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
(e) SALES AND LEASEBACK TRANSACTIONS
330.5253 Sale and Leaseback—Out-of-State Purchase. Corporation A, located in Texas, purchases equipment from a Texas vendor and pays the vendor Texas sales tax. Corporation A then sells the equipment to a leasing agent and leases it back. Some of the equipment is shipped to and used in California.
The sale and leaseback transaction does not qualify as a financing transaction under Regulation 1660(a)(3)(A) or under (a)(3)(B). Also, the sale and leaseback transaction does not come within the provisions of section 6010.65 under Regulation 1660(a)(3)(D), Acquisition Sale and Leaseback Transactions, since Corporation A paid Texas tax reimbursement rather than California sales tax reimbursement on the purchase of the equipment.
Since the sale and leaseback does not qualify as a financing transaction under Regulation 1660, the lease is a taxable continuing sale unless the lessor timely paid California use tax measured by the purchase price of the property. Thus, if the lessor has paid no California tax or tax reimbursement with respect to its purchase of the equipment, the lease of the property to Corporation A is a taxable continuing sale and tax is due on the rentals payable at the rate in effect at the location where the property is physically located. As a retailer deriving rentals from a lease of property located in this state, the lessor will be required to collect use tax from Corporation A and to pay that use tax to this state. 12/7/95.