Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2015
Sales and Use Tax Annotations
330.0000 LEASES OF TANGIBLE PERSONAL PROPERTY—IN GENERAL—Regulation 1660
(a) IN GENERAL
330.2815 Sales and Reacquisition of Rental Inventory. A taxpayer is an equipment rental business. Some of its rental equipment was acquired ex-tax. The taxpayer now wishes to convert the ex-tax acquisitions to a tax paid status by selling the equipment to a nonrelated organization at fair market value and then to reacquire all or most of it and pay tax on the reacquisition price. The taxpayer's intent is to avoid tax on rental receipts.
The above plan would not be effective to avoid tax on rental payments. This transaction would be a sham if there were a written or oral understanding with the other organization that the taxpayer would reacquire the equipment. The substance of the transaction governs rather than the form. The substance would be that the taxpayer attempts to elect to pay tax on the purchase price of rental equipment after the time for making an election has passed. 1/14/77.