Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 295.1073


295.1073 Hostess—Free Goods. A retailer furnishes merchandise free of charge to hostesses who market the retailer's merchandise by holding hostess parties. The value of the "free" merchandise is based on the value of merchandise paid for and shipped as the result of the hostess' party. The definition of gross receipts under section 6012(a) includes "the total amount of the sale . . . whether received in money or otherwise . . . " Here, the retailer receives the sales price for the "free merchandise" not in money, but rather in services performed by the hostesses. The measure of tax is the value of these services performed in exchange for goods. Absent any express agreement to the contrary between the retailer and the hostess, the value of the services is equivalent to the retail value of the goods received. 12/11/90.