Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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455.0000 RECORDS—Regulation 1698

Annotation 455.0835

455.0835 Subsequent Rental After Personal Use. A lessor leased equipment not in substantially the same form as acquired and paid use tax on its rental charges. After rental of the property, the lessor made personal use of the equipment. It was advised in a letter from the Board that the equipment would be subject to use tax measured by the cost of the equipment with credit allowed for tax previously paid for the rental of the equipment. The Board's letter did not state whether or not a subsequent lease of the equipment would be taxable. The lessor concluded that since the tax paid on the rental of the equipment far exceeded the use tax due on the cost of the equipment, it was not required to charge additional tax when the equipment was first rented to a customer after it made personal use of the equipment.

While Regulation 1660 provides that a credit for prior payment sales or use tax can be applied against tax due, the regulation also states that use tax is due on subsequent rental charges. (Regulation 1660(c)(6).)

Also, with respect to erroneous information, the lessor did not rely on what the Board stated in its response, but, rather, what the Board did not state in its response. Section 6596 requires reliance on erroneous advice from the Board, not what the Board failed to state. Therefore, taxpayer cannot be granted relief from tax liability under section 6596. 3/14/95.