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Business Taxes Law Guide—Revision 2024

Sales and Use Tax Annotations


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

Annotation 330.5111

(e) Sales and Leaseback Transactions

330.5111 Sale and Leaseback. Company A purchased furniture and equipment on a tax-paid basis and then stored the property. Prior to making any functional use, A entered into a sale/leaseback transaction with a leasing company B. Tax was not paid on the sale to B or the lease back to A. If the sale/leaseback transaction qualified as a financing transaction, the tax would have been properly paid when A purchased the property, and no further tax would be due. However, the sale/leaseback did not qualify as a financing transaction under either the general or specific rule of Regulation 1660. Thus, either the sale to B or the lease to A is subject to tax. Since B did not make a timely election to pay tax on the purchase price, the lease to A was a taxable continuing sale. If A did not depreciate the property for income tax purposes, take investment tax credit, or make any other use of the property except to hold it for resale in the sale/leaseback transaction, it is entitled to a tax-paid purchases resold deduction for the tax or tax reimbursement it paid when it purchased the property. 8/28/90.