Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
280.0000 GIFTS, MARKETING AIDS, PREMIUMS AND PRIZES— Regulation 1670
280.0670 Gift Versus Loan of Property. A computer manufacturing company transfers personal computers to selected educational institutions in this state. The recipient institution is free to use the property as it sees fit. However, the institution is under an obligation to return the property to the manufacturer or destroy the property if and when the property becomes obsolete. The computers are shipped by the manufacturer from a point outside this state, and title to the computers pass to the educational institution outside this state pursuant to agreement terms.
The above transaction is a gift subject to a condition and not a mere loan. The critical fact is that, although the transferee may not alienate the property, the transferee has no absolute duty to return it, but may alternately destroy the property upon obsolescence. If there was an absolute duty to return the property, we would treat the transaction as a loan, despite the title provision, because an absolute obligation to return the property would be incompatible with a transfer of title. 5/14/84.