Starting in 2019 Indiana General Assembly imposes Heavy Equipment Rental Excise Tax in lieu of Personal Property Tax

Starting in 2019 Indiana General Assembly imposes Heavy Equipment Rental Excise Tax in lieu of Personal Property Tax

In 2019 heavy rental equipment will be subject to a new excise tax but avoid personal property tax.

In 2019 heavy rental equipment will be subject to a new Indiana excise tax but will avoid personal property tax.

In its 2018 legislative session the Indiana General Assembly enacted and the Governor approved House Enrolled Act No. 1323, which starting in 2019 imposes a new excise tax on “heavy rental equipment” while removing such equipment from taxation as personal property.  “Heavy rental equipment” under new Ind. Code § 6-6-15-2 is personal property, including attachments, which is owned by a person that is classified under 532412 of the North American Industry Classification System Manual (“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”) and that is a retail merchant in the business of renting heavy equipment. The property may not be intended to be permanently affixed to any real property, and it must not be subject to registration for use on a public highway.  It does not, however, include equipment rented for mining purposes or equipment subject to abatement during the calendar year.  To qualify the rental period must not exceed 365 days or must be open ended with no specified end date.

The legislation imposes a new excise tax upon the rental of heavy rental equipment from a retail merchant and from a location in Indiana.  The tax rate is 2.25% of the gross retail income received by the retail merchant for the rental.  Transactions are exempt if the “rentee” (the word used in the statute for the party renting the equipment) is the United States, the State of Indiana or a political subdivision.  The transaction is also exempt if it is a sub-rental by the rentee to a third party and the rentee was subject to the tax.  The rentee is liable for the tax, and the transaction is sourced to the business location of the retail merchant from which the heavy rental equipment is rented.

Starting with the January 1, 2019 assessment date, heavy rental equipment that is rented or held in inventory for rental or sale and the rental of which would be subject to this new excise tax will not be subject to Indiana’s personal property tax.

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