Washington Sales Tax for Contractors - Equipment Rental
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6/30/20262 min read
Equipment Rental – Single Payment
If a single payment is made and the contractor picks up the equipment at the location of the rental company, the sales tax rate and location code are based on the location of the rental company.
If a single payment is made but the equipment is delivered to the contractor at another location, the sales tax rate and location code is based on the location where the contractor receives the equipment.
Equipment Rental – Periodic Payments
If the item is rented or leased for a length of time and periodic payments are made, the first payment is coded to the location where the contractor receives the equipment, normally the location of the rental company.
All subsequent payments are coded to the location where the equipment is primarily used by the contractor.
Equipment Rental with Operator Services
The Department presumes that providing equipment along with an operator to a construction contractor is a retail sale unless it can be demonstrated that the business providing the equipment with operator is responsible for installing, connecting, or affixing construction materials or equipment to land or improvements.
Equipment Rental with Operator Services - Example
A business is hired by a prime contractor to provide a crane and a crane operator to work under the direction of the prime contractor to move construction materials and equipment to various locations at the construction site. The business providing the crane and crane operator must charge sales tax to the prime contractor because this activity is considered the rental of equipment with an operator (not a construction service) since that business has no responsibility to actually install or affix materials or equipment to the real property under construction. In addition, the charges for this service are taxable under the retailing B&O tax classification. The crane business cannot accept a reseller permit from the prime contractor.
Equipment Rental with Subcontractor Services
If the business providing the equipment and operator is contractually responsible for the completed construction, such as installing, connecting, or affixing materials to land or buildings, then it must report its income based on the nature of the activities performed (for example, wholesaling, government contracting, or public road construction, as the case may be).
For a custom construction contract, a business providing the equipment and operator can accept a reseller permit from the prime contractor and not collect sales tax.
In this limited case it reports under the wholesaling B&O tax classification and sales tax does not apply.
However, where the construction is taxable as government contracting or public road construction, the charges for providing the subcontractor services are taxable under the government contracting or public road construction B&O tax classification (not wholesaling).
Equipment Rental with Subcontractor Services - Example
A crane operator is hired by a prime contractor to install the HVAC system on the top of a commercial building and must bolt the HVAC system to the roof top framework. In this case, the business providing the equipment and operator is taxable as a subcontractor and may accept a reseller permit from the prime contractor and report under the wholesaling B&O tax classification (sales tax will not apply).
Source: Washington State Department of Revenue (WA DOR)