Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 330.3019


330.3019 Tuxedos—Rentals through Franchise and Bridal Stores. In addition to providing rental tuxedos to its corporate stores, a taxpayer provides tuxedos to franchise and bridal stores. All locations use identical rental tickets with the name of the taxpayer's company. The only distinction between tickets is the store address listed. Rental prices and policies were established by the taxpayer and were identical at all locations. The orders were made on the taxpayer's forms. The franchise and bridal stores telephone orders to the taxpayer's warehouse and the taxpayer delivers and picks up the tuxedos. The franchise and bridal stores have their own employees. They collect the rental receipts and deposit them in their bank accounts. The franchise and bridal stores receive a flat 35 percent to 50 percent commission. All stores, except for bridal stores, use almost identical window displays and signs. (There is much less tuxedo paraphernalia in bridal stores because tuxedo rentals are not the majority of the business.) Radio and print advertising do not make a distinction between corporate, franchise, or bridal store locations and stress the total number of locations available.

The taxpayer does not pay sales tax reimbursement or use tax on the purchase price of the tuxedos, nor is any use tax collected on rentals payable. Since tax was not paid on the purchase price, the leases are taxable. The remaining question is whether the franchise and bridal stores are leasing the tuxedos to the customers or if instead those stores act as the taxpayer's agents in facilitating the taxpayer's leases to the customers.

Under the facts here, there is but a single lease transaction, recorded on a single form, with the taxpayer never relinquishing control of the tuxedos. There is never a separate lease to the stores followed by the stores' sublease to the customers. The taxpayer was leasing the tuxedos to the customers and the franchise/bridal stores were acting as the taxpayer's agents. Thus, the taxpayer owed the amount of tax it was required to collect on rentals payable. 6/8/95.