17 NCAC 07B .4411          EXTENSION OF LEASES

When tangible personal property, the sale of which is subject to a maximum tax, is leased for a definite stipulated period of time, the lease payments during the lease period are subject to the maximum tax.  If the original lease contains provisions for extension either by notification or by failure to notify the lessor of termination, the extended term of the lease is part of the original lease and the maximum tax would apply to the entire lease including any extension under the terms of the original lease.  If, however, the original lease does not contain provisions for extension at the option of the lessee, whether by action or nonaction, but a new lease agreement is subsequently entered into granting an extension or a new lease, there would be a second lease which would not have the benefit of sales tax payments made by reason of the first lease with respect to the maximum tax.


History Note:        Authority G.S. 105‑164.4; 105‑164.6; 105‑262;

Eff. February 1, 1976.