Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
210.0000 DEMONSTRATION, DISPLAY AND USE OF PROPERTY HELD FOR RESALE—General—Regulation 1669
210.0110 Equipment Loans. A company purchases, under a resale certificate, surveying equipment of a kind which it routinely resells at retail. A portion of this equipment is allocated to a rental pool inventory. The taxpayer has elected to pay tax based on the rental receipts method. The company gratuitously loans equipment from the rental pool inventory to purchasers if any equipment that the company previously sold breaks down and needs repair. The company believes that the equipment loans to customers for which no rental receipts were generated were accommodation loans and exempt from tax. The company relies on its election to pay tax on rental receipts as the basis to assert that no tax is due. It reasons that no rental receipts were obtained from the accommodation loans and, by paying tax on rental receipts, it meets all of its tax obligation related to the equipment.
Rather than imposing use tax on the full purchase price of property purchased under a resale certificate and then used for "accommodation loans," the legislature has provided that tax will be measured only by fair rental value for the period of such loans provided the property is otherwise held for resale. There is no provision in the Sales and Use Tax laws that would allow a purchaser to acquire equipment ex-tax for exclusive use as loaners. Only items held for resale may be acquired ex-tax. Loans of ex-tax inventory are taxable regardless of whether the loans are for personal purposes or for accommodation loans. The express statutory mandate in the Code requires taxes on accommodation loans measured by fair rental value. 2/19/92; 5/19/92.