In General Information Letter ST 25-0024-GIL, issued on April 21, 2025, the Illinois Department of Revenue (Department) addressed concerns from a leasing company regarding the taxability of equipment and services bundled into rental arrangements. While the core rental of a tower crane is considered a taxable retail lease, the use of operated assist cranes to install or remove that equipment is not subject to the state’s Retailer’s Occupation Tax (ROT).
According to the Department, the use of an operated assist crane, even when itemized separately for labor, transport or use, does not constitute a taxable lease if the lessee does not possess or control the crane when used solely to erect or dismantle a leased tower crane. The Department emphasized that when a crane provider retains full control and operation of the assist crane, the transaction is not considered a lease. Instead, it is classified as a nontaxable service since no procession, control, or tangible property is transferred to the customer. This interpretation is significant for construction companies and equipment lessors that routinely utilize assist cranes for temporary operations.
The ruling comes in response to legislative changes enacted through Public Act 103-592 which redefines leases are retail sales for the purpose of ROT. Effective January 1, 2025, gross receipts from leases of tangible personal property are taxed at both state and local levels. However, the law does offer an exclusion for scenarios where the lessee does not receive possession or control of the property.
While the taxation of equipment leases in Illinois is expanding, lessor operated assist crane services remain exempt, offering some relief to the construction and heavy-equipment sectors. To avoid unexpected tax exposure, companies should ensure contracts and invoices clearly state that assist cranes remain under the operator control, itemize labor, transport, and equipment charges and avoid any terms suggesting lessee possession or control of the assist crane.
(General Information Letter ST 25-0024-GIL, Illinois Department of Revenue, April 21, 2025)