Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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557.0000 TRANSPORTATION CHARGES—Regulation 1628

Annotation 557.0302

557.0302 Leases. A company's rental contracts states the following: "Lessee agrees to pay, in addition to the rental charges set forth, a freight charge at the rates stated in the company's published Freight Charge Schedule for equipment of the type leased in effect on the date of delivery and installation of the leased equipment, such charge to be both from and to the company's factory, plus any additional costs of local delivery and handling not included in those rates. In the event of exercise by the lessee of its option to purchase, that portion of the freight charge so paid representing the charge for return of the equipment to the company's facilities shall be refunded to the lessee."

This contract is not a delivered price contract. The price of the equipment delivered is not fixed by the rental agreement but may fluctuate, up or down, depending upon the fluctuation in the company's Freight Charge Schedule, which presumably reflects changes in actual freight costs. The delivery charge would thus be excludable from the measure of tax assuming that delivery is made by other than the company's facilities. On the same assumption, additional costs of local delivery charges would be excludable from the measure of tax. Tax is properly applicable to return transportation charges since the charges are mandatory under the agreement. There is no specific statutory exclusion for return transportation charges. 1/4/72.