Trademark License Taxable as Part of Equipment Sales Price

Thursday, June 5th, 2014

 
 
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South Carolina
General

The South Carolina Administrative Law Court ("Court") recently ruled that a trademark license was taxable as part of the sale of an IMAX theater system.

The taxpayer owned a movie theater. It purchased an IMAX theater system. The purchase contract was for the sale of the equipment, maintenance services, and a license to certain IMAX trademarks. There were no separate fees for trademarks or maintenance services. After doing some market research, the taxpayer determined the value of the equipment. The taxpayer sought a refund for the difference between the value of the equipment and the full contract price, arguing that the difference was a fee for nontaxable trademark licenses.

South Carolina taxes sales of tangible personal property. Sales of intangibles such as trademarks are not generally subject to tax. Tax applies to the sales price. The sales price is the total amount for which an item is sold, without any deduction for the cost of the property sold, the cost of the materials used, labor or service cost, interest paid, losses, or any other expenses.

The Court determined that the cost of the trademark licenses was part of the sales price of the equipment. Neither the contract nor any invoices showed separate fees for the licenses. Also, the licenses were only available with the purchase of the equipment. The licenses were "inextricably connected" to the sale of the equipment. The charge for the licenses was therefore taxable as part of the sales price of the equipment.

http://www.ttrus.com/sites/default/files/sc/SC_trademark.pdf


About TTR

Transaction (buying or selling things), Tax (the tax on this activity), Resources (our people, our website, our support services) - TTR, Inc.

TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

TTR likes to keep things simple and fun, which is why it has great people who provide help to clients on any support questions they have about transaction tax issues.

Please visit TTR on the web at www.ttrus.com or call 866.578.8193.

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