Leases of tangible personal property are considered taxable sales. The person leasing out the property (lessor) is a retailer. The lessor must collect tax unless the customer qualifies for an exemption and provides a completed 
Form ST-101 – Sales Tax Resale or Exemption Certificate. Lessees of qualifying interstate commerce vehicles can rent tax exempt if they provide a completed Form ST-104IC – Sales Tax Exemption Certificate – Interstate Commerce Vehicles.
If lessors don’t charge sales tax when they rent out or lease out property used in Idaho, the customer owes use tax unless an exemption applies. See “Use Tax – How to report, file and pay use tax.”
Lessors can buy property exempt for resale if they’ll lease it out. They must give the vendor a completed Form ST-101.
There are three types of leases of tangible personal property.
Basic Lease
The customer returns the property to the lessor at the end of the lease term.
The lessor charges sales tax on each lease payment.
Lease with Option to Buy
The customer has the option of buying the property during the lease term or at the end of the lease term at fair market value.
The lessor charges sales tax on each lease payment and on the price the customer pays when buying the property.
Lease-Purchase
The customer makes regular payments during the lease term. At the end of the term, title to the property passes to the customer for $0 or an amount that’s less than fair market value.
The customer owns the property at the end of the lease term, so this is a sale and a financing arrangement. Collect sales tax at the beginning of the lease term on all the payments the customer will make during the lease term. At the end of the lease term, collect sales tax on any additional amount you charge then for the purchase of the property.
Out-of-state companies leasing out property in Idaho
Out-of-state companies that lease out property to others in Idaho must follow all these requirements:
- Get an Idaho seller’s permit before leasing property in the state. Learn more about getting an Idaho seller’s permit.
- Collect and forward sales tax on the leased property to us. Any entity that can lease the property tax exempt must give you a completed Form ST-101 – Sales Tax Resale or Exemption Certificate.
- Report income from Idaho leases on your Idaho income tax return.
Idaho companies that lease out property in another state
Lessors collect Idaho tax on the first month’s lease payment for property used outside Idaho if the customer receives the property in Idaho.
- No Idaho tax: The lessor delivers the property to the customer outside of Idaho and the customer doesn’t use it in Idaho during the lease term.
- Idaho tax on the first lease payment only: The lessor delivers the property to the customer in Idaho and the customer uses it outside the state for the remainder of the lease term.
Note: When lessors don’t collect and forward Idaho tax, they must keep records documenting the point of delivery and place of use during the lease term.