How the New Excise Tax Affects Contractors in Indiana
Effective January 1, 2019, Indiana approved House Enrolled Act No. 1323 creating a new excise tax on heavy equipment rentals without operators at a rate equal to 2.25% of the gross retail rental income received.
The new tax will be imposed upon the renter of the heavy rental equipment in Indiana and sourced to the retail merchant’s business location. The merchant is responsible for collecting and reporting the tax in conjunction with other sales and use tax filings. The tax should be separately stated on the invoice, regardless of the ultimate use of the equipment. The new tax only applies to short-term leases under 365 days or open-ended leases with no specified end date.
How Heavy Rental Equipment is Categorized
Heavy rental equipment is categorized as all personal property (and attachments used in conjunction):
- Classified under NAICS manual code 532412 in effect on January 1, 2018
- United States 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.
- Owned by a retail merchant in the business of renting heavy equipment, including any attachments
- Not intended to be permanently affixed to any real property
- Not subject to registration for use on a public highway
However, heavy rental equipment does not include equipment rented for mining purposes or heavy equipment that is eligible for a property tax abatement.
Who is Exempt From this Tax?
Excused from the tax is the United States Government and the State of Indiana, as well as any political subdivision or an agency/instrumentality of either. A transaction of sub-rent from a renter to another person, if the renter was liable for the tax imposed, would be exempt as well.
Starting on January 1, 2019, heavy equipment that is rented (as noted and defined above) and subject to the new excise tax, will not be subject to personal property tax.
Should you have any questions, please do not hesitate to contact your local Sikich tax advisor.
About the Authors
Leslie Compton, EA
Leslie Compton, EAManager, Tax Services
Brian Kelley, CPA, MST
Managing Director, State and Local Tax Services
Dustin Sheppard, CPA, CCIFP, MBA
Senior Manager, Tax Services
