Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
490.0000 RETURNS, DEFECTS AND REPLACEMENTS—Regulation 1655
(a) RETURNED MERCHANDISE
(1) In General
490.0070 Repossession of Franchise. A franchisor repossesses a franchise and continues to operate it prior to resale. The repossession by the franchisor in cancellation of the remaining balance on the mortgage does not result in a "sale." If the franchisor does not attempt to resell the franchise, tax will not apply to the franchisor's use of fixtures and equipment therein, unless it can be established that the repossession was a sham. However, if the return of the equipment by the franchisee is eligible for the returned merchandise deduction, a subsequent use by the franchisor would be subject to tax.
When the franchise is resold, the franchisor is liable for sales tax on the sale. 1/4/71.