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Mass. SC rules for out-of-state business in sales tax dispute

LEGAL NEWSLINE

Sunday, December 22, 2024

Mass. SC rules for out-of-state business in sales tax dispute

Marshall

BOSTON (Legal Newsline) - The Commonwealth of Massachusetts may not collect taxes on merchandise sold by an out-of-state company to Massachusetts residents, the state Supreme Court ruled Wednesday.

State Attorney General Martha Coakley's office represented the Department of Revenue, which filed the case in 2003. It argued that tires sold by Town Fair Tire Center in its three New Hampshire stores (where there is no sales tax) would be used in Massachusetts.

After a report by an auditor, the DOR assessed more than $108,000 in use taxes to Town Fair.

"The absence of a statutory presumption that a vendor's knowledge that a purchaser is a resident of Massachusetts will permit a finding that the goods purchased out of State were purchased 'for' use in Massachusetts and actually used in the Commonwealth is particularly significant because legislatures in other states have enacted just such a presumption," says the unanimous opinion, authored by Chief Justice Margaret Marshall.

"The Legislature may, of course, enact such a presumption, but in the absence of any such statutory authorization, it is error to rely on a presumption that tires sold to a Massachusetts resident outside the Commonwealth were actually used in the Commonwealth.

"And the principles of interpretation of tax statutes preclude us from "engrafting such language on the statute as written."

The decision overturned a ruling by the Appellate Tax Board. The Supreme Court transferred the case in from the Appeals Court.

The opinion also says the State failed to prove the tires were actually used in Massachusetts.

"There is no evidence that any of the tires sold in the 313 transactions under review were actually stored or used in Massachusetts, the board made no such finding, and the (DOR) commissioner does not argue otherwise," it says.

Nevada, California and Wisconsin were cited as states that have laws requiring in-state taxes to be paid on some out-of-state purchases by their residents.

"The commissioner argues that the 'presumption' that the tires were used in Massachusetts was 'unrebutted' by Town Fair," one footnote in the opinion says.

"The use of a presumption to establish use in the Commonwealth is, we have concluded, not permissible in this case. Accordingly, there was no obligation on Town Fair to rebut the 'presumption.'"

The State of New Hampshire filed an amicus brief in support of Town Fair.

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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