Iowa Admin. Code r. 701—213.1(423) — Conditional sales contracts

213.1(1) Definition. A “conditional sale” is a sale in which the vendee receives the right to the use of the goods that are the subject matter of the sale, but the transfer of title to the vendee is dependent on the performance of some condition by the vendee, usually the full payment of the purchase price. 213.1(2) Factors used to determine a conditional sale. Conditional sales are evidenced by the facts supporting the nature of the vendor’s business, the intent of the parties, and the facts supporting the control over the tangible personal property by the vendee. A conditional sales contract would exist where: a. The vendee/lessee has total control over the property and is responsible for all losses or damages; b. The transfer of the property is complete except for title, which passes upon the condition of full payment; and where such full payment is performed under nearly all the vendor’s “lease” agreements, except in cases of default; and c. The vendor has no intent of retaining control over the property except for purposes of selling it or financing it for sale. In determining whether an agreement constitutes a conditional sale or a true lease, substance shall prevail over form, and the terminology of the written agreement will be considered only to the extent that it accurately represents the true relationship of the parties. 213.1(3) Taxability of conditional sales. When a conditional sale exists, the seller bills the purchaser for the full amount of tax due, and sales tax is due on the full contract price upon delivery of the property that is the subject of the contract. No further tax is due on the periodic payments. Interest and finance charges are not considered part of the sales price if they are separately stated and reasonable in amount and are, therefore, not subject to tax.