Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
280.0000 GIFTS, MARKETING AIDS, PREMIUMS AND PRIZES— Regulation 1670
280.0784 Premium Sold by Oil Company to Dealer. Sales of premiums to independent dealers are sales for resale, pursuant to Regulation 1670(c), when the premiums are to be given to the dealer's customers only if the customers purchase other specified goods or services. These sales are sales for resale notwithstanding that the oil company's selling price to the dealer is less than 50% of cost.
When the service station dealer delivers a premium, together with a purchase of nontaxable labor, the selling price of the premium will be deemed to the cost of the premium to the oil company or the cost to the independent dealer, whichever is the greater.
If the premium delivered is a nontaxable item (e.g., food product) and the goods required to be purchased are of a taxable nature (e.g., gasoline), the same rule would apply. The sales price of the nontaxable item would be deemed to be the cost of the premium to the oil company or the cost to the independent dealer, whichever is the greater. The premium sales price is deducted from the sales price of the taxable item. If the dealer obtains tax reimbursement on a larger amount, the dealer will be required to pay the excess tax reimbursement to the state.
In situations where the premium is delivered in connection with a transaction involving both taxable and nontaxable charges (e.g., a lube job and an oil change), total consideration received must be allocated among three items (i.e., the premium, the oil change, and the lube job). 9/8/72; 7/10/96.