ALABAMA DEPARTMENT OF REVENUE
SALES, USE & BUSINESS TAX DIVISION
SALES & USE TAX RULE
810-6-2-.36.05. Lay-away Sales.
(1) The Sales Tax Law defines a sale as follows: "installment and credit
sales and the exchange of properties as well as the sale thereof for money,
every closed transaction constituting a sale." It has been held that Alabama
sales tax applies only to sales that are "closed" within the state and
that, for tax purposes, sales are closed when title to the goods are passed
to the purchaser.
(2) The time that title to the goods passes as designated by the layaway
contract is determinative of the time that sales tax is due. If there is
no layaway contract or the contract is silent as to the time title transfers,
amounts received in payment of the sales price of property held by the
seller until the total amount of the sales price is paid to him are not
taxable until the total sales price, including the service charge, has
been paid and the property delivered to the purchaser.
(3) If the customer fails to complete payments under the layaway agreement
and obtains from the retail merchant a refund of those payments, excluding
the service charge, and title has not passed, the retail merchant is entitled
to a credit for any sales tax previously paid to the Department upon the
transaction regardless of the amount refunded to the customer. In an incompleted
layaway transaction there can be no "return" since the customer never obtains
delivery of the goods. (Adopted October 1, 1959, readopted through APA
October 1, 1982, amended January 10, 1985)
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