Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2016
Sales and Use Tax Annotations
330.0000 LEASES OF TANGIBLE PERSONAL PROPERTY—IN GENERAL—Regulation 1660
(a) IN GENERAL
330.2670 Purchase of Equipment by Parent Corporation for Use by a Subsidiary. A corporation purchased equipment ex-tax and transferred the equipment to its parent corporation ex-tax. The parent makes periodic charges to the subsidiary for use of the equipment. All charges are made on the books of the corporations. Payment for the equipment to the supplier is sometimes made by the subsidiary and sometimes by the parent. There is no written agreement between the parent and the subsidiary.
Inasmuch as the corporations are related, the transactions could have been cast in any form desired by the parties. The transaction was cast in the form of a sale to the parent and leaseback. Tax should be applied based on the form in which the transaction was cast. The subsidiary's original purchase was for resale. The sale to the parent was a sale for resale by way of lease. Since the parent failed to make a timely election to pay tax on cost, tax applies to lease payments. 5/31/94.