Companies Must Consider Massachusetts Sales/Use Tax on Rolling Stock
Though not new in 2024, transportation companies traveling through Massachusetts should keep their relatively recent imposition of sales/use tax on rolling stock in mind as risk and exposure is considered.
Back in 2023, the Massachusetts Department of Revenue published Directive 23-1 which outlined its position that rolling stock which enters the state for more than six days is subject to sales/use tax, less a credit for tax paid to other jurisdictions.
The challenge with Massachusetts’ sales/use tax on rolling stock
Why is this an issue? Most states provide sales and use tax exemptions on rolling stock. If you don’t have a credit from paying sales or use tax to another jurisdiction, you may be liable for tax in Massachusetts at a rate of 6.25%.
If rolling stock was used or stored in Massachusetts no more than six days, it’s considered de minimis and no tax applies. This de minimis threshold does not apply to rolling stock leased monthly. Even just one trip into Massachusetts with leased rolling stock is subject to use tax on the monthly transaction.
An example of how the sales/use tax affects rolling stock in Massachusetts
The tax is equipment specific, meaning if one tractor — assuming non-leased — for a company travels to or through the state eight times and another tractor for the same company only travels through the state two times, use tax only applies on the tractor which travelled to or through the state eight times.
While bills have been introduced proposing a repeal of the tax, none have passed. Transportation companies should therefore assess risk and exposure and take steps to mitigate potential tax liability.
How we can help
CLA’s tax team has members evaluating sales and use tax in every state and can help you comply with regulations. Contact us for assistance with Massachusetts’ sales and use tax on rolling stock or any other tax questions.
Nathan is a CPA and has more than ten years of experience providing tax planning, consulting and compliance services to a number of privately held businesses and individuals in a variety of industries, with a special focus on the transportation and logistics industry. He actively communicates with clients and seeks ways to align their individual and business goals with available tax strategies to allow them to make well-informed decisions.
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