The plan was simple. New York State, like many other jurisdictions, allowed a purchaser, to purchase for resale, tangible personal property (TPP) that is subsequently leased to another taxpayer. The theory is simple. The sales and use tax (sales tax) is meant to be a tax on the actual use or consumption of goods and is not intended to pyramid on each transaction, but only impose its burden on the end user. Accordingly, the purchaser – lessor buys TPP from a vendor for resale and doesn’t pay sales tax. The purchaser – lessor leases the TPP to the lessee and collects and remits sales tax on the monthly lease payments. So far, all seems in balance. The sales tax is imposed only once on the intended party, the lessee as end user.
So what is the perceived problem with this arrangement?