Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
330.0000 LEASES OF TANGIBLE PERSONAL PROPERTY—IN GENERAL—Regulation 1660
(b) RENTAL RECEIPTS—ITEMS INCLUDED AND EXCLUDED
330.3438 Maintenance Agreement. A lessor's customers have an option of either leasing business equipment pursuant to a single contract which contains the lease provisions and a maintenance agreement, or leasing business equipment pursuant to two separate contracts, one for the lease and one for the maintenance. Under either scenario, however, the lessor's customers are required, as a condition of leasing the equipment, to purchase some form of maintenance agreement exclusively from the lessor. That is, the lessor will not lease equipment to a customer unless that customer also purchases a maintenance agreement.
Under these facts, the lessor's "separate" maintenance agreement is regarded as a mandatory maintenance contract and is, therefore, part of the taxable rental receipts from the lease of its equipment. Therefore, the lessor is required to collect use tax from its customers on this amount and remit it to the Board. The fact the lessor charges its customers a "one-time" lump-sum lease payment for its "separate" maintenance agreements does not effect the application of the tax. 5/17/96.