Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 335.0074

335.0074 Resale of Leased Mobile Transportation Equipment. A taxpayer purchases mobile transportation equipment from a dealer for purposes of a lease. The equipment is purchased in response to a request from the person who intends to lease the equipment from the taxpayer. The taxpayer executes the lease and at the same time, assigns the lease to a bank. The amount paid to the taxpayer by the bank exceeds the amount paid by the taxpayer to the dealer for the equipment. The dealer registered the vehicle showing the bank as the registered owner c/o the customer-lessee, and also showing the bank as the legal owner.

There is a sale of the vehicle from the dealer to the taxpayer. This is evidenced by the fact the taxpayer purchases the vehicle with its own funds, and also exercises incidents of ownership over the vehicle when it leases the vehicle. In addition, there is a sale of the vehicle from taxpayer to the bank.

Under the circumstances of this case, the original sale of the vehicle from the dealer to taxpayer is a sale for resale. Taxpayer's lease of the vehicle, the assignment of the lease, and the resale of the vehicle to the bank constitutes a single, integrated transaction. Accordingly, the lease should not be regarded as an intervening use of the vehicle. The original sale from the dealer to the taxpayer is therefore not subject to tax.

Furthermore, since taxpayer is registered as a dealer with the Department of Motor Vehicles, the sale from taxpayer to the bank is subject to sales tax. The measure of tax is taxpayer's gross receipts from the sale. 4/12/78.