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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
A B C D E F G H I J L M N O P R S T U V W X
L
330.0000 Leases of Tangible Personal Property—In General—Regulation 1660
Annotation 330.2522
(a) In General
330.2522 Option to Purchase—Fair Market Value. A lessor leases equipment to hospitals. All equipment leased is purchased tax-paid and leased in substantially the same form as acquired. For its service of obtaining the equipment and leasing it, the lessor collects a service fee from the lessees at the time the leases commence. The service fee is 3% of the cost of the leased equipment. The lease period is five years and, in some cases, the lease provides the lessee with an option to purchase the equipment at the end of the lease for fair market value. In some instances the fair market value is a nominal amount.
When the parties are dealing in good faith knowing that in a high technology ever-changing area they would let the marketplace dictate the option price, the fact that fair market value might be nominal at leases end would not alter the conclusion that the above leases are true leases with bonafide options to purchase. Since the leases are true leases which are in a tax-paid status, the 3% service fee which the lessor charges the lessees at the commencement of the leases is not subject to tax. 2/25/83.