Buying Tangible Personal Property for Renting and Leasing

This section covers buying property that you’ll rent out or lease out.

Bare rentals

Any entity that makes bare rentals can buy the property exempt for resale using Form ST-101 – Sales Tax Resale or Exemption Certificate.

Fully operated rentals

Owners that make fully operated rentals are the users of the property. They must pay sales tax on the property when they buy it.

Used in both bare and fully operated rentals

You’ll need to determine how you’ll primarily be renting out your property when you buy it. You must pay sales tax on the property based on your primary rental activity.

Property you buy primarily for bare equipment rentals isn’t taxable.
Property you buy primarily for fully operated rentals is taxable.

If you buy property primarily for bare rentals

You could owe use tax if you buy property for bare rental then use it in a fully operated rental. You’ll owe use tax on the fair market rental value of the property purchased for resale for the period you use it to provide a fully operated rental service.

Example You have an inventory of small tractor loaders you rent out to DIY landscapers. You bought the tractors exempt for resale because they’re primarily rented bare.

Occasionally, a customer asks you to provide an operator along with the tractor. This is a fully operated rental service, and you owe use tax on the property’s use. You didn’t pay sales tax on the property, so you owe use tax on the amount you charge DIY customers for the rental period your operator uses it.

If you buy property primarily for fully operated rentals

You can’t apply for a refund of sales tax if you pay tax on property to use in fully operated equipment rentals, but you then rent it out as bare equipment.