Rentals & Leases: How Does Sales Tax Apply to Them?

Whether you’re a lessor or a lessee, it’s important to understand the different scenarios that you may encounter and know how sales tax applies to the different types of transactions.

Florida Reduces Sales Tax Rate for Rental, Lease, or License to Use Real Property

The Florida sales tax rate imposed on commercial rentals will decrease from 5.7 to 5.5 percent, effective January 1, 2020.

Indiana Issues Directive on Heavy Equipment Rental Excise Tax

Indiana has a heavy equipment rental excise tax imposed at a rate of 2.25% and effective January 1, 2019.

Reduction of Florida Sales Tax on Commercial Real Property Leases to Commence January 2018

Beginning January 1, 2018, Florida’s sales tax rate imposed on the total rent charged for renting, leasing, letting, or granting a license to use commercial real property is reduced.

Additional Payments For Real Property Lease Taxable in Florida

A Florida lessor failed to charge, collect, and remit sales tax to the state on payments made in addition to rent from a lessee. The lessor was audited, and the state assessed sales tax on the additional payments.

Colorado Issues Guidance on Advance Payments for Vehicle Rentals

The Colorado Department of Revenue indicated that vehicle and hotel occupancy rentals are similar in nature and therefore, several occupancy provisions seem appropriate to apply to the taxability of advance payments on vehicle rentals.

Oklahoma Issues Letter Ruling Regarding Taxability of Car Rental Fees

Customer facility charges that are separately stated, imposed on and charged to customers, and remitted to airports by a car rental company should not be included in gross receipts for sales tax purposes.

Rentals Used for Church Construction Contract Exempt in Oklahoma

Oklahoma tax law allows a contractor who has a construction contract with a church to make purchases of tangible personal property or services necessary to perform the contract, exempt from sales and use tax.

Tax Base of Aircraft Acquired in Exchange Not Reduced for Like-kind Exchange from Indiana Sales Tax

A company was required to collect Indiana sales tax on the leasing of an aircraft it acquired in an exchange based on the total consideration the company provided with a deduction for the value of a like-kind exchange.

Equipment Lease is Taxable Transfer of Property in Arkansas

Leases of equipment by a taxpayer were subject to Arkansas sales tax and short-term rental tax since tangible personal property was transferred to customers at delivery sites and services rendered were incidental.

Rental Cars Used in Chicago Are Subject to Personal Property Lease Transaction Tax

A car rental company’s short-term vehicle rental that occurred outside Chicago was subject to the Chicago personal property lease transaction tax since the vehicle was used in Chicago.

Illinois Discusses Taxability of Final Lease Payments

The final payment of a lease-to-own transaction was not subject to Illinois sales tax. More…

Tangible Personal Property Leases between Related Business Entities Exempt in Wyoming

Wyoming enacted a sales tax exemption for a lease or rental of tangible personal property, effective 07/01/15. More…

Colorado Issues Guidance on Taxability of Leased Vehicles Used in Interstate Commerce

Colorado issued guidance on whether certain lease payments for vehicles used in interstate commerce are subject to sales or use tax. More…

Tax Due on Residual Value of Leased Vehicle when Option to Buy is exercised in Idaho

An Idaho taxpayer who totaled a leased vehicle was not entitled to a sales tax refund after exercising his option to buy the vehicle. More…

Use Tax Credit Available on Sales of Loaner Cars in Illinois

A car dealership was entitled to a use tax credit against the Illinois sales tax it owed on retail sales of cars under a loaner car program. More…

Vendor Properly Collected Virginia Sales Tax on Unfulfilled Portion of Lease

An out-of-state vendor correctly collected Virginia sales tax on a Virginia lessee’s unfulfilled portion of a lease agreement. More…

Illinois Discusses Changes to “”Selling Price”” for Leased Motor Vehicles

Illinois has issued a bulletin to explain changes affecting the basis for determining the \”selling price\” for certain motor vehicles sold in order to be leased.

Certain Car Lease Payments Not Taxable in Illinois

Effective January 1, 2015, lease payments made on certain vehicles were not subject to Illinois sales and use tax because the lease is not for a defined period.

Louisiana Suspends Revenue Ruling on Taxability of Repair Parts for Rental Equipment

In February 2013, Louisiana issued Revenue Ruling No. 13-003 regarding the taxability of repair parts for rental equipment. The ruling stated that the Louisiana sales tax exclusion for items of tangible personal property that are sold for the purpose of…

Automatic Recurring Inventory Maintenance Fees Taxable in Florida

Linen companies that provide rental linens and include in the sales price of the rental an automatic and recurring charge – an “inventory maintenance fee” – for the guarantee that inventory levels for a desired linen item remain constant are…

Oklahoma Discusses Out-of-State Lessor Transactions

Oklahoma has issued a letter ruling regarding the sales tax treatment of transactions involving an out-of-state company that leases equipment to customers in Oklahoma. The company did not have a place of business in Oklahoma, and the equipment it leased…

Texas Lessor Liable for Accelerated Taxes When It Assigned Lease

A taxpayer that entered into operating leases for equipment located in Texas and then assigned its right to receive lease payments to third parties was properly assessed Texas sales tax because it failed to accelerate, collect, and report the sales…

Delaware Lowers Tax on Leases

Delaware has issued a notice to remind taxpayers of gross receipts tax rate changes that became effective on January 1, 2014. Among the rate changes, the tax rate on leases has been reduced from 2.011% to 1.991%. (Detailed List of…