Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2015
Sales and Use Tax Annotations
210.0000 DEMONSTRATION, DISPLAY AND USE OF PROPERTY HELD FOR RESALE—General—Regulation 1669
210.0470 Sample. Yardage goods were purchased ex-tax by an apparel manufacturer specifically for use in the designing and production of style samples. These samples are shown to buyers (major retail chains) who order from the selection. All samples produced are eventually sold through the manufacturer's own retail outlets, which specialize in seconds.
The labeling of an item as "samples" and the fact that the samples are sold as seconds are not criteria for the imposition of the use tax. The main criterion is whether there has been an intervening use "other than retention, demonstration, and display while holding it for sale in the regular course of business." In the above situation, the purpose of the manufacturer's ex-tax purchase was to utilize the yardage by incorporating it into the manufactured article, i.e., the samples. The samples were then used solely for demonstration or display while holding them in the regular course of the manufacturer's business. Such a use is nontaxable. 7/1/77.