Guides
Equipment rental tax exemptions: certificate forms in four states
Equipment rental tax exemptions in California, Texas, New York and Pennsylvania: the certificate forms yards collect, when to take them, resale vs use tax.
Equipment rental tax exemptions: certificate forms in four states
What to take away
- Most US states tax equipment rentals as a sale or lease; Delaware, Montana, New Hampshire, and Oregon have no state sales tax.
- The rate usually follows the place of use, not only where the customer picked up the machine.
- A complete exemption certificate shifts the tax to the customer. An incomplete one leaves the yard liable.
- Equipment rented with an operator is often taxed as a service, not as tangible personal property.
How US states tax equipment rentals
There is no federal sales tax in the United States. Equipment rental tax exemptions come from state law or from a certificate the customer signs.
State Rental Tax Treatment
California
- Treatment
- Taxable
- Verify
- District boundaries
Texas
- Treatment
- Taxable
- Verify
- Permit number
New York
- Treatment
- Taxable
- Verify
- Each charge
Florida
- Treatment
- Taxable
- Verify
- Certificate format
Pennsylvania
- Treatment
- Taxable
- Verify
- Local surtax
Each state writes its own rules, and renting tangible personal property is normally a taxable sale or lease. Equipment rental sales tax by state therefore varies, and one national rate does not exist.
State-level rates run from 0 percent in Delaware, Montana, New Hampshire, and Oregon to 7.25 percent in California. Local taxes sit on top, so a combined rate can pass 10 percent in some cities.
| State | How rentals are generally treated | What yards should verify |
|---|---|---|
| California | Taxable; district taxes follow the place of use | District boundaries at the job site |
| Texas | Taxable, with narrow exemptions for certain industries | Customer permit number and certificate |
| New York | Taxable; delivery and fuel charges can join the taxable receipt | Whether each separate charge is taxable |
| Florida | Taxable, with exemptions for some agricultural and government rentals | Certificate format and renewal timing |
| Pennsylvania | Taxable on the lease price | Local surtax in Philadelphia and Allegheny County |
Exemption certificates that shift the tax to the customer
An exemption certificate is a customer's written claim that a rental is not taxable. When a yard accepts a valid certificate in good faith, the state usually looks to the customer for the tax.
Exemption Certificate Checklist
- Confirm the exemption reason
- Use a state-accepted form
- Check registration number is active
- Capture name, address, reason, signature, date
- File with contract and invoice
A missing or incomplete certificate leaves the yard holding the tax, plus interest and penalties. Some states let a dealer collect the form after the rental; check that state's rule before relying on it. File every rental equipment tax exemption certificate with the contract, and take it before the machine leaves the yard.
The certificate forms in four states
Each state publishes its own forms, and a yard should keep the current version on file for every customer who claims an exemption:
- California:the California Department of Tax and Fee Administration (CDTFA) lists CDTFA-230, the General Resale Certificate, for sub-rentals and resale. Partial exemption certificates sit beside it, including CDTFA-230-D for qualified sales and purchases of farm equipment and machinery and CDTFA-230-M for manufacturing, research and development equipment.
- Texas:the Comptroller of Public Accounts uses Form 01-339, the Texas Sales and Use Tax Resale Certificate. The seller keeps the completed certificate in its books and records for four years as its evidence of why tax was not collected.
- New York:the Department of Taxation and Finance issues Form ST-120, the Resale Certificate, and Form ST-121, the New York State and Local Sales and Use Tax Exempt Use Certificate.
- Pennsylvania:the Department of Revenue's REV-1220 is the Pennsylvania Exemption Certificate. The customer ticks either a unit certificate for one transaction or a blanket certificate for multiple transactions, and names the seller, vendor or lessor, which covers a rental yard.
For any other state, including Florida in the table above, take the form that state's revenue department publishes, not one of these four.
Resale certificates, re-rentals, and short-term rentals
Resale certificates work differently for rentals. A customer who rents a machine and uses it is the end user, so most states reject a resale claim.
A yard that sub-rents equipment to another rental company may accept a resale certificate where the state allows it. Confirm the rule before you waive tax.
A certificate is a promise from the customer. The yard still needs proof the promise was made in writing, on the right form, at the right time.
Equipment rented with an operator
Many states treat a machine supplied with an operator as a service rather than a rental of tangible personal property. The tax then follows how that state taxes the service.
Keep pure equipment rentals on a separate contract line. Mixing labor and machinery invites a reclassification that changes the taxable base.
Example: a lift rented in one state and used in another
A customer picks up a scissor lift in a state with no sales tax and tows it to a job site in a state that taxes rentals.
That second state can charge use tax on the rental value for the time the machine worked inside its borders. The yard may need to register there, or the customer may report the tax.
Yard records that support the tax position
Equipment rental tax compliance in the US depends on records that tie each charge to a place and a date. Contracts, delivery tickets, fuel logs, hour meter readings, and return inspections show where a machine worked.
Safety records belong in the same file. Workers who move machines with a forklift must be trained and evaluated under OSHA's powered industrial truck standard, and those logs date the handling work.
Return lanes and walkways stay clear under OSHA's rules for walking-working surfaces, which keeps inspection traffic moving through the yard.
Before a returned machine reaches the service bay, mechanics follow the energy control steps in OSHA's lockout/tagout standard. Those records also show when a unit stopped earning.
When Canadian rules apply instead
US equipment hire yard tax rules stop at the border. A yard with a Canadian branch, or one that rents to customers hauling equipment north, deals with GST/HST instead.
The guide covers CRA registration thresholds and how provincial PST differs, including British Columbia against Ontario. Read the GST/HST guide before you invoice a Canadian customer.
