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
330.2482 Option to Purchase. A contract for the lease of tangible personal property includes an option to purchase. Although the contract term is 60 months, the lessee may make an election which becomes effective at the end of the 54th month of the contract term. The customer can continue to make payments on the equipment covered by the agreement for the remaining six months, and will obtain title to the equipment. Alternatively, the customer may return the equipment to the lessor at the end of the 54th month. If the customer fails to make a timely election to return the property, then it is regarded as having elected to continue making payments on the equipment through the remainder of the 60- month term.
Since the lessee has a true right to terminate the agreement at the end of the first 54 months, it is a true lease for that period. If the lessee elects to continue to make payments (or fails to make an election), the lessee is certain to gain title to the property. Therefore, unless the lessee makes a timely election to return the property after the 54th month, the lessor makes a sale at inception at the end of the 54th month. 4/16/92.