Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
280.0000 GIFTS, MARKETING AIDS, PREMIUMS AND PRIZES— Regulation 1670
280.0768 Manufacturer's Awards Program A manufacturer/retailer of pool cleaning equipment sells mainly to distributors. However, it also sells parts to, and provides warranty service for, various preferred dealers. Under a promotional program, pool builders, retailers and service companies who purchased 12 units from one of the distributors would receive a bonus unit directly from the manufacturer. The units are all inventory items that, by terms of the award program, must have been purchased for resale to a pool owner. The bonus unit must also be of the same type as at least 50% of the total units purchased from the distributor. The manufacturer believes that the transfers of these bonus units qualify as quantity sales discounts and should not be subject to tax until the units are eventually resold to consumers by the pool builders, retailers, or service companies.
The bonus units are inventory items which are of the type sold by retailers in the normal course of business and are transferred to the retailers only because the retailers have already purchased numerous units manufactured by the manufacturer. The manufacturer's restrictions are evidence that the bonus units, like the dozen units already purchased, will be resold by the retailer in the regular course of business. We conclude that the sale of the bonus unit is a sale for resale and that no tax is due on the transfer. 5/23/90.