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Business Taxes Law Guide—Revision 2024

Sales and Use Tax Annotations


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330.0000 Leases of Tangible Personal Property—In General—Regulation 1660

Annotation 330.2525

(a) In General


330.2525 Optional Services—Lease of Audio Equipment. Company A rents audio visual equipment for short periods (generally 1 to 4 days) and reports tax on rental receipts. A typical agreement obligates Company A to supply audio visual equipment, a video wall processor, a computer (programmed by Company A) and other equipment required for video production. In addition, the lessee may request some or all of the following optional services:

(a) Delivery and pickup of the equipment

(b) A crew to set up the equipment

(c) An engineer to operate the equipment

(d) A crew to take down the equipment

(e) Custom computer programming

Charges for the rental of the equipment and any optional services are separately stated when billed to the lessee. Under the above stated scenario the application of tax to the optional services are as follows:

(1) Delivery and pickup.—If delivery is by the facilities of the lessor the charge is taxable, unless the lease commences prior to the property being delivered to the lessee. If delivery is by common or independent carrier, the charge is not subject to tax, unless the property is leased for a delivered price.When property is leased for a delivered price, the charge for the delivery is taxable unless the lease commences prior to the property being delivered to the lessee. The charge for optional pick up services are excludable from tax.

(2) Set up and take down.—Optional set up charges are excludable from the measure of tax provided the set up occurs after the lease commences. The charge for optional take down services is also excludable from tax.

(3) Engineer to operate the equipment.—If providing an engineer is truly optional and if the lessee actually gains control of the equipment, the charge for the engineer is not taxable.

(4) Custom computer programming.—The charge for custom computer programming, as defined in Regulation 1502, is not subject to tax; however, any computer program in existence at the time the lease contract is executed, is not custom programming for purposes of the sales and use tax and the charge for using such a program would be subject to tax.

Sometimes the lessee will contract to sublease the equipment, including the engineer, to others. In this case, tax will not apply to the rental receipts, provided the lessor accepts a valid resale certificate for the lease, which is timely taken and accepted in good faith. However, the same analysis applicable to whether the transaction between the lessor and the lessee is a true lease, is also applicable to the transaction between the lessee and the sublessee. That is, who has the actual control of the equipment and whether the charge for the additional services are truly optional with the sublessee. 10/1/92.