Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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S

515.0000 SERVICE ENTERPRISES GENERALLY—Regulation 1501

Annotation 515.0012.680

(a) IN GENERAL—SERVICE DISTINGUISHED FROM SALE

515.0012.680 Operator-Provided Sound Equipment. A taxpayer is engaged in the sale and lease of sound systems and sound equipment such as horns, speakers, microphones and stands, and amplifiers. The taxpayer entered into an agreement with a movie studio to furnish a fully energized sound engineering system, the services of a sound engineer, and the tools necessary to operate the system. The agreement required the sound engineer to maintain, supervise, and personally operate the sound system. Further, all personnel provided by the taxpayer were deemed to be the taxpayer's employees.

In a true lease, the chief characteristic is the giving up of possession to the lessee, so that the lessee and not the owner uses and controls the rented property. Under the facts of this particular arrangement, the taxpayer did not transfer control of the sound system to the customer. Rather, the taxpayer maintained control of the sound system in that at all times, the sound engineer controlling and using the sound system was an employee of the taxpayer and under the taxpayer's control. Thus, this is not a true rental agreement. The gross receipts from this agreement are not subject to the tax. Rather, the taxpayer is the consumer of the sound system it used to fulfill the agreement and tax applies to the sale of the sound system to the taxpayer or to the taxpayer's use of the property, measured by the purchase price. 2/7/96.