Is Your Interstate Fleet Exposed to a Use Tax Assessment?

On March 23, 2023, the Massachusetts Department of Revenue released a Commissioner’s Directive addressing the application of Massachusetts use tax to “rolling stock.” This guidance describes rolling stock generally as tractors and trailers that are pulled by tractors. Rolling stock owned or leased for at least 12 months is deemed subject to Massachusetts use tax if it is stored or used in the state for more than 6 days during a 12-month period.

Each 12-month period is considered separately. A use tax liability can be overcome or reduced if the rolling stock was previously subjected to Massachusetts or another state’s sales or use tax (via a full or partial credit). Interstate motor carriers operating rolling stock (or other types vehicles) in Massachusetts should consider an internal fleet review for use tax liability. 

The Commissioner’s Directive imposes use tax if an interstate vehicle is stored or merely operates more than six (6) days during a 12-month period in and through Massachusetts. This is an extreme position. The more typical approach taken by state tax authorities is to impose use tax if an interstate vehicle is based in that state (e.g., at a terminal). 

Under this more typical approach, potential use tax audit exposure may arise on an interstate vehicle purchased, titled, and/or registered exempt from sales and use tax in one state, but is based in another state. Interstate carriers with vehicles based in multiple states should regularly review internal sales/use tax compliance to ensure exemptions ae properly claimed, and potential use tax exposure is identified and addressed.