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BTLG Table of Contents > Sales and Use Tax Annotations > L > 330.0000 Leases Of Tangible Personal Property—In General > Annotation 330.3427

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

Annotation 330.3427

(b) Rental Receipts—Items Included and Excluded

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330.3427 Lease with Option to Purchase. A rental contract for water ozonation equipment requires an initial payment of $25,000, an additional payment of $20,000 on the tenth day after start up and payments of $2,500 per month for at least four months. If certain savings on electrical costs are realized by the customer, the customer is required to purchase the equipment at the end of the fourth month for $99,635 less credit for the two large payments made at the beginning of the lease term. Otherwise, the purchase is optional.

If the conditions in the contract are not satisfied, the customer is not required to purchase the property. If those conditions are not satisfied, the customer has the option to purchase the property for an option price that is not nominal. The contract is therefore a lease and not a sale at inception. 3/2/93.