Indiana implemented a new excise tax on the rental of heavy equipment that took effect on January 1, 2019. The heavy equipment rental excise tax applies to the rental of all personal property (with some exclusions and exemptions) by a merchant that primarily rents equipment described in NAICS code 532412, which is U.S. industries engaged in renting or leasing heavy equipment for the items listed below:
- Bulldozer rental or leasing without operator
- Construction form rental
- Construction machinery and equipment rental or leasing without operator
- Crane rental or leasing without operator
- Earth moving equipment rental or leasing without operator
- Forestry machinery and equipment rental or leasing
- Heavy construction equipment rental without operator
- Logging equipment rental or leasing without operator
- Mining machinery and equipment rental or leasing
- Oil field machinery and equipment rental or leasing
- Oil well drilling machinery and equipment rental or leasing
- Welding equipment rental or leasing
- Well drilling machinery and equipment rental or leasing
Note: Also includes any retail merchant in the business of renting heavy equipment, including any attachments.
The tax imposed on the rental of heavy equipment is 2.25 percent of the gross retail value, meaning any delivery or miscellaneous charges on the rental bill will also be subject to the 2.25 percent tax. The renter is liable for the tax, and it will collected by the rental merchant. This tax will be reported through INTax in the same manner that sales tax is reported.
Where the rentals are located and where they are received does matter in how the tax is imposed. This tax is imposed on the rentals from a location in Indiana and received in Indiana. A rental transaction by a merchant located outside of Indiana is not taxable. However, a merchant in Indiana, where a delivery occurs in Indiana either by picked up or delivery, the transaction is subject to the tax. For rental property rented from a location in Indiana, but used outside of Indiana, is subject to the heavy equipment rental excise tax. For rental property that is received from a location outside of Indiana, but used in Indiana, is not subject to the excise tax.
There are some exclusions and exemptions that do apply:
- Property that is registered as a motor vehicle for use on a public highway
- Property that is permanently affixed to any real property
- Rentals to US government, the state, or political subdivision and agencies/instrumentalities of the US government and the state.
- Heavy rental equipment that is rented for mining purposes or eligible for the property tax abatement deduction
- Rentals for a specific period of more than 365 days
- Transactions that are a subrent of the taxable personal property from a rentee to another person where the rentee was liable for and paid the tax. (Tax is imposed on the first rental)
Additional information:
- Rental property that is subject to the heavy equipment rental excise tax is exempt from the personal property tax.
- The term “Rental” includes transferring possession or control of the heavy rental equipment for consideration for a period not to exceed 365 days or for a period that is open-ended under the terms of the rental contract with no specified end date.
- The rental of equipment described in NAICS code 532412 rented by a merchant that does not primarily rent equipment described in NAICS code 532412 is not subject to the heavy equipment rental tax. Meaning the rental of equipment does not generate the largest portion of the person’s gross revenue.
Note: We have reached out to Indiana to see if they had a more detailed explanation on what they define as heavy equipment outside of NAICS code 532412 and they are unable to do so at this time. Rodefer Moss will update this post as new information is published by the Indiana Department of Revenue.