Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales And Use Tax Court Decisions


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F

Framingham Acceptance Corp. v. State Board of Equalization . . . (1987)

Sales Price of Leased Equipment Includes Balance of Unpaid Rental Receipts

The seller purchased equipment tax-paid and leased it to the buyer for a term of 84 months, with an agreement allowing the buyer to purchase the equipment for $9,000 after the completion of the rental payments. The buyer decided to buy the equipment after 52 months. The seller sold it for the originally agreed-upon price of $9,000, plus the unpaid rental receipts balance of $56,110, less unearned finance charges of $7,578.

The Board assessed tax on the entire amount paid, including the unpaid rental receipts. The seller contended the sale was a modification of the lease, which increased the final rental payment, and that only the originally agreed-upon sales price was subject to tax.

The court of appeal held in favor of the Board. The contract for sale necessarily terminated the original lease agreement and brought about a redetermination of the value of the equipment. The amount paid for the transfer of title did not constitute lease payments but was the sales price. Framingham Acceptance Corp. v. State Board of Equalization (1987) 191 Cal.App.3d 461.