BOSTON (Aug. 25, 2009) — The Massachusetts Supreme Judicial Court has ruled in favor of Town Fair Tire Centers Inc. in its battle with the state's Department of Revenue (DOR) over the collection of use taxes.
In today's ruling the state's top court reversed the Appellate Tax Board decision to allow the state agency to assess the tire dealership $229,311 in uncollected use tax, penalties and interest. The agency claimed the dealership should have collected Massachusetts' 5 percent sales tax on tires Massachusetts residents purchased at Town Fair's New Hampshire stores between 2001 and 2003.
Under Massachusetts law, retailers with stores in the state should collect sales tax, or use tax, on products sold in other states but used within Massachusetts. Town Fair has 74 locations in New England, including 25 stores in Massachusetts and seven in New Hampshire, which does not have a sales tax.
Town Fair appealed the appellate tax board ruling last fall to the state appellate court, but the Supreme Judicial Court picked up the case itself and heard arguments in the case last April.
Town Fair's attorney in the case, David Nagle of Sullivan and Worcester L.L.P., said previously that the case held ramifications for other tire dealers and retailers who also may be subject to collecting use tax from out-of-state customers.
Massachusetts residents are obligated to report untaxed purchases subject to the use tax on their state tax returns. Since a “miniscule number” of residents pay the use tax on their tax returns, according to a DOR spokesman, the state claims retailers operating outlets in both states should be collecting the use tax at the point of purchase in New Hampshire.