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
330.2886 Subleases—Tax on Rental Payments. A lessor leases property in substantially the same form as acquired. At the time the property was acquired, the lessor paid tax or tax reimbursement as measured by the purchase price. This constituted an irrevocable election not to pay tax on rentals payable. Thereafter the lessor may not change its election by reporting tax on the rentals payable and claiming a tax-paid purchases resold deduction.
The same rule is applicable to subleases. When a lessee contracts to lease property and pays use tax to the lessor measured by the rentals payable, the lessee has made an irrevocable election not to pay tax on the rentals payable that result from a subsequent sublease. That is, the lessee/sublessor may not change its election by reporting tax on the rentals it receives from the sublease by claiming a tax-paid purchases resold deduction on the rentals paid under the prime lease. Therefore, the lessee/sublessor must continue to pay tax on its rentals payable under the prime lease and the sublease is not taxable. 4/26/91.