portion of the form is the direct payment
certificate that is to be completed by the qualified purchaser for transactions
with specific vendors. A qualified purchaser may reproduce the Form ST-14 as
needed for transactions with vendors, but must retain the original in its
possession. Once a Form ST-14 is accepted, in good faith, by a vendor, the
liability for the payment of the sales or use tax and for the filing of all
related returns is placed upon the qualified purchaser. The qualified purchaser
will be required to file sales/use tax returns with and pay the appropriate tax
directly to the Department of Revenue.
(b)
Conditions of
Use. The use of Form ST-14 will in no way affect the amount of tax
due from any transaction. Form ST-14 may only be used for purchases for
business purposes. Form ST-14 may not be presented for the purchase of motor
vehicles, boats, airplanes, meals, alcoholic beverages, or any other goods or
services specifically excluded by the Commissioner upon the Form
ST-14.
(4)
Purchaser Qualifications. Any purchaser meeting the
qualification criteria listed in 830 CMR 64H.3.1(4)(a)1. through 6. may apply
to the Commissioner for direct payment authority on the form prescribed by the
Commissioner (Form DPP-1). Interested purchasers should send a completed
Application for Direct Payment Authority, including all other required
information, to the Audit Support Unit.
(a)
Selection Criteria. To be considered for selection for
direct payment authority, a purchaser must meet each of the following criteria:
1. The purchaser must operate a business that
regularly acquires tangible personal property or taxable services;
2. The purchaser must reasonably expect and
demonstrate that its purchases subject to Massachusetts sales/use tax will be
of a sufficient dollar volume to allow the Commissioner to find that the
purposes of the direct payment statute will be furthered by granting a direct
payment permit to the applicant. The Commissioner anticipates that a dollar
volume of $1,000,000 of purchases subject to Massachusetts sales/use tax
($50,000 of tax liability) per year or greater will be sufficient to satisfy
this criterion;
3. The purchaser
must register as a vendor under M.G.L. c. 64H and M.G.L. c. 64I, and must agree
to file monthly sales/use tax returns and pay the Department of Revenue monthly
on the purchases made;
4. The
purchaser shall demonstrate to the satisfaction of the Commissioner that it
maintains a viable automated accounting system that can track its taxable
purchase transactions, produce written periodic reports, and accurately
calculate the sales/use tax due;
5.
The purchaser shall identify the names and business addresses of all business
locations from which the direct payment certificate, if granted, will be used,
or to which goods will be sold and/or delivered. A Form ST-14 will be limited
to use by the single legal entity to whom and in whose name the certificate is
issued; and
6. The purchaser shall
provide all additional information that the Commissioner believes necessary to
verify the adequacy of the purchaser's self-assessment, collection and
remittance procedures, and any other information necessary to substantiate any
aspect of the purchaser's application.
(b)
Notification of Acceptance or
Rejection. The Commissioner will review the Application for Direct
Payment Authority to determine if the selection criteria have been met. If the
Commissioner determines that the selection criteria have been satisfied, he
will grant direct payment authority to the purchaser. The granting of direct
payment authority to a particular purchaser is solely at the discretion of the
Commissioner. Notice of acceptance or rejection of a purchaser's request will
be made in writing within 90 days of the Commissioner's receipt of a completed
application. If the application is rejected, the notice will state the
reason(s) for rejection. If no notice of acceptance or rejection is received
within 90 days of the receipt of a completed application, the application will
then be deemed to be denied and the applicant may appeal such denial pursuant
to the provisions of 830 CMR 64H.3.1(4)(c). Each qualified purchaser granted
direct payment authority will be sent an original Form ST-14 signed by the
Commissioner. An applicant denied direct payment authority may reapply only
after a sufficient change in the purchaser's circumstances that would warrant
another review. The new request will be treated as a newly filed application
and must contain complete documentation as required by 830 CMR 64H.3.1.
Purchasers seeking direct payment authority may neither represent that they
have such authority nor conduct business as if they have such authority while
an application is pending.
(c)
Appeal Process. A purchaser that has been denied
direct payment authority may appeal the decision of denial in writing to the
Appeal and Review Bureau. The decision of the Appeal and Review Bureau shall be
the final determination of any administrative appeal. Purchasers denied direct
payment authority on appeal may reapply as noted in 830 CMR
64H.3.1(4)(b).
(5)
Bond Requirements. The Commissioner may require a
purchaser to post a bond in an amount, and from a surety, acceptable to the
Commissioner as a condition of receiving a Form ST-14 if, in the discretion of
the Commissioner, it is in the best interest of the Commonwealth to require
such security. The amount of the bond must be at least equal to the estimated
yearly tax amount that will be due from the purchaser if direct payment
authority is granted, but may be higher if the circumstances require.
(6)
Use of Direct Payment
Certificates (Form ST-14).
(a)
Acceptance of Form ST-14. On each and every occasion
when a qualified purchaser purchases tangible personal property or taxable
services for use in the course of its business, the qualified purchaser must
present its Form ST-14 to the vendor to certify that the qualified purchaser
has direct payment authority. In lieu of presenting its Form
ST-14 on each separate occasion when a qualified purchaser makes a purchase
from a vendor, the qualified purchaser and vendor may agree that the delivery
of the Form ST-14 shall serve as applying on a "blanket" basis to all sales
made by the vendor to the qualified purchaser and covered by the direct payment
certificate. A vendor that is presented with a valid Form ST-14 and that
accepts same in good faith shall not collect the tax upon the purchaser's
purchases and shall not include the sales covered by the Form ST-14 in its
gross receipts for the purposes of collecting and remitting tax, and will be
relieved of the return and payment obligations of M.G.L. c. 62C with respect to
these sales. For each transaction in which the qualified purchaser uses its
Form ST-14, all return, payment and other obligations of a vendor under M.G.L.
chs. 62C, 64H and 64I shall rest with the qualified purchaser. A qualified
purchaser shall not transfer, assign, loan or otherwise permit any other person
or entity to use or possess its Form ST-14. A qualified purchaser shall not use
its Form ST-14 to purchase tangible personal property or taxable services on
behalf of any other person or entity. Either practice by a qualified purchaser
shall be grounds for revocation and termination of its direct payment
permit.
