Does your business engage in the rental of heavy equipment? If so, there is a new excise tax enacted in Indiana which may affect your business.
Effective January 1, 2019, Indiana implemented an excise tax imposed upon the rental of heavy rental equipment from a retail merchant located in Indiana.
What is the Indiana Heavy Equipment Excise Tax?
As stated in §6-6-15-3, the excise tax will be 2.25% of the gross retail income received by the retail merchant for the rental. The liability for this tax will fall upon the person renting the equipment as part of the transaction and must be separately stated on the invoice to customers. Tax collected will then be remitted to the state of Indiana by the retail merchant.
What qualifies as “heavy rental equipment”?
§6-6-15-2 defines “heavy rental equipment” as personal property (including attachments used in conjunction with the personal property) that is owned by a person or business that is classified under the NAICS code of 532412 and is a retail merchant in the business of renting heavy equipment. However, this does not include heavy rental equipment that is rented for mining purposes or any equipment that is eligible for a property tax abatement.
Under these new Indiana statutes, the term “rental” does not apply to any transfer of possession or control of heavy rental equipment that is in excess of 365 days, or for a period with no specified end date. Those transactions are not subject to the excise tax.
Any transactions involving the United States government, the state of Indiana, a political subdivision, or an agency of the previously mentioned entities are exempt from the tax imposed by these statutes.
Equipment that qualifies as “heavy rental equipment” will be exempt from Indiana Property Tax for any assessment dates after December 31, 2018. §6-1.1-2-7 specifically lists property subject to the heavy equipment rental excise tax as exempt property.
If you have questions about how this tax affects your business, please contact your local Blue & Co. tax advisor.