Massachusetts Determines Indirect Cost Items Do Not Qualify for Resale Exemption

The Massachusetts Appellate Tax Board determined that a defense contractor’s purchases of indirect cost items connected to its performance of government contracts did not qualify for the resale sales tax exemption. The contractor contended that the items, which included food and catering services, janitorial supplies, cell phones, and office furnishings, should qualify because pursuant to Federal Acquisition Regulations, the cost of and title to these items vested to the federal government immediately after purchase by the contractor. However, these items were not delivered to the government as final products, and the Board found them to be merely incidental to the government contacts and served only to facilitate their completion. (Raytheon Company v. Commissioner of Revenue, Massachusetts Appellate Tax Board, No. C277684, July 17, 2008)

Posted on September 5, 2008