Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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L

330.0000 LEASES OF TANGIBLE PERSONAL PROPERTY—IN GENERAL—Regulation 1660

Annotation 330.2820

(a) IN GENERAL

330.2820 Sales of Rental Units to New Lessor. A leasing company acquires the property it rents ex-tax and reports tax on the rental receipts. It proposes to sell its rental inventory to a related legal entity, at fair market value in an arms-length transaction. The purchaser will pay sales tax on the purchase price of the rental units. The purpose of the transaction is to put the rental units on a tax-paid basis and thereby eliminate the need to collect use tax on rental receipts. The seller/lessor will terminate the existing lease contracts, and the purchaser will enter into new leases with each lessee.

Provided the existing leases are terminated, the purchaser pays a fair market price for the rental units in an arms-length transaction, and also pays sales tax reimbursement to the seller/lessor, the purchaser's subsequent lease of the rental units will not constitute "continuing sales and purchases." Therefore, no tax will be due on the rental receipts collected by the new purchaser/lessor. 3/30/90.