Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 295.0408


295.0408 Option to Purchase Price—Leased Equipment. A lessor acquired certain equipment and paid sales tax reimbursement to the vendor. The equipment was then leased for a term of 60 months. The lessee was given an option to purchase the equipment for $1,000 plus sales tax of $60. However, the lessee decided to purchase after the first twelve months. The lessor required a payment of $9,510 plus the option to purchase price of $1,000 and the $60 sales tax on the $1,000.

Under this scenario, the lessor and lessee have entered into a new contract which is to transfer title to the lessee and that tax applies to the entire amount paid by the lessee for transfer of title, less the amount of $60 that is intended as sales tax reimbursement. Accordingly, the measure of tax on the sale is $10,510. 8/7/78.