The Washington Department of Revenue has made amendments to the state’s excise tax rule on leases or rentals of tangible personal property to clarify the department’s policies regarding charges for specific construction services, like concrete pumping. Specifically, the rule revision clarifies the distinctions between charges for the rental of concrete pumping equipment with an operator, sales of construction services, and sales of construction materials.
In Washington, equipment rentals without an operator and leases of operated equipment are generally subject to the retailing B&O tax. In certain scenarios, when services are eligible for resale, the wholesaling B&O tax may apply.
The rule revision provides several specific examples for taxpayers. In one example, a prime contractor hires a concrete pumping company to pump premixed concrete as directed by the contractor. The concrete pumping company operates its own equipment but does not provide the concrete mix. The stand-alone concrete pumping services provided in this scenario are classified as a rental of equipment with an operator. Charges for this transaction are subject to retailing B&O tax and retail sales tax.
In another example, a subcontractor is hired by a prime contractor to pave a parking lot. The subcontractor uses its own equipment to complete the project and is required to meet contractual specifications set by the end consumer. At the time of purchase, the prime contractor provides the subcontractor with a reseller permit instead of paying retail sales tax. In this scenario, the subcontractor’s business activity is classified as a construction service and not “rental of equipment with an operator.” Charges for this transaction are subject to wholesaling B&O tax, as construction services are eligible for resale – further supported by the fact that the subcontractor is responsible for the final outcome of the construction activities (per its contract with the end consumer), not solely providing equipment to complete the job. (WAC 458-20-211, Washington Department of Revenue, effective April 23, 2021)