| (i) Assignment of lease payments and property under operating leases. A lessor may assign to a third party the lessor's right to receive all lease
payments due under an agreement with the lessee and, in the same transaction, transfer title to the property covered by the lease. At the time the operating lease contract is assigned and title to the property is transferred to the third party, the third party purchaser must begin collecting and remitting tax on the full amount of the taxable rental charges remaining in the lease. The third party purchaser may issue a resale certificate to the lessor as provided by subsection (j) of this section. Tax must be reported by the third party purchaser as provided by subsection (f)(3)(A) of this section. (j) Sales for resale; resale certificates. (1) The purchaser of property which is to be held for lease within the United States of America, its territories and possessions, or within the United Mexican States may issue a resale certificate in lieu of the sales or use tax at the time of purchase. Mexican retailers who purchase for resale must show their
Federal Taxpayers Registry (RFC) identification number for Mexico on the resale certificate and give a copy of their Mexican Registration Form to the Texas seller. However, if the lessor subsequently uses the property in any manner other than the leasing of it, or display or demonstration of it, the lessor becomes liable at the time of the use for sales tax based on the fair market rental value for the period of time used. The fair market rental value is the amount that a lessee would pay on the open market to rent the item for use. If the fair market rental value of the property cannot be ascertained, tax is due on the original purchase price of the property. (2) At any time, the lessor using the property purchased under a resale certificate may stop paying tax on the fair market rental value and instead pay sales tax on the original purchase price. When the lessor elects to pay sales tax on the purchase price, credit will not be allowed for taxes previously paid
on the fair market rental value. See §3.285 of this title (relating to Resale Certificate; Sales for Resale). (3) A resale certificate may be issued by a retailer for a repair or replacement part, accessory, or equipment that will be attached to a motor vehicle to be rented or leased under the provisions of the Tax Code, Chapter 152. In this paragraph, the terms "rental" and "lease" are defined by the Tax Code, Chapter 152, rather than by subsection (a)(2) of this section. (k) Lease of real property with tangible personal property. (1) If a contract for the lease or rental of real property includes the lease or rental of tangible personal property (such as furniture) as part of the agreement, no sales tax is due on the amount charged the tenant for the lease or rental of the tangible personal property. A resale certificate may not be issued and sales or use tax must be paid at the time the tangible personal property is
purchased. (2) Sales or use tax is due on the separate lease or rental of tangible personal property by a person or entity not owning or managing the real property in which the tangible personal property is or will be situated. A resale certificate may be issued in lieu of paying the tax at the time of purchase of the tangible personal property for subsequent lease or rental. (l) Other taxes. For information pertaining to tax on motor vehicle rental receipts, refer to sections promulgated under the Motor Vehicle Sales and Use Tax Act. (m) Local tax. For proper collection and allocation of city and transit sales taxes, see §3.374 of this title (relating to Collection and Allocation of the City Sales Tax) and §3.424 of this title (relating to Collection and Allocation of Transit Sales Tax).
|Source Note: The provisions of this §3.294 adopted to be effective January 1, 1976; amended to be effective September 2, 1976, 1 TexReg 2668; amended to be effective March 8, 1977, 2 TexReg 700; amended to be effective November 22, 1977, 2 TexReg 4311; amended to be effective November 14, 1980, 5 TexReg 4321; amended to be effective May 17, 1982, 7 TexReg 1696; amended to be effective December 5, 1984, 9 TexReg 6017; amended to be effective December 6, 1991, 16 TexReg 6756; amended to be effective August 21, 1997, 22 TexReg 7505.