Planning to take advantage of the Massachusetts sales-tax holiday this weekend? Keep in mind a couple of key points:

If you’re a Rhode Island resident, chances are that any purchase you make won’t be truly tax-free; you’ll still owe a special tax to Rhode Island, called a use tax.

And no matter what state you’re in, remember that the Massachusetts sales-tax holiday doesn’t apply to everything; there are some key exceptions.

Following are some details:

Rhode Island Use Tax: Like many states that have a sales tax, Rhode Island also has a use tax. So say you buy something in another state, something on which you’d pay a Rhode Island sales tax if you bought it in Rhode Island. In that case, you’d owe a Rhode Island use tax.

Yes, you’d get a credit for the sales tax you paid to the other state. But you’d still owe any difference to Rhode Island, in the form of a use tax. (The Rhode Island use-tax rate is 7 percent, the same as the Rhode Island sales-tax rate.)

How does this rule apply to the Massachusetts sales-tax holiday?

Suppose you’re a Rhode Island resident and you travel to Massachusetts to shop this weekend. You pay $1,000 for a computer, a TV, an appliance or other such item. Because of the sales-tax holiday, Massachusetts won’t charge you its 5-percent sales tax. But you would owe a 7-percent use tax to Rhode Island.

As a result, in this example, you wouldn’t have to pay the $50 sales tax to Massachusetts. But you would have to pay the $70 use tax to Rhode Island, said Peter J. McVay, chief revenue agent for field audit services at the Rhode Island Division of Taxation.

“They would owe the full amount of 7 percent” on such a purchase, McVay said in an interview yesterday at the state tax agency’s headquarters in Providence.

There’s no minimum or maximum involved, he said. So if a Rhode Island resident buys a $100 item during the Massachusetts sales-tax holiday, he won’t have to pay the $5 Massachusetts sales tax, but will have to pay the $7 Rhode Island use tax.

There’d be no credit involved, because you didn’t pay any tax to Massachusetts, said Mark Higgins, dean of the University of Rhode Island’s College of Business Administration. “If you didn’t pay anything [in sales tax to Massachusetts], you’d owe the full amount to Rhode Island,” said Higgins, coauthor of the textbook Concepts in Federal Taxation.

Rhode Island gives taxpayers the option to pay the use tax on their Rhode Island income-tax returns. As a result, you can wait until next April’s filing deadline to pay use tax on items you buy in Massachusetts this weekend, items for which a use tax is due.

For the 2005 tax year, the latest for which figures are available, about 1,280 returns paid a use tax — out of more than 486,000 Rhode Island resident returns filed, according to a report filed with the General Assembly earlier this year.

In other words, few people wind up paying the use tax. One reason is awareness. Many businesses know about the use tax, but many consumers do not, Higgins said. Even if you know about the tax, chances are you’ll forget about it by the time tax-filing season comes around, he said.

What about enforcement? Like many other tax systems, the use-tax system is one of voluntary compliance, McVay said. In other words, if you owe the tax, you’re expected to pay it, on your own. That’s the law.

Will you get caught? Well, there won’t be any Rhode Island tax agents stationed at the border with Massachusetts this weekend, McVay acknowledged. Nevertheless, you could be caught later on, if a Massachusetts business is audited, and there’s a paper trail that points to you. In that case, you’d owe the original tax, plus interest and penalty.

Massachusetts Rules: The Massachusetts sales-tax holiday runs today and tomorrow. But it isn’t all-encompassing. “It only applies to certain items,” Higgins said.

For example, in general, the sales-tax holiday applies only to purchases by individuals, not by businesses. Thus, purchases by corporations or by other businesses — and purchases by individuals for business use — remain fully taxable, according to a Technical Information Release published by the Massachusetts Department of Revenue earlier this week.

The rules for individuals are a bit tricky, too. For example, the holiday applies only to individual items with a retail price of $2,500 or less. So if the sales price on a single item exceeds $2,500, the entire item is taxable.

For instance, if you buy something with a retail price of $3,000, you’ll pay the full 5-percent Massachusetts sales tax on the entire $3,000.

However, individual items purchased together will generally qualify for the sales-tax holiday. For example, if you buy a TV for $1,500, a stereo receiver for $1,200, and a computer for $2,000, and they’re all rung up together, they’re all tax-free.

But there’s yet another rule for so-called bundled purchases — when several items are offered for sale at a single price. In that case, the $2,500 rule applies. For example, if you buy a computer package, which includes the computer itself, along with a monitor, keyboard, mouse and printer, and the single sales price for that package is $3,500, the entire $3,500 price is subject to tax. That’s because the single sales price of the package ($3,500) is greater than the sales-tax holiday’s threshold amount of $2,500.

Keep in mind, though, that there are lots of things that don’t qualify for the holiday, no matter their price and no matter if they’re all rung up together. These items are still subject to the full Massachusetts 5-percent sales tax this weekend. They include:

•Motor vehicles

•Motorboats

•Meals

•Cigarettes and other tobacco products

One more point: If you’re a Massachusetts resident, the sales-tax holiday applies to items you buy within Massachusetts, as well as to items you buy from outside Massachusetts. So if you buy a computer or other such item from another state during the holiday (whether in person, by phone or online), you won’t owe a Massachusetts use tax on that item.

TODAY’S TIP: For more about the Rhode Island use tax, see the state tax agency’s Web site:

www.tax.ri.gov

For more about the Massachusetts sales-tax holiday, including the Technical Information Release mentioned above (TIR 07-12), see the Massachusetts Department of Revenue Web site:

www.mass.gov/dor

Neil Downing is a Journal staff writer and author of The New IRAs and How to Make Them Work for You. Questions about your money matters? Call us at 1-401-277-7484 and leave a message, or e-mail:

moneyline@projo.com

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