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BTLG Table of Contents > Sales and Use Tax Annotations > L > 330.0000 Leases Of Tangible Personal Property—In General > Annotation 330.3424

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330.0000 Leases of Tangible Personal Property—In General—Regulation 1660

Annotation 330.3424

(b) Rental Receipts—Items Included and Excluded

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330.3424 Late Charges. A lessee fails to return leased property timely. As a result, an additional payment is required by the lease contract. This payment is considered to be a charge for continued possession of the property and is subject to use tax, regardless of whether the payment is designated as a rental or a penalty. However, if the lease contract meets the statutory requirements for a liquidated damages provision, the amount in excess of the normal rental would be regarded as nontaxable liquidated damages. To qualify as nontaxable liquidated damages, the contract must specify that the payment is for liquidated damages and that both parties have agreed to a specific amount. 8/21/91.