Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2017
Sales and Use Tax Annotations
330.0000 LEASES OF TANGIBLE PERSONAL PROPERTY—IN GENERAL—Regulation 1660
(a) IN GENERAL
330.2790 Sale at Inception. A lease contains a clause requiring the lessee to purchase the leased equipment at fair market value at the end of the lease term or to find a buyer. The lease contract specifies the residual value of the property at the end of the lease term. If the option price paid by the lessee or the sale price paid by a third party (called the "realized value") is less than the residual value of the property, the lessee must pay the lessor the difference. If the "realized value" is more than the residual value, the lessor pays the lessee the difference. That is, the lessor always receives a total net payment equal to the residual value specified in the lease. Once the lease commences, the lessor never retakes possession of the property without there being a default by the lessee. Under these facts, the contract is a sale at inception. 4/12/90.