Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
295.0000 GROSS RECEIPTS
295.0660 Selling Price Below Cost—Further Explanation of Applicable Rules. Manufacturers frequently purchase advertising material and sell it to their dealers at less than cost.
If the manufacturer gives away the advertising material, then, provided the gift takes place in the state, he is liable for use tax upon the purchase price of that material. If he makes but a nominal charge to his dealers for it, he is the consumer of it rather than the reseller thereof. Where there is in fact a substantial sales price then under the definition in the statute the property was purchased for resale and the tax applies only to the retail price.
If a fictitious retail price were charged solely to avoid tax, that price would be ignored as a sham. If, on the other hand, the transaction is bona fide, the tax is measured by the actual gross receipts from the retail sale of the tangible personal property. 5/21/51.