Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
190.0000 CONSTRUCTION CONTRACTORS—Regulation 1521
(e) FIXED-PRICE CONTRACTS
190.2865 Fixed Price Leases. For a lease to qualify for exemption from the sales and use tax increase of July 15, 1991, as a fixed price contract, it must satisfy the following criteria: (1) it must be binding prior to July 15, 1991; (2) neither party has a right to terminate the contract conditioned solely upon the notice; (3) the agreement must fix the amount of all costs at the outset; and (4) it must include a provision which fixes the tax obligation on a tax-included basis or sets forth either the amount of tax or the rate of tax and does not provide for an increase in the amount of tax.
A lease containing the following clause fails to satisfy condition (4) above:
"TAXES. Lessee should reimburse lessor for (or pay directly if instructed by lessor) all charges and taxes (local, state and federal) which may now or hereafter be imposed or levied upon the sale, purchase, ownership, leasing possession or use of Equipment . . . "
A lease containing this type of clause permits the lessor to pass the tax increase on to the lessee and is, therefore, not for a fixed price. 8/25/92.