Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
490.0000 RETURNS, DEFECTS AND REPLACEMENTS—Regulation 1655
(d) DEFECTIVE MERCHANDISE
490.0780 Lease with Purchase Option. Equipment was leased with option to purchase, the lessor electing to report use tax measured by his rental receipts. When the lessee exercised his option, the lessor reported sales tax measured by the option purchase price. The equipment proved defective; the lessor replaced it, charging the lessee an amount equal to the original lease payment, plus option purchase price and giving full credit for the rental payments and option purchase price previously paid. Under such circumstances, the lessor was entitled to take the deduction for defective merchandise when he reported the sale of the replacement equipment. 7/2/65.