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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
A B C D E F G H I J L M N O P R S T U V W X
S
495.0000 Sale
Annotation 495.0944
(e) Retail Sale or Sale for Resale—Delivery by Owner, Former Owner, Factor or Agent
495.0944 Purchasing Agent. A taxpayer proposes to enter into an agreement whereby it would act as purchasing agent for a hospital district. The taxpayer would purchase supplies on behalf of the hospital, warehouse all the supplies at its facilities until needed by the hospital, mark and identify those supplies as for the hospital, maintain insurance naming the hospital as an additional insured, pay vendors, and be responsible for late charges, interest, and price changes arising from the taxpayer's late payments.
The hospital is to pay the taxpayer the cost of supplies from the vendors and will be invoiced upon delivery to the taxpayer's facilities. Payment will be due 26 days after the date of delivery to the hospital facilities. Also, the taxpayer guarantees no more than a maximum price will be billed to the hospital for the supplies. The taxpayer will be paid a set fee for performance of the requirements of the contract.
Based on the provision of the contract, the taxpayer is not acting as the hospital's agent, but rather is purchasing supplies for resale to hospital. As an agent, the billing to the hospital must be the same as paid by the supplier. Under the contract, not more than a stated maximum amount will be billed to the hospital. Thus, if the amount paid to the supplier exceeds the maximum, the taxpayer absorbs the difference. Additionally, the taxpayer is responsible for late charges, interest, price changes arising from late payments, and the hospital does not pay the taxpayer until 26 days after supplies are delivered to the hospital. Accordingly, it is in effect financing the hospital's purchases. Also, the taxpayer is making purchases through a group purchasing arrangement. Finally, the contract specifies that warehoused goods are marked "held for X hospital." Under an agency arrangement, the goods would be the property of the hospital not merely "held for." All of the above factors results in a conclusion that the contract is a contract to buy and sell and not an agency contract. 5/10/88.