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
330.2849 Soap Dispensers. A taxpayer is in the business of selling hand soap to hotels, car rental companies, and other businesses. The taxpayer also transfers dispensers for the soap to the customers since both the hand and laundry soaps cannot be used without a dispenser. The dispensers are provided to each customer along with the first load of soap.
The hand dispensers cost the taxpayer $3 each. A load of hand soap for the dispenser costs the taxpayer $28. A load of this soap is sold for $58.
The laundry dispensers cost the taxpayer $300 each. A load of laundry soap for the dispenser costs the taxpayer $25. The laundry soap is sold for $48.
The invoice for the first load states that the dispenser is "lease only—no-charge—dispensers leased." Customers are not required to purchase additional soap after the first load. If they do, the taxpayer continues to charge $58 for the hand soap and $48 for the laundry soap. Invoices for reorder continue to use the "lease only" language.
The taxpayer claimed a depreciation deduction for the dispensers on its income tax return. Since there is a transfer of possession but not a transfer of title to the dispensers, there is a lease of the dispensers to the customer. The lease price is included in the charge for the soap. If the taxpayer reports the tax on the sale of this first-load charge, no further tax is due. If the charge is exempt for any reason, tax is due on the receipts attributable to the lease of the dispenser. In the absence of any stated charge, the cost of the dispensers will be treated as lease receipts. 10/29/87.