BAKER TRANSPORT, INC. vs. STATE TAX COMMISSION (and a companion case [Note 1]).

LIACOS, J. The taxpayers appeal from a decision of the Appellate Tax Board (board) under G. L. c. 58A, Section 13. The board upheld the State Tax Commission (commission) in its denials of applications for abatements of sales and use taxes assessed against the taxpayers in connection with the leasing of tractors and trailers for the period commencing April 1, 1966, and ending September 30, 1968.

The taxpayers were two Massachusetts corporations with usual places of business in the Commonwealth. [Note 2] Baker is a licensed intrastate carrier, and Dedham was a wholly owned and operated subsidiary of Baker involved in the leasing of trailers to carriers engaged in commodity transportation. On or about August 27, 1959, each corporation

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entered into a separate agreement with The Stop & Shop Companies, Inc. (Stop & Shop). Baker agreed to supply Stop & Shop with transportation services necessary for the shipment of merchandise from a central warehouse to its various stores located throughout Massachusetts. In the agreement Baker agreed to use only trailers leased from Dedham. Dedham, in turn, agreed to furnish Stop & Shop with all trailers necessary for the shipment of merchandise to various locations. [Note 3]

For the period involved in these appeals, Baker and Dedham both filed required sales and use tax returns in which they reported no tax due. On October 16, 1968, the Commissioner of Corporations and Taxation (Commissioner) sent each taxpayer a notice of intention to assess a deficiency for sales and use taxes for the period in question. On February 5, 1969, Dedham was assessed sales taxes attributable to its trailer rentals to Baker and other carriers, while on March 10, 1969, Baker was assessed both sales and use taxes based on its tractor rentals to other carriers. [Note 4]

On February 4, 1971, each taxpayer filed a proper application for abatement. These applications were denied by the Commissioner on May 7, 1971. A timely appeal was filed by each taxpayer with the board on July 30, 1971.

Before the board the taxpayers asserted three grounds for relief: (1) that they were engaged in a joint venture with Stop & Shop and Lidel, and, thus, were engaged in a service excluded from taxation under G. L. c. 64H, Section 1 (13) (b); (2) that certain transfers not at issue here were a return of property exempt from taxation under G. L. c. 64H, Section 1 (14) (c) (ii); and (3) that since the taxable transactions involved motor vehicle rentals the tax should be paid by the lessee pursuant to the terms of G. L. c. 64H, Section 3 (c), as well as G. L. c. 64H, Section 1 (12) (a), and (13). The

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taxpayers have not appealed from the board's adverse decisions on grounds (1) and (2). The only issue before us is whether the taxpayers' contention relative to the liability of the sales tax under G. L. c. 64H, Section 3 (c), is correct. We conclude that it is not, and we affirm the decision of the board.

The original sales tax statute as enacted by St. 1966, c. 14, Section 1, provided in subsection 3, that "each vendor . . . shall collect from the purchaser the full amount of the tax," [Note 5] and further provided in subsection 10, that "the vendor shall pay to the commissioner the taxes imposed by this section." [Note 6] There is no question, as is conceded by the taxpayers, that this section clearly put the responsibility for tax payment on the vendor (lessor), in these cases Baker and Dedham. [Note 7] However, St. 1966, c. 14, Section 1 (now incorporated in G. L. c. 64H), was amended in subsection 3 by St. 1966, c. 483, Section 1, which provided: "Notwithstanding the provisions of this subsection, the excise imposed by subsection two of this section . . . upon sales at retail . . . of motor vehicles or trailers shall be paid by the purchaser to

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the registrar of motor vehicles." [Note 8] The effect of this amendment was to create an exception to the general rule of vendor payment described in G. L. c. 64H, Section 3 (c).

The taxpayers argue that since G. L. c. 64H, Section 1 (13), inserted by St. 1967, c. 757, Section 1, defines a "[s]ale at retail" to be a "sale of tangible personal property for any purpose other than resale," and since "sale" is further defined in G. L. c. 64H, Section 1 (12) (a), to include a lease or rental, see Zayre Leasing Corp. v. State Tax Comm'n, 365 Mass. 351 (1974), and since G. L. c. 64H, Section 1 (8), defines a "[p]urchaser" to include a lessee, the lease transactions in these cases are, for purposes of the statute, a sale at retail of a motor vehicle which triggers the provision of G. L. c. 64H, Section 3 (c), and thus the tax liability is properly attributable to the lessees rather than to the taxpayers. The board, on the other hand, held that the exception was triggered only when there was either a transfer of registration or the issuance of a new certificate. While the taxpayer's argument has a beguiling simplicity, it does not withstand strict scrutiny in light of the obvious purpose of the Legislature in enacting the amendment and the abundant evidence in the statutory scheme which supports the board's position.

The legislative intent in creating the exception in Section 3 (c) is not difficult to fathom. By making payment of the tax a condition precedent to the issuance or transfer of a certificate of registration, the Legislature was adopting what it believed to be the most efficacious method of ensuring the payment of taxes on all taxable sales of motor vehicles. In addition, it attempted to ensure that such

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taxes would be paid by putting the original responsibility on the purchaser rather than on the vendor. It obviously believed that the normal pass-through theory which is built into the statute, First Agricultural Nat'l Bank v. State Tax Comm'n, 353 Mass. 172, 179-181 (1967), rev'd on other grounds, 392 U.S. 339 (1968), would not be adequate to ensure proper tax payments in a large number of situations where ownership of motor vehicles might be transferred. [Note 9]

This perception of the legislative intent and purpose is bolstered by an examination of the entire statutory scheme. General Laws c. 64H, Section 25, states that any change of motor vehicle registration shall be presumed to be a "sale at retail" invoking the sales tax liability, and makes evidence of tax payment a condition precedent to the issuance of a certificate of registration. [Note 10] This statute makes clear that it is the transfer or acquisition of an ownership interest in a motor vehicle which was a key concern of the Legislature in devising the most efficient scheme for ensuring tax payments on such transactions.

In addition, G. L. c. 64H, Section 10, requires that in the normal course of business sales taxes should be paid to the

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Commissioner, while Section 3 (c) requires that the sales taxes should be paid to the Registrar of Motor Vehicles (Registrar). We note that when what is now Section 3 (c) was originally offered as an amendment in 1966, the draft provided that the tax be paid to the Commissioner, 1966 House Doc. No. 3242, but the redraft provided for payment to the Registrar. 1966 House Doc. No. 3332.

Thus, the entire statutory scheme and legislative history of the section in question show that it was meant only to operate where there was a coincidence of time between the necessity of tax payment and some function involving the transfer or issuance of registration. [Note 11] The instant cases clearly do not fall within the scope of these concerns.

Therefore, keeping in mind the proposition that an exception to the general rule is to be narrowly construed, Commonwealth v. Yee, 361 Mass. 533, 537 (1972), and that the interpretation of the administering agency is entitled to a certain degree of weight, Cleary v. Cardullo's, Inc., 347 Mass. 337, 343 (1964), we hold, in accord with the board, that G. L. c. 64H, Section 3 (c), operates only in those situations where there is such a transaction involving the transfer or issuance of motor vehicle registration.

The decision of the Appellate Tax Board is affirmed.

So ordered.