August 5, 2009

Massachusetts Issues Form ST-5R for Sales and Use Tax Transition Rule

Holland & Knight Alert
James F. Millea

On August 1, 2009, Massachusetts increased its sales and use tax rate from 5 percent to 6.25 percent. In connection with the rate increase, the Massachusetts Department of Revenue issued a series of transition rules that delayed the imposition of the increased rate with respect to purchases pursuant to certain contracts that were in effect before August 1, 2009. These transition rules were described in our July 23, 2009 alert.

The Department of Revenue has now issued Form ST-5R which is used to claim the benefits of the transition rule. A contractor or subcontractor must use Form ST-5R when purchasing tangible property for use pursuant to a qualified contract to be eligible for the 5 percent rate under the transition rule.

Purchasers acquiring property for use in fulfilling a qualifying contract should deliver the Form ST-5R to the vendor. The vendor does not collect any sales tax on a sale eligible for the 5 percent rate under the transition rule. By delivering the Form ST-5R to the vendor, the purchaser agrees to report and pay the sales or use tax on the purchase at the 5 percent rate. The purchaser reports and pays the sales tax for the purchase on the purchaser’ s sales tax return if the purchaser is a registered Massachusetts vendor or on a business use tax return if the purchaser is not a registered Massachusetts vendor.

Form ST-5R is available on the Department of Revenue’s website.

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