Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
330.0000 LEASES OF TANGIBLE PERSONAL PROPERTY—IN GENERAL—Regulation 1660
(b) RENTAL RECEIPTS—ITEMS INCLUDED AND EXCLUDED
330.3629 Loan of Equipment for Promotional Purposes. A computer hardware manufacturer enters into an agreement with a software developer which provides that the manufacturer will loan computer equipment to the developer on a temporary, no-charge basis. The developer uses the computer at trade shows and customer sites for promotional and demonstration purposes. The loan period is for eighteen months during which time the manufacturer carries the computer on its books as inventory and takes no depreciation. The computer is placed in inventory and held for sale when it is returned. In return, the manufacturer receives certain intangible rights from the developer, the developer provides the manufacturer with advertising space in the developer's magazine, and the manufacturer receives certain royalties. The agreement is regarded as a lease since the manufacturer receives consideration for the granting of possession of the computer to the developer. Tax is due based on the amount of time that the computer is in California and the value of the consideration received. 5/5/94.