New England’s Town Fair Tire, Inc. is at the center of a recent Massachusetts Supreme Judicial Court ruling that multi-state businesses are not required to collect a “use tax” on sales made outside of the Bay State’s boundaries to people who live in Massachusetts.
“The case has potential consequences for other multi-state retailers whose customers cross the border to buy merchandise in states that have no sales taxes or lower sales taxes,” says David J. Nagle, Town Fair’s lawyer.
“Under the court’s decision, consumers may be liable for paying ‘use taxes,’ which resemble sales taxes but are imposed on the use of goods in Massachusetts, but retailers like Town Fair Tire are not required to collect this tax if their sales occur entirely outside Massachusetts,” he explains, citing a “border war” brewing between Massachusetts and New Hampshire – Granite State legislators have passed a new law prohibiting New Hampshire merchants from sharing private customer information with Massachusetts’ tax auditors.
The attraction to purchasing products in New Hampshire is simple, according to reporter Lisa Redmond, who is covering the story for the Lowell Sun: Massachusetts recently raised its sales tax to 6.25 percent from 5 percent, while New Hampshire has no sales tax at all.
The case before the Massachusetts Supreme Judicial Court revolved around 313 Tire Fair customer invoices from its New Hampshire stores that listed Massachusetts addresses for the patrons. The Massachusetts Department of Revenue (DOR) demanded that Town Fair pay $109,000 in allegedly uncollected use taxes.
The Massachusetts Appellate Tax Board ruled that Town Fair should have been aware that the purchased tires would be used in Massachusetts, and thus the company was liable for collecting the tax.
On appeal, the Supreme Judicial Court held that a vendor such as Town Fair is only liable for the use tax if the merchandise is “actually stored, used or consumed in Massachusetts.”
“In this case, there was no evidence that Town Fair Tire’s customers actually used the tires in question in Massachusetts, and the court rejected the DOR’s presumption of such use based on the mere intent of its customers,” says Nagle. “As the court reasoned, the Massachusetts legislature has specified with particularity the circumstances in which ‘for use in the Commonwealth’ may be presumed, and in the absence of a statutory basis for presuming actual use, the DOR erred in presuming that tires sold to a Massachusetts resident outside the Commonwealth were actually used there.”
The DOR has no plans to appeal the latest verdict, according to spokesman Robert R. Bliss, who notes that the decision “is the end of the line for this case, since it does not involve constitutional issues that might require the attention of a higher court.”
In business for more than 40 years and headquartered in East Haven, Conn., Tire Fair has 76 outlets throughout Massachusetts, New Hampshire, Maine, Rhode Island and Connecticut.
The text of the court ruling is available here.
For more information, visit www.townfair.com and www.lowellsun.com.