(b)
Good Faith
Requirements for Form ST-14. The burden of demonstrating that the
vendor was not obligated to collect a sales/use tax from a purchaser shall rest
with the vendor. Acceptance of a Form ST-14 shall relieve the vendor from the
requirement of collecting the tax only if the vendor accepts the form in good
faith from a qualified purchaser who, at the time of purchasing the tangible
personal property or taxable services, intends to use the property or services
only for business purposes. A vendor may seek confirmation from the
Commissioner prior to accepting a Form ST-14 as to whether the purchaser who
tenders the certificate is a qualified purchaser. The vendor may make such
inquiries of the qualified purchaser that the use of the Form ST-14 is proper
as will reasonably satisfy the vendor that it is given in good faith. Form
ST-14 may not be accepted for any types of transactions disallowed by 830 CMR
64H.3.1, or specifically disallowed by the Commissioner.
(c)
Requirements for Proper Form
ST-14. Each Form ST-14 must be in the form prescribed by the
Commissioner and must contain the following information:
1. Name of qualified purchaser;
2. Address of qualified purchaser;
3. Qualified purchaser's registration number
and permit number;
4. Effective
date of the Form ST-14;
5.
Expiration date of the Form ST-14;
6. Certification that the tangible personal
property and services are being purchased only for business purposes;
and
7. Any other information the
Commissioner may require.
(d)
Vendor
Requirements. All vendors must retain the Forms ST-14 for the
period of time required by the provisions of the record retention regulation,
830 CMR
62C.25.1. Upon written notice to a vendor,
the Commissioner may require the vendor to produce any and all Forms ST-14
accepted by the vendor during any period for which a tax return has been filed
or for which a return is due. The vendor must make the requested Forms ST-14
available for inspection by the Commissioner within 60 days of the date of the
Commissioner's request. If the vendor does not produce the requested Form ST-14
within the 60-day period, the vendor must carry the burden of proving, by other
evidence, that the vendor was not required to collect the tax based on the
qualified purchaser's direct payment authority.
(7)
Monthly Reporting and Payment
of Tax. Qualified purchasers are required to file with the
Commissioner a monthly sales and use tax return (Form ST-9), accompanied by
payment of the tax due, by following each of the applicable provisions of
830 CMR
62C.16.2: Sales and Use Tax Returns
and Payments. Each responsible person of a qualified purchaser may be
held personally liable under the provisions of M.G.L. c. 64H, § 16, and
M.G.L. c. 64I, § 17, as applicable for sales/use taxes not remitted to the
Department of Revenue.
(8)
Audit and Recordkeeping Requirements. Qualified
purchasers shall maintain a list of all vendors to whom they have issued Form
ST-14, including the date each was issued. Upon the request of the Commissioner
a qualified purchaser shall produce this list, the original Form ST-14, or any
other information required to verify the qualified purchaser's compliance with
the requirements of 830 CMR 64H.3.1, or that the proper tax is being paid in a
timely manner. All records must be retained for the period of time required by
the provisions of the record retention regulation,
830 CMR
62C.25.1.
(9)
Term and
Renewal. Direct payment authority granted to a particular
qualified purchaser will be valid for a term of not greater than five years,
and will expire on December 31st of the final
calendar year of the current term. Qualified purchasers must apply for renewal
of direct payment authority no later than 120 days before the end of the
current term. The Commissioner will review the purchaser's participation in the
program as well as the selection criteria set forth in 830 CMR 64H.3.1(4)(a) to
determine whether a renewal should be granted. Notification of the decision of
renewal or termination will be given to the qualified purchaser no later than
30 days before the end of the current term. The qualified purchaser must notify
the Commissioner within 30 days of any changes that occur to the form of legal
organization of the qualified purchaser that would require a new federal FID
number or department of revenue registration number for that purchaser. In such
event, the existing direct pay permit (Form ST-14) shall be null and void and
the new purchaser shall reapply for direct payment authority under the new
organizational structure following the application process outlined in 830 CMR
64H.3.1. If any organizational change occurs, whether by merger, acquisition or
otherwise, whereby the qualified purchaser entity no longer conducts an active
trade or business or no longer has a legal existence, the direct payment
authority shall automatically terminate.
(10)
Revocation, Termination and
Penalties.
(a)
Revocation and Termination. Direct payment authority
may be revoked by the Commissioner at any time upon 30 days written notice to
the qualified purchaser, and may be revoked without notice if the Commissioner
determines that the collection of any tax due from the qualified purchaser is
in jeopardy. Any qualified purchaser whose direct payment authority is either
forfeited voluntarily, revoked by the Commissioner, or has expired shall return
the original Form ST-14 to the Commissioner and immediately notify all vendors
from whom it has purchased taxable items that its Form ST-14 is no longer
valid. In addition, the Commissioner has the discretion to disallow the
qualified purchaser from using its direct payment authority for transactions
with a particular vendor if in his discretion it is warranted.
(b)
Penalties. A
qualified purchaser that fails to give such notice shall be fined $1,000 per
vendor to which notification was required to have been given.
