Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 335.0041

335.0041 Interstate Commerce Exemption. Since leases of mobile transportation equipment (MTE) are specifically excluded from the definition of "sale" and "purchase", a lessor of MTE is always the consumer of the MTE. MTE acquired tax paid may be consumed in any manner chosen by the owner, including leasing it to others, without incurring further tax liability.

The right to the interstate commerce exemption for MTE acquired ex-tax from out of state is not affected by the fact that the owner of the MTE may choose to lease it during the course of the six-month test period(s). If the lessee's use does not satisfy the requirements of the test, the resulting tax liability is that of the lessor, not the lessee. This is true even if the lessor had made a timely election to report its use tax liability measured by fair rental value and collects reimbursement from its lessee for that tax liability.

(Note: If the lessor wishes to report its tax liability, if any, measured by fair rental value, it must do so with its timely return for the period in which the MTE is first leased, even if the lessor is unsure whether its use of the MTE will qualify for the interstate commerce exemption. If it makes a timely election to pay tax on fair rental value and thereafter can establish that it qualifies for the interstate commerce exemption, it may file a claim for refund for the amount of tax previously paid.) 8/1/90. (Am. 2000–1).