Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 315.0285


315.0285 Purchase of Drums. A client of a container service company purchases a quantity of drums to guarantee availability of the drums when needed during a season. The client takes title and possession of the drums and requests the company to store the drums until needed. The company charges a storage fee. Later, the client takes some drums and requests the company to recondition some of the other drums, for which the company charges a reconditioning fee.

Assuming the company sells the drums prior to storage (i.e., contract provides that title passes, payment is made, and tax reported at that time), the charge for storage after the sale is not part of the taxable gross receipts from the sale as long as that storage is not mandatory. If the drums are used drums and the reconditioning is for the purpose of restoring the drums to their original condition, the application of tax is as provided by Regulation 1546. If the reconditioning prepares the drums for a new and different purpose, the reconditioning is fabrication and the entire charge for the reconditioning is subject to sales tax. If the drums are new, the reconditioning is fabrication, by definition, and the entire charge is subject to sales tax. 7/7/92.