SALES TAX - TAXABILITY OF VEHICLES PREVIOUSLY
LEASED EXEMPT TO INTERSTATE CARRIER. UPON
THE EXPIRATION OF A TAX EXEMPT LEASE OF A
VEHICLE TO AN INTERSTATE CARRIER, SALES TAX
IS DUE FROM THE LESSOR RETAILER ON A TAX BASIS
OF THE ORIGINAL COST TO RETAILER LESS STRAIGHT-
Advice has been requested concerning the taxability of vehicles originally purchased by a retailer and leased or rented tax exempt to an interstate motor carrier when the lease subsequently expires and the vehicles are used for personal consumption by the lessor retailer.
K.S.A. 79-3606(f) exempts vehicles purchased or leased for consumption or movement directly and immediately in interstate commerce. The case of United Parcel Service, Inc. v. Arnold, 218 Kan. 102, established that vehicles operating as part of an interstate fleet need not cross state lines to qualify for the exemption. Therefore, individual owner-operators who register as retailers may purchase vehicles exempt for resale if they subsequently lease the vehicles to another entity. If that entity operates in interstate commerce, that lease is also tax exempt.
Upon the expiration of the lease to an interstate motor carrier the vehicle previously subject to the lease again becomes a part of the retailer's stock of goods which is taxable if it is used by the lessor retailer. K.A.R. 92-19-11 provides that when a retailer removes tangible personal property from a stock of goods to use for personal consumption, he is the ultimate consumer and pays tax on the amount of the cost shown on his books. The application of that regulation to the situation stated herein shall be construed to mean that sales tax is due on an amount equal to the original cost of the vehicle to the retailer less monthly straight-line depreciation computed over a reasonable life of the vehicle.
F. KENT KALB
SECRETARY OF REVENUE