Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 335.0043.650

335.0043.650 Sale and Purchase Back of Truck Rental Inventory. A taxpayer is in the business of leasing trucks which are mobile transportation equipment (MTE). It currently reports tax on rental receipts (fair rental value). The taxpayer proposes to sell at book value all of its rental truck inventory to a nonrelated dealer. The taxpayer will then purchase back the trucks at book value and pay sales tax reimbursement on the full purchase price to the dealer. The taxpayer will not report use tax on its subsequent rental receipts since it will have paid sales tax reimbursement on the purchase price of the trucks.

Transfers without a purpose or effect other than to change the way tax is reported and paid are disregarded for sales and use tax purposes. (See Annotations 330.1875 (7/8/92); 330.2820 (3/30/90); 330.5200 (8/14/69).) It is clear that the proposed transaction has no purpose other than to change the way the taxpayer reports tax. After the sales take place, nothing will have changed other than that tax will be reported and paid on the purchase price, rather than being reported and paid on fair rental value. As such, it will be disregarded for sales and use tax purposes and the taxpayer will continue to be required to report tax on fair rental value. 7/1/96.