Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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G

295.0000 GROSS RECEIPTS

Annotation 295.0575

(a) GENERAL

295.0575 Sale of Royalty Rights. A taxpayer sold medical equipment for a stated amount plus a royalty based on the number of patients using the equipment during a 60 month period. The taxpayer reported sales tax on the sales price of the equipment and also on the royalties as they became due and payable. Subsequently, the taxpayer sold the rights to a substantial portion of the future royalties to a finance company.

The sale of the future rights to the royalties is a sale of an intangible asset and no sales tax applies to the amounts received on the sale. However, the taxpayer, not the finance company, would continue to owe sales tax on the royalty payments it receives as the amount becomes definite. 5/17/88.