Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
210.0000 DEMONSTRATION, DISPLAY AND USE OF PROPERTY HELD FOR RESALE—General—Regulation 1669
210.0012 Accommodation Loans of Rental Equipment. A company acquires electronic leveling equipment. It reports use tax measured by its rental receipts. Accommodation loans of the rental equipment are made to clients whose property is being repaired. If the repair work to be done is under warranty, a "no charge" invoice is prepared. If the repair work to be done is not under warranty, a $100 fee is charged for the loaned equipment. Use Tax is not reported on either of these types of transaction. The company claims the $100 fee is a re-calibration fee which covers recharging the instrument and preparing it for return to rental inventory.
It is clear that the company's consistent policy where nonwarranty work is to be done is that the rental equipment will not be transferred without a flat rental fee of $100.00. While it appears to be a reduced rent, it is mandatory consideration received for the transfer of tangible personal property. This mandatory fee fits the definition of consideration sufficient to support the finding of a "sale" and is subject to tax as part of the "sales price." A loan in which no consideration passes is a "use" of ex-tax inventory inconsistent with holding the item for resale. When such use occurs, the measure of tax is the fair rental value. Since the company charges $100 for the loans on nonwarranty repair items, the taxable fair rental value for the equipment used for accommodation loans for warranty repair is also $100.00. 4/23/92.