March 23, 1983

On behalf of ********************, you inquire about the sales tax treatment of an agreement ("Agreement") characterized by the parties as a "lease" of equipment. The Agreement is set forth on a printed form, with handwritten additions and modifications. A printed clause in the Agreement purports to require the lessee to return the equipment to the lessor upon the expiration of the lease; however, the Agreement includes the handwritten notation "zero buyout," by which the parties intended to provide for passage of title to the lessee on the expiration of the lease without any additional payment.

The Agreement also states that the "total cost" of the equipment to the lessor is $15,430, and calls for payment by the lessee of 48 monthly installments of $447.32. The Agreement does not separately state any amount representing interest or other financing charges.

General Laws Chapter 64H, Section 1(12) defines "sale" as including "[a] transaction whereby the possession of property is transferred but the seller retains the title as security for the payment of the price." Chapter 64H, Section 1(14) defines "sales price" as the total amount paid by a purchaser to a vendor as consideration for a retail sale, valued in money or otherwise, and declares that any amount for which credit is given to the purchaser by the vendor must be included in determining the sales price.

Based on the foregoing, it is ruled that the Agreement is an installment sale rather than a true rental for Massachusetts sales tax purposes. Therefore, a tax based on the total sales price (that is, the total of the monthly payments under the Agreement) was due at the time of sale. No deduction from the sales price may be made for amounts not separately stated that may represent interest or other financing charges.

Very truly yours,

/s/Ira A. Jackson

Ira A. Jackson
Commissioner of Revenue

IAJ:JXD:mf

LR 83-17