Form 9m 3/01 - Taxpayer Advisory Bulletin - State Of Massachusetts (Page 6 of 12) in pdf

Taxpayer Advisory Bulletin March 2001, Vol. 17, No. 1

In its decision, the ATB ruled that the tax-

public importance due to the number of

Recent

payer’s “consultants” were not “repre-

time-share resorts in the Commonwealth.

sentatives” under M.G.L. c. 64H, § 1(5).

The plaintiff corporation had been as-

Legal

In its decision, the ATB construed the

sessed the use tax in February 1997 and

term “representative” to mean someone

paid the assessment in March 1997. The

Decisions

who had authority to act for, and bind the

corporation also claimed that it was not

out-of-state corporation. In essence, the

the proper entity for assessment. No

ATB found that the term “representative”

abatement application was ever filed,

required a principal/agency relationship

even though plaintiff corporation had

between the parties.

sought a pre-assessment review before

U.S. District Court

the Appeal & Review Bureau. The statu-

The SJC overturned the ATB’s interpreta-

Bankruptcy

tory time for an abatement under Chap-

tion of the term “representative” and

In re Healthco International, Inc. Chap-

ter 62C expired one year before the Su-

looked to “the nature and extent of this

ter 7 Case No. 93-41604-JBR (January

perior Court action was commenced.

out-of-state taxpayer’s involvement with

2001) — On January 23, 2001, the United

its in-state sales force.” The SJC further

Under very limited circumstances, the

States Bankruptcy Court issued its deci-

found that the taxpayer and the ATB’s

Supreme Judicial Court has allowed a

sion in favor of the Chapter 7 trustee,

suggested application of the term “rep-

taxpayer to pursue declaratory relief

sustaining the trustee’s objection to the

resentative” was “a technical construc-

rather than seeking an abatement under

claim of the Massachusetts Department

tion of the term that would permit ven-

M.G.L. c. 62C. The court, however, has

of Revenue (DOR). The claim was for the

dors to escape sales and use tax liability

cautioned against widespread use of

debtor’s sales tax liability for the years

by artful drafting.”

this alternative. The administrative rem-

1989 through 1993 in the amount of

edy must be seriously inadequate under

$432,385.87. DOR and the trustee stipu-

The SJC also noted that the Legislature

all the circumstances of the case.

lated to facts that were adopted by the

had granted the Commissioner broad

court as its findings. These stipulated

powers to promote the efficient adminis-

Certain of the claims were dismissed as

facts included: (1) that DOR had timely

tration of the tax statutes. The SJC stated

being time barred and the remainder

filed a valid proof of claim; (2) that the

that this grant of broad powers “would be

were dismissed for failure to exhaust ad-

proof of claim represented taxes as-

thwarted by a requirement that the Com-

ministrative remedies. The court deter-

sessed against the debtor pursuant to a

missioner track down hundreds of individ-

mined that this case is not one of the ex-

sales tax audit; and (3) that DOR had dis-

uals in the Commonwealth who are con-

ceptional cases in which taxpayers may

posed of the audit file in accordance with

tractually prohibited from selling products

bypass the administrative process.

its records retention policy six years after

at wholesale and retail establishments. By

The plaintiffs have indicated an intent to

the audit, but during the pendency of the

contrast, imposing this burden on a ven-

appeal this decision.

debtor’s bankruptcy.

dor does not seem undue where the ven-

dor knows the identity and sales volume

The sole basis for the trustee’s objection

Appeals Court

of each sales person located in-state.”

was that the claim was based on an audit.

Tax Administration

The specific allegation made by the

Superior Court

Richard Bolt v. Commissioner of Rev-

trustee was that the trustee “disputes the

enue, Appeals Court No. 98-P-2038

audit.” The trustee offered only the debtor’s

Tax Administration

(December 2000) — In this case, the

tax returns for the periods in question in

The Cove at Yarmouth Resort Hotel

Appeals Court upheld the Appellate Tax

rebuttal to the audit. The court held that

Condominium Trust and The Cove at

Board’s (ATB) dismissal of the taxpayer’s

the lack of availability of the audit file by

Yarmouth Resort Hotel Condominium

petition due to the taxpayer’s failure to

DOR, during the pendency of the bank-

Association, Inc. v. Commissioner of

timely file an application for abatement.

ruptcy case, created an evidentiary bar-

Revenue, Docket No. 00-180 — In this

rier for the trustee that was virtually im-

The taxpayer filed a second amended es-

case, the Superior Court dismissed the

possible to overcome. For this reason

tate tax return and application for abate-

plaintiffs’ action against the Commissioner

the court imposed a burden of produc-

for lack of subject matter jurisdiction.

ment on June 26, 1997, more than three

tion on DOR to provide evidence to vali-

years after the Notice of Assessment of

Plaintiff Trust and Corporation had desig-

date its claim.

estate tax was issued, and more than one

nated responsibilities for the operation of

year after the expiration of the period for

a time-share resort. The plaintiffs sought a

An appeal of the decision is being

filing an application for abatement speci-

declaration under M.G.L. c. 231A that

considered.

fied in M.G.L. c. 62C, § 37. The Commis-

they were entitled to the statutory exemp-

sioner declined to consider the applica-

Supreme Judicial Court

tion set forth in M.G.L. c. 64H, § 6(i) from

the taxes imposed on sales, furnishing or

tion for abatement. The taxpayer filed a

Sales and Use Tax

petition at the ATB.

service of gas, water, electricity, steam,

Commissioner of Revenue v. Jafra

telephone, or telegraph because the util-

The taxpayer argued that the filing of the

Cosmetics Inc., SJC-08265 (January

ity products were used for residential pur-

second amended return, reporting a gross

2001) — The Supreme Judicial Court

poses. The plaintiffs’ action for declara-

estate more than 25 percent greater than

(SJC) issued its decision in the above-ref-

tory relief also requested that the court

the estate as originally reported, operated

erenced matter on January 25, 2001. The

abate the applicable taxes paid to date.

to extend the period for filing an applica-

SJC reversed the Appellate Tax Board’s

tion for abatement pursuant to M.G.L. c.

The plaintiffs claimed that the time-share

(ATB) earlier decision. This is a significant

62C, § 26(f).

was entitled to the residential exemption

decision in the sales/use tax nexus area.

and that this issue was of substantial

Form 9m 3/01 - Taxpayer Advisory Bulletin - State Of Massachusetts Page 6

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