Idaho Admin. Code r. 35.01.02.024 - RENTALS OR LEASES OF TANGIBLE PERSONAL PROPERTY
Sections 63-3612, 63-3613, 63-3616, 63-3622UU, Idaho Code
01.
In General. The lease or
rental of tangible personal property, including licensed motor vehicles, is a
sale. (3-31-22)
02.
Bare
Equipment Rental. A bare equipment rental, that is, a rental of
equipment without operator, is a taxable sale. The owner of the equipment is a
retailer with a requirement to collect and remit Idaho sales tax on each rental
payment and remit the tax to the State Tax Commission just like any other
retailer. The tax applies whether the equipment is rented by the hour, day,
week, month, or on a mileage, or any other basis. The equipment owner who
primarily rents bare equipment may buy the equipment without paying tax to the
vendor by giving the vendor a resale certificate. See Rule
128 of these rules. If the
equipment owner uses the equipment for his own benefit or in his own business
operations, the equipment owner pays use tax based on a fair market rental
value for the period during which he used his own equipment.
(3-31-22)
03.
Fully Operated
Equipment Rentals. (3-31-22)
a. A fully
operated equipment rental, equipment with operator, is a service rather than a
retail sale of tangible personal property. No sales tax is due on a fully
operated equipment rental. (3-31-22)
b. A fully operated equipment rental is an
agreement in which the owner or supplier of the equipment or property supplies
the equipment or property along with an operator, and the property supplied is
of no value to the customer without the operator. (3-31-22)
c. The owner or supplier of the equipment or
property used in a fully operated equipment rental is the consumer of the
equipment or property, and is taxable when he buys or uses the equipment in
Idaho. Special rules apply to transient equipment used for short periods in
Idaho. See Rule 073 of these
rules. (3-31-22)
d. If the
equipment or property has value to the customer without an operator, then the
lease or rental of the equipment or property is a distinct transaction. It is
taxable and its price must be stated separately from the price of the service
provided by the operator. (3-31-22)
e. Example: A crane rental company provides a
mobile crane to a contractor, along with an operator. The contractor may not
use the crane without the operator, so the leasing company is not required to
charge sales tax on the lease of the crane. (3-31-22)
f. Example: Pick-Up Industries provides a
three (3) cubic yard trash container to a customer. Pick-Up also provides trash
hauling service to empty the container. Since the container is used to store
trash between collections, its transfer to a customer is a taxable lease.
(3-31-22)
04.
Mixed
Use of Rental Equipment. (3-31-22)
a.
If the equipment owner primarily rents bare equipment but sometimes supplies
equipment with an operator, the equipment owner is the consumer of the
equipment while it is used by the operator to perform a service contract.
Accordingly, the equipment owner must pay use tax on the fair market rental
value of the equipment for that period of time unless he paid tax when he
bought the equipment. (3-31-22)
b.
If the equipment owner primarily rents fully operated equipment but sometimes
rents bare equipment, he charges sales tax on the rental of the bare equipment
even though tax was paid on the original purchase of the property. In this
case, the owner purchased the equipment for a purpose other than the resale or
re-rental of that property in the regular course of business.
(3-31-22)
05.
Operator Required to Be Paid by Customer. In some cases, an
equipment owner supplies equipment along with an operator but a contract or a
state or federal law requires the customer to pay the operator. If all other
indications of an employee-employer relationship, such as the right to hire and
fire, immediate direction and control, etc., remain with the equipment owner,
the owner is viewed as supplying a service and no sales tax applies to the
service fee. However, the fact that the transaction is a fully operated
equipment rental needs to be clearly stated on the face of the invoice or other
billing document. The Commission may, whenever it deems appropriate, examine
the facts on a case-by-case basis to determine if a true employer-employee
relationship exists between the equipment owner and the operator.
(3-31-22)
06.
Maintenance of
Rental Equipment. If the owner who primarily rents bare equipment is
responsible for the maintenance of the equipment, he may buy the necessary
repair parts and equipment tax exempt by providing his vendor with a resale
certificate. The owner who rents fully operated equipment may not buy the
equipment or repair parts tax exempt. (3-31-22)
07.
Rentals to Exempt Entities.
The rental or lease of equipment invoiced directly to an entity exempt from
sales tax, such as the state of Idaho or one (1) of its political subdivisions,
is not taxable. However, if the rental or lease is to an individual or
organization performing a contract for, or working for an exempt entity, the
rental is taxable. (3-31-22)
08.
Exempt Equipment Rentals. Equipment which would have been exempt
from tax if purchased is also tax exempt if leased or rented. To claim this
exemption, the renter provides the owner with a properly completed exemption
certificate. See Rule
128 of these rules.
(3-31-22)
09.
Rental Payments
Applied to Future Sales. Rentals to be applied toward a future sale or
purchase are taxable. (3-31-22)
10.
Personal Property Tax. A lessor may require reimbursement from the
lessee for the personal property tax the lessor pays on leased equipment. A
charge for personal property tax will be exempt from sales tax if the lease is
for a term of one year or longer; if the property tax is billed as a separate
line item; and if the charge is no more than the property tax actually paid by
the lessor. (3-31-22)
11.
Out-of-State Rental/Lease. Rental or lease payments on equipment
used outside Idaho are not subject to Idaho sales tax. Rental or lease payments
on equipment used in Idaho are taxable. If the equipment is delivered in Idaho,
even though it will be used outside the state, then the rental or lease payment
for the first month, or other period, is subject to Idaho tax.
(3-31-22)
12.
Lease-Purchase
and Lease with Option to Purchase. (3-31-22)
a. Lease-purchase agreements include
transfers which are called leases by the parties but are really installment,
conditional, or similar sales. Where ownership passes to the transferee at the
end of the stated terms of the lease contract with no additional consideration
from the transferee, or where the additional consideration does not represent
the fair market value of the property, the transaction is a sale and tax on the
entire sales price is collected on the date the property is delivered.
(3-31-22)
b. Lease with option to
purchase agreements include transfers in which the personal property owner,
lessor, transfers possession, dominion, control or use of the property to
another for consideration over a stated term and the owner, lessor, keeps the
property at the end of the term unless the lessee exercises an option to buy
the property at fair market value. The owner/lessor collects sales tax from the
lessee at the time each lease payment is charged. If the lessee exercises the
option to buy, the lessor/owner collects sales tax from the lessee/buyer on the
full remaining purchase price when the option is exercised.
(3-31-22)
13.
Cross-References. (3-31-22)
a.
See Rule 025 of these rules on real property
rental. (3-31-22)
b. See Rule
037 of these rules on aircraft and
flying services. (3-31-22)
c. See
Rule 038 of these rules on flying clubs.
(3-31-22)
d. See Rule
044 of these rules on trade-in for
rental or lease property. (3-31-22)
e. See Rule
049 of these rules on warranties
and service agreements. (3-31-22)
f. See Rule
073 of these rules on transient
equipment. (3-31-22)
g. See Rule
106 of these rules on motor
vehicles. (3-31-22)
Notes
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