BOSTON — The Massachusetts Supreme Judicial Court yesterday struck down the Department of Revenue's attempt to stick a Connecticut-based tire company with a $108,947 tax bill for tires purchased in New Hampshire.
The DOR had sought the assessment on Town Fair Tire Centers Inc., which has 60 stores in New England, arguing the company should have assessed taxes on Massachusetts residents who purchased their tires in New Hampshire.
A DOR auditor found in 2003 that the company's three New Hampshire stores completed 313 sales in one month to purchasers with Massachusetts addresses.
As a result, the tax-collecting agency inferred the tires were intended for use in Massachusetts, and use taxes should be assessed for the Commonwealth. That decision was upheld by the Appellate Tax Board. But the SJC found the arguments of DOR Commissioner Navjeet Bal flawed.
"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 commissioner does not argue otherwise," the court said in an opinion written by Chief Justice Margaret Marshall. "For her part, the commissioner acknowledges that 'intent' to use the goods in Massachusetts is not sufficient to trigger the use tax."
Town Fair's attorney, David Nagle, said the company was pleased with the court's decision.
"I think that both sides acknowledge, there was no evidence of actual use in the Commonwealth," Nagle said. "There's no statutory basis for such a presumption."
In a statement, DOR didn't acknowledge the defeat, citing only the portion of the ruling that affirmed that Massachusetts residents who make purchases in a no-tax state for use in Massachusetts must report those purchases on their state income tax forms.
The SJC did leave open the possibility that the Legislature could revisit the law to include a provision that goods sold outside of Massachusetts, but intended for use in the Bay State, could be taxed.
The ruling brings resolution to a case that sparked controversy earlier this year, as retailers and consumer groups worried that state tax collectors would follow consumers seeking better deals across the state line, into states like New Hampshire, which has no sales tax.
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