Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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R

475.0000 RESALE CERTIFICATES—Regulation 1668

Annotation 475.0950

475.0950 Delivery by Authorized Computer Dealers. A computer manufacturer offers an opportunity to employees to purchase personal computer products at discounted prices. Authorized computer dealers may participate in these transactions under agreement with the manufacturer.

Employees may place orders directly with the manufacturer or with participating dealers. A participating dealer, by agreement with the manufacturer, receives orders on the manufacturer's behalf, transfers possession of products that were ordered either at the store or directly from the manufacturer, and is responsible for the satisfaction of the manufacturer's purchases. A "Dealer's Handling Fee" is paid by the manufacturer in connection with the dealer's involvement in these employee transactions.

Purchases may be made by employees on either a cash basis or payroll deduction basis. Cash purchase orders must be placed with participating dealers. Payroll deduction purchases must be placed directly with the manufacturer. Employees must pick up the product ordered under either of the purchase options at the store of the participating dealer.

In situations where orders are placed directly with a participating dealer (cash purchases), a computer is delivered by the dealer out of its stock to the employee. The manufacturer replaces the computer on an item-for-item basis. Cash purchasers remit to the dealer the employee price for the product received plus applicable sales or use taxes. The amount received by the dealer as sales or use tax is retained by the dealer in partial payment of the "Dealer's Handling Fee," and the manufacturer remits to dealer the balance of the handling fee due. The manufacturer timely reports all sales made under this program and pays all applicable sales and use taxes, whether the products delivered through the dealer's store were ordered by employee directly from it or by placing the order at the dealer's store. Title to all products, whether cash or payroll deduction purchases, passes from the manufacturer to the employees at the time of delivery to the employee by the dealer.

In situations where orders are placed directly with the participating dealers (cash purchases), the manufacturer is the retailer and the transaction is subject to sales tax. In the circumstances of this case, it is permissible for the dealer to collect reimbursement from purchases and to account to its principal in the transaction and retain the reimbursement as a credit against the handling fee due the dealer.

In situations where computers are purchased under the payroll deduction plan, the orders are forwarded to the manufacturer's out-of-state plant. The computers are shipped from the out-of-state plant to the participating dealer and are subsequently picked up by the employee. Tax reimbursement amounts are not collected by the dealer. In these circumstances, the manufacturer also is the retailer of the product and the manufacturer is required to collect use tax directly from the purchases and remit the tax to the Board.

In order for the dealer to document the transaction as a nonretailer sale, the dealer should obtain a resale certificate from manufacturer for products which the dealer delivers from its own inventory to the manufacturer's employee purchasers. 3/22/84.