Massachusetts High Court Hears Oral Argument on Consumer’s Standing to Recover Sales or Use Tax

by M. Robinson & Company, P.C.
Contact

An attorney representing a Massachusetts consumer (“Dedham Health”) argued this week that the Massachusetts Department of Revenue (DOR) must abate and refund the sales tax and/or use tax that the seller collected from Dedham Health and then paid to the DOR.  The seller, an entity that sold Dell computers and related services, argued alongside the DOR that Dedham Health was not entitled to receive a refund.

Oral argument at the Massachusetts Supreme Judicial Court (SJC) took place on (November 7, 2017).  The case is titled Worldwide Techservies LLC & others v. Commissioner of Revenue, docket number SJC-12328.

Facts of the Dispute

Dedham Health purchased a Dell computer over a decade ago, and it paid sales or use tax on both the computer itself (which everyone agrees is taxable) and on a related service contract for repair and maintenance of the computer hardware.  Later, the Dell entities sought abatement of the tax it collected from customers and paid to the DOR for the service contracts.  After the DOR denied abatement, the Dell entities petitioned the Massachusetts Appellate Tax Board (ATB).  Dedham Health intervened on the basis of its substantial interest as a member of a putative class of consumers who paid sales or use tax for nontaxable service contracts.

On December 17, 2013, the ATB issued a three-page interlocutory order (which is found at the end of the appellant’s brief), holding that the service contracts were nontaxable.  The DOR’s attorney disagreed with that decision “on the merits” and would have appealed it based on a regulation, 830 CMR 64H.1.1, which states in part:

“A service transaction is subject to the sales tax where…[t]he transfer of tangible personal property occurs, and the value of the property is not inconsequential in relation to the total charge, and the charge for the property is not separately stated on the bill to the customer.”

However, the ATB never issued a final decision that could be appealed “on the merits.”  Instead, the ATB suspended the litigation while Dedham Health pursued a class-action case under M.G.L. section 93A in Massachusetts Superior Court.   The Superior Court dismissed that case because it lacked jurisdiction. Meanwhile, the Dell entities withdrew their petition from the ATB “with prejudice.”  The ATB accepted the withdrawal and closed the case despite Dedham Health’s objection.  Dedham Health appealed, arguing that the ATB’s closing of the case after hearing arguments and issuing an interlocutory order violated the ATB’s procedural rules and left Dedham Health without a remedy to recover the tax it paid.

Our Legal Analysis

There are two issues:

(1) Are the class-action plaintiffs right on the merits?

(2) Have the class-action plaintiffs been denied due process?

The quoted regulation has stood the test of time. If the service fees were separately stated, they are not subject to the use tax. Otherwise, they are. In this case, sometimes the service fees were separately stated, and sometimes the service fees were not separately stated. Thus, the class-action plaintiffs might recover to the extent that the services fees were separately stated. The real question is whether the plaintiffs were denied due process when the Dell entities terminated their case, with prejudice. We believe these plaintiffs were not denied due process. The plaintiffs’ claim was against their vendor, the Dell entities. If these plaintiffs did not timely sue the Dell entities, they lost their rights under the normal statute of limitations considerations. The implementation of statutes of limitations generally do not involve the denial of due process. For these reasons, we believe that the Massachusetts Department of Revenue will win. Time will tell. We await the opinion of the Supreme Judicial Court.

(c) The Massachusetts Tax Alert, 2017.

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© M. Robinson & Company, P.C. | Attorney Advertising

Written by:

M. Robinson & Company, P.C.
Contact
more
less

M. Robinson & Company, P.C. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.