SALT Report 2258 – The Massachusetts Commissioner of Revenue issued a letter ruling regarding the application of sales and use taxes to the transfer of mobile laser eye equipment and certain services provided by the Taxpayer to Medical Service Providers pursuant to a contract.
The contract between the two parties stipulates that the Taxpayer will provide a trained and certified Technician to deliver, install, and calibrate the laser at the beginning of the contract and disassemble and remove the laser at the end of the contract. If necessary, the Technicians will train and assist the Medical Service Providers’ physicians to use the laser. Although, the responsibility for damage, theft, or destruction lies with the Medical Service Provider, the laser remains the sole and exclusive property of the Taxpayer.
The Taxpayer requested guidance as to whether the transfer of the laser to the Medical Service Providers’ constitutes a lease or rental and if the charges for the Technicians services are exempt.
In its response, the Commissioner stated that when determining whether a taxable lease or rental of tangible personal property has occurred, depends on whether possession of the property is transferred to the lessee as provided in G.L. c. 64H, § 1.
Based on that regulation, the Commissioner determined that the transfer of the laser by the Taxpayer to the Medical Service Providers constitutes a taxable lease or rental, because upon transfer of the laser the Medical Service Providers obtains control and direction over and, possession of, the laser. Once transferred, the Taxpayer and the Technicians are only responsible for providing assistance to the Provider in using the laser.
As for the delivery and removal services provided by the Technicians, the Commissioner determined that they qualify as transportation charges associated with the lease of tangible personal property. These charges are excluded from sales tax so long as they:
- Reflect the cost of preparing and moving the property to a location designated by the lessee,
- Are separately stated on the invoice provided to the lessee, and
- Reasonably reflect the actual costs incurred by the lessor
Lastly, the installation, calibration, and disassembly services provided upon completion of the contract, as well as the service of assisting the physicians in using the laser are also excluded from sales tax because amounts charged for labor or services rendered in installing or applying the leased property are excluded from the “sales price” upon which the tax is based as provided in G.L. c. 64H, § 1. However, these charges must also be separately stated on the invoice or receipt provided to the lessee.
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