Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Transactions and Use Tax Annotations


Annotation 800.0012

800.0012 Fixed Price Contracts—District Taxes. A contract for the purchase of light rail cars was entered into prior to the imposition of a new district tax. The contract which calls for payment of a lump sum amount for the rail cars, including a fixed amount for sales and use taxes, itemized at 6 percent, qualifies as a fixed price contract. As such, it is not subject to the imposition of a new district tax which became operative after the contract was signed. Regulation 1823 provides that if no party to the contract has the unconditional right to terminate the contract, then the sales of tangible personal property occurring after that date are not subject to the (new) district taxes.

However, the ¼% state earthquake tax increase, effective 12/1/89, had no comparable exemption for contracts other than fixed-price construction contracts and leases. Since the contract for the rail cars was neither a construction contract nor a lease, if the cars were delivered during 1990, before the expiration of the ¼% tax increase on 1/1/91, the applicable state tax rate was 6¼%. The tax was due and payable when the property was delivered from the seller to the buyer, regardless of when payment was due or is made. As such, the tax was required to have been reported and paid with the return for the period in which the sale occurred. 1/23/90.