Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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L

330.0000 LEASES OF TANGIBLE PERSONAL PROPERTY—IN GENERAL—Regulation 1660

Annotation 330.3780

(c) CONTINUING SALE AND PURCHASE

330.3780 Transfer of Artwork for Reproduction Purposes. Corporation B purchases original artwork and issues resale certificates to sellers. Under the purchase agreements, B retains all rights and interest in the artwork, including reproduction and licensing rights. B then transfers possession of the artwork to Corporation A which uses the artwork to make reproductions. After Corporation A has finished using the artwork for making the reproductions, it returns the artwork and pays B.

Under this scenario, B is leasing the artwork to A. The lease is a continuing sale and purchase since B issued a resale certificate when it purchased the artwork, and B must collect and pay use tax measured by the amount of consideration it receives from A. This includes all the amounts B receives from A under the transaction, whether it is referred to as royalties or licensing fees, and whether it is paid as a lump sum, periodically or based on the number of reproductions sold.

If Corporation B photographs the original artwork and sells the negative to A, who uses the negative to make reproductions, B has made a taxable use of the artwork and must pay use tax measured by its purchase price. B has also made a sale of the negative to A and must pay sales tax on the sale. The gross receipts subject to tax include all the consideration received from Corporation A, no matter what label is given to such amount (i.e., royalties, licensing fees, etc.). 1/20/93.