Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
295.0000 GROSS RECEIPTS
295.0360 "Inflated" Down Payment. A vehicle is sold for $1,000 but contract shows purchase price of $1,500 with a $500 down payment. The $500 is never in fact paid by the purchaser nor is it ever intended that it should be paid. Transaction is handled in this manner for the purpose of obtaining financing from a finance company.
If there is no trade-in, the measure of the tax is $1,000 unless customer is charged sales tax on $1,500, then the $1,500 becomes the measure of the tax.
If property is traded in as part payment of the price, the measure of the tax is the full $1,500.
In some cases, the sales price may be written down and the entire down payment not shown on the contract. For example, upon the sale of a $1,500 vehicle with an $850 down payment, the contract will reflect a purchase price of $1,000 with a $350 down payment. However, since seller has received $850 plus purchaser's promise to pay an additional $650, the measure of the tax is the full $1,500. 3/12/54.