Did a signed short-form equipment sale-leaseback agreement satisfy California's historical 90-day rule when funding and final documents came later?

Plain-English summary

An unidentified requester sent a February 3, 1993 letter that the Board received March 8. As restated, an unnamed lessor and lessee signed a short-form equipment-lease agreement within 90 days after the lessee's first functional use. It included the parties, equipment cost, rent and a lease-termination option.

Funding and drafting the final document occurred after 90 days. The opinion still found historical section 6010.65(a)(2) satisfied: the acquisition sale/leaseback was timely consummated even though part remained executory beyond the deadline.

Because the lessee had paid sales-tax reimbursement on its original equipment purchase, both sale and leaseback were excluded from “sale” and “purchase” under the stated facts, avoiding additional tax.

The request, identities and equipment, short-form and final documents, original purchase/tax and first-use proof, exact signature dates, funding, returns, audit and later outcome are absent. Live Annotation 330.5046 gives the same result but omits the request/receipt timing and all of those record gaps.

Common questions

Did funding have to occur within 90 days?

No, not under the specific facts. The signed short-form agreement had already fixed the basic transaction terms.

Did the final long-form documents have to be completed within 90 days?

No. Their later drafting did not defeat the timely signed agreement.

Was the original acquisition tax important?

Yes. The opinion's tax-free conclusion expressly relied on the lessee having paid tax when it originally acquired the equipment.

Did the source include either agreement?

No. It only restates four terms from the short form and says the final document was drafted later.

Were the exact first-use and signature dates shown?

No. The source states only that both parties signed within the 90-day period.

Was a completed transaction or later tax outcome shown?

No. The opinion answers the described transaction without execution, return or audit records.

Citations and references

• Historical California Revenue and Taxation Code section 6010.65(a)(2) — 90-day consummation rule applied
• Live Annotation 330.5046 — signed-agreement and tax-paid-acquisition result
• Request, agreements, transaction/tax/use/signature/funding proof, returns/audit and outcome — absent

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.5046
• Original supporting opinion: 330.5046 PDF

Original ruling text

330.5046

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

March 11, 1993

This is in response to your letter dated February 3, 1993, which was received here on March 8, 1993. You ask our opinion as to application of the sales tax law to a certain described transaction. We understand that Lessor and Lessee entered into a “short form agreement" outlining the basic terms and conditions of an equipment lease. Included in the agreement were the parties, cost, rental amount and lease termination option. The agreement was signed by both parties within 90 days of the “first functional use" of the equipment by Lessee. However, the funding and drafting of the final document occurred after the 90-day period.” You inquire as to whether under these facts an acquisition sale and leaseback has been "consummated" within the meaning of that term as it is used in California Revenue and Taxation Code section 6010.65 (a) (2) . You further inquire as to whether the sale/leaseback transaction would be exempted from additional taxation, since the lessee has paid sales tax reimbursement on its original purchase of the equipment. It is our opinion that the transaction in question would qualify as an acquisition sale and leaseback under section 6010.65. The transaction would have been consummated on a timely basis, notwithstanding the fact that the sale and leaseback transaction may have remained executory in part for a period beyond the 90-day limitation date. Both the sale and the leaseback transaction would thus be excluded from the definition of “sale" and “purchase" (and thus tax free), since the lessee paid tax at the time of the original acquisition.

Very truly yours,

Gary J. Jugum
Assistant Chief Counsel

GJJ:sr