If you are in the construction industry and rent equipment, there is a new excise tax that will be charged on equipment that you rent starting January 1, 2019. This new excise tax will be assessed on heavy equipment and construction equipment that you rent or lease and does not come with operators. The tax will be 2.25% of the gross retail rent value.
During the legislative session of the Indiana General Assembly for 2018, the state of Indiana enacted and the Governor signed into law House Enrolled Act No. 1323. This new law imposes a new excise tax of 2.25% of the gross retail income received by the retail merchant on heavy equipment rentals starting on January 1, 2019. The new Heavy Equipment Rental Excise tax imposes the tax on “heavy rental equipment,” which is defined 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 industry classification code of 532412 of the North American Industry Classification System Manual that is in effect on January 1, 2018 and that is a retail merchant in the business of renting heavy equipment, including any attachments. This heavy equipment would not be intended to be permanently affixed to any real property and would not be subject to registration under IC 9-18.1 for use on a public highway.
The NAICS defines code 532412 as a US industry that comprises establishments primarily engaged in renting or leasing heavy equipment without operators that may be used for construction, mining, or forestry, such as bulldozers, earthmoving equipment, well-drilling machinery and equipment, or cranes. The North American Industry Classification System contains multiple index entries which include the following: 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, 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 and well drilling machinery and equipment rental or leasing.
The new legislation exempts heavy rental equipment that is rented for mining purposes or heavy rental equipment that is eligible for a property tax abatement deduction. It also exempts the tax if the rentee is the US Government, the state of Indiana, a political subdivision or an agency or instrumentality of an entity above. It also exempts the tax if it is a transaction of sub-rent from a rentee to another person and the rentee was liable for the tax imposed.
The tax is imposed on rentals that do not exceed 365 days or for a period of time that is open ended under the terms of the rental contract with no specified end date. The tax is only imposed on equipment rental from a retail merchant and from a location in Indiana.
Starting January 1, 2019, heavy equipment or construction equipment, as noted above and defined by NAICS code 532412, rented or held in inventory for rental or sale and the rental of which is subject to the new excise tax will not be subject to personal property tax.