Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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195.0000 CONTAINERS AND LABELS—Regulation 1589

Annotation 195.1526


195.1526 Leases of Pallets/Containers. A manufacturer leases pallets/
containers and pays rent to the lessor on a "per pallet/container day" basis.

Manufactured items are secured to the pallets or, in the case of containers, the commodity is placed in the containers and the assembled pieces are sold to customers by the manufacturer as a one unit load. The manufacturer does not make a separate charge for the pallets/containers. The pallets/containers are not returned to the manufacturer by its customers; however, the lessor retrieves them on behalf of the manufacturer and reuses them.

The pallet/containers leased to the manufacturer constitute "returnable" containers since they must be returned to the lessor on the manufacturer's behalf in order to terminate the manufacturer's responsibilities with respect to the leased pallets and it is in the manufacturer's best interest that the pallets/containers be returned to the lessor as soon as possible. The fact that the manufacturer's customers do not return the pallets/containers to the manufacturer but rather the lessor retrieves the pallets/containers on behalf of the manufacturer is immaterial. Accordingly, the initial lease of new pallets/containers for first filling to the manufacturer would be subject to tax for the term of the lease. However, any subsequent leases of the same pallets/containers for refilling are not subject to tax. 1/2/98; 5/14/98. (M99–2).