Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
330.0000 LEASES OF TANGIBLE PERSONAL PROPERTY—IN GENERAL—Regulation 1660
(a) IN GENERAL
330.2310.118 Lease/Sale—Repossession and Subsequent Sale. A firm "leases" equipment to a restaurant owner under terms which provide that ownership transfers to the lessee for $1.00 at the termination of the lease. The restaurant owner defaults on the lease, and the firm enters into a contract with the former owner of the restaurant to "assume the lease." The second contract contained the same provisions with respect to the transfer of ownership at the termination of the lease for $1.00 with a price adjustment due to the prior use of the equipment.
The original contract is a sale, and tax applies on the full contract price in the period in which the contract sale took place. The subsequent reacquisition by the seller because of default may result in bad debt deduction in accordance with Regulation 1642. The subsequent contract is also a sale at inception, and tax applies to the full contract price as provided in Regulation 1641. 4/16/97.