SST Panel Interprets Souring Rule of Short-Term Rentals

In December 2009, a release was issued by Ohio, an SST associate member state, announcing that the state had changed its laws to benefit from a Streamlined Sales Tax (SST) Agreement amendment that retains origin sourcing for most sales. However, the release stated that leases of tangible personal property generally must be sourced on a destination basis.

On February 17, 2010 Tim Maloney, Canton Chair Rental, submitted a request for an interpretation by the Compliance Review and Interpretations Committee (CRIC) as to whether rentals of tangible personal property that do not involve recurring periodic payments can be sourced on an origin basis under the SST Agreement. Canton Chair Rental Company rents tables, chairs and other party-related items to individuals, families and companies in various Ohio counties for a fee on a short-term, non-recurring basis, and not of duration of more than thirty days. Maloney asked the CRIC to rule that, under the Agreement, a lease or rental that does not require recurring periodic payments must be treated the same as a retail sale of tangible personal and, therefore, be sourced on an origin basis.

By a unanimous vote on March 11, 2010, the CRIC submitted to the Governing Board a recommendation that the interpretation proposed not be accepted. The CRIC stated that Article IX, Rule 902 of the Rules and Procedures adopted by the Streamlined Sales Tax Governing Board provides “A member state may source retail sales, excluding lease or rental, of tangible personal property…” and “any transfer of possession or control of tangible personal property for a fixed or indeterminate term for consideration.” Therefore, the transaction highlighted in Tim Maloney’s interpretation request clearly fit within the definition of “lease or rental”. Furthermore, the CRIC indicated Subsection 310B.2 “for a lease or rental that does not require recurring periodic payments, the payment is sourced the same as a retail sale in accordance with the provisions of subsection 310A” as a reason for denying the proposed interpretation. Additional regulations apply. (Conference Call, Compliance Review and Interpretations Committee, February 25, 2010; Interpretative Opinion 2010-02, Compliance Review and Interpretation Committee, March 11, 2010)

Posted on April 15, 2010