## Facts

- J.C. Penney Co., a Delaware corporation headquartered in Texas, operated ten retail stores in Massachusetts during tax years 1991–1993 and also ran a separate catalog business.
- J.C. Penney produced seasonal and specialty catalogs describing merchandise available for mail-order purchase.
- Catalog planning, design, and layout occurred outside Massachusetts; independent printers in Indiana, South Carolina, and Wisconsin printed the catalogs using materials and labor sourced outside Massachusetts.
- After printing, catalogs with address labels and postage were shipped by common carrier to a U.S. Postal Service facility outside Massachusetts and then mailed to Massachusetts residents.
- The Commissioner of Revenue assessed Massachusetts use tax under G.L. c. 64I on catalogs mailed into Massachusetts, treating their distribution as a taxable in-state “use” of tangible personal property.
- The Appellate Tax Board ordered an abatement, concluding J.C. Penney did not make a taxable “use” in Massachusetts and that recipients were the consumers.
- The Commissioner appealed.

## Issues

1. Whether arranging for catalogs to be printed out of state and mailed to Massachusetts residents constitutes a taxable “use” in Massachusetts under G.L. c. 64I, § 1.
2. Whether J.C. Penney, rather than the recipients, is the “consumer” liable for the Massachusetts use tax on the catalogs.
3. Whether applying the use tax to the catalogs violates the dormant Commerce Clause under the *Complete Auto* test.

## Decision

- The Supreme Judicial Court reversed the Appellate Tax Board and upheld the Commissioner’s use-tax assessment.
- The court held that J.C. Penney’s controlled distribution of catalogs into Massachusetts was a taxable “use” in the Commonwealth.
- The court held J.C. Penney was the “consumer” of the catalogs because it employed them as marketing tools to generate sales, and recipients did not purchase or control the catalogs’ distribution.
- The court held the tax, as applied, satisfied the Commerce Clause under *Complete Auto Transit, Inc. v. Brady*.

## Legal Principles

- “Use” under G.L. c. 64I, § 1 includes the exercise of any right or power over tangible personal property incident to ownership and is construed broadly to reach in-state exploitation of property even when printing and initial mailing occur out of state.
- A business that designs, owns, and directs the distribution of promotional catalogs into Massachusetts for solicitation purposes is the “consumer” for use-tax liability; passive recipients are not the consumers.
- Massachusetts use tax is complementary to the sales tax and may be applied to prevent a tax advantage from out-of-state production of property used in Massachusetts.
- Under *Complete Auto*, a use tax on catalogs mailed into the state is constitutional where: (a) the taxpayer has substantial nexus (including physical presence and targeted solicitation), (b) the tax is fairly apportioned to in-state use, (c) it does not discriminate against interstate commerce, and (d) it is fairly related to state-provided services.

## Conclusion

Massachusetts could impose use tax on catalogs printed outside the state and mailed to Massachusetts residents because J.C. Penney’s directed in-state distribution was a taxable “use,” the company was the relevant “consumer,” and the assessment satisfied dormant Commerce Clause requirements.


Comm'r of Revenue v. J.C. Penney Co., 431 Mass. 684, 730 N.E.2d 266 (2000)