As the name suggests, sales taxes almost always apply to sales of tangible items. But can rentals of tangible items also be taxed? Rentals are taxable in many states, although not all of them, and Arizona is one state that places taxes on rented property.
What kinds of rentals are taxable? Any company that is in the business of renting tangible property to others is subject to taxes. Some of these types of property include:
- Clothing, linens, and towels
- Vehicles such as cars, boats, or trucks
- DVDs, video games, and movies
- Construction equipment
- Restaurant equipment
- Gardening tools
- TVs and other electronics
- Home appliances
A company must pay taxes for all rentals, even if rentals are not its primary business. An electronics store that also rents out some items must pay taxes on those rentals.
There are a number of exceptions and special cases to these rules. For example, an item that is purchased by a business intending to rent out it out, is not taxable at the time of purchase – these items are considered ‘sale for resale’ purchases, which makes them exempt. Also, rentals to some nonprofit organizations may be exempt from tax.
Although the tax rules of each state can be difficult to navigate, you can comply with all regulations if you follow the right advice. Taxify is ready to help your business out.