The Massachusetts Department of Revenue has issued a letter ruling outlining certain sales and use tax exemptions afforded to a water purification plant. The letter ruling states that the sale, furnishing, or service of water provided by the taxpayer in question is exempt from sales and use taxes. The letter ruling further states that Contractors and subcontractors in a true agency relationship with the taxpayer may qualify for the same exemptions that the taxpayer qualifies for in regards to the purchase of tangible personal property. The characteristics of agency relationship include the power of the agent to change legal relations of the principal, such as the power to subject the principal to legal liability; the fiduciary duty owed by the agent to the principal; and the contractor will act as agent for the taxpayers with respect to purchases. Also, the letter ruling states that purchases of materials, tools and fuel to be consumed and used, and machinery and replacement parts to be used, directly and exclusively in the production, storage, or delivery of water will be exempt from taxation. (Letter Ruling 05-02, Massachusetts Department of Revenue, March 8, 2005)