Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-6-5 - USE TAX LAW; CONTRACTORS GROSS RECEIPTS TAX; LODGINGS TAX; RENTAL TAX; UTILITY TAXES; MISCELLANEOUS RULES › Section 810-6-5-.09.01 - Leasing And Rental Of Tangible Personal Property - Rule No. 2

Current through Register Vol. 42, No. 9, June 28, 2024
(1)
								§
								40-12-222,
Code of Ala. 1975
, as amended, levies a privilege or
			 license tax upon every person, firm or corporation engaged or continuing within
			 this state in the business of leasing or renting tangible personal property an
			 amount equal to four percent of the gross proceeds of any such business, except
			 the rate of two percent shall apply to the gross proceeds derived by the lessor
			 for the leasing or rental of linens and garments, and one and one-half percent
			 shall apply to the gross proceeds derived by the lessor for the leasing or
			 rental of automotive vehicles, truck trailers, semitrailers, and house
			 trailers.
(2)
								§
								40-12-220(4) of the rental tax law defines gross proceeds as the value proceeding or
			 accruing from the leasing or rental of tangible personal property, including
			 any license or privilege taxes passed on to a lessee by a lessor, without any
			 deduction on account of the cost of the property so leased or rented, the cost
			 of materials used, labor or service cost, interest paid, or any other expense
			 whatsoever, and without any deductions on account of loss, and shall also
			 include on the part of any person claiming exemption under subdivision (4) of
			 §
								40-12-223 an amount equal to the amount of rental paid on any tangible personal property
			 acquired under such exemption and thereafter diverted to the use of such
			 person.
(3) The gross proceeds
			 derived by the lessor of tangible personal property for services provided which
			 are incidental to the lease of the property and embodied in the lease agreement
			 are subject to rental tax, even if the charge for such service is separately
			 stated. When, under a separate optional agreement, the lessor of tangible
			 personal property performs independent services that are separate, distinct,
			 and not incidental to the leasing of the property, the gross proceeds from
			 those independent services are not derived from the lease and are not subject
			 to rental tax. To be excluded from the amount subject to rental tax, the
			 charges for the independent services must be separately stated.
(a) When a lessor engaged in leasing or
			 renting tangible personal property requires maintenance of the item leased or
			 rented as part of the leasing or rental contract, the gross proceeds derived
			 therefrom, including charges for maintenance, will be subject to the tax. When
			 there is a separate, optional contract for maintenance only, the rental or
			 leasing tax will not apply to the gross proceeds derived therefrom.
(b) When a lessor engaged in leasing or
			 renting tangible personal property is required to deliver and pick-up the
			 leased property as part of the leasing or rental contract, the gross proceeds
			 derived therefrom, including the delivery and pick-up charges, will be subject
			 to the tax. A separate agreement for delivery and pick-up services is
			 considered part of the lease agreement and the delivery and pick-up fees are
			 subject to the rental tax. A lessor cannot separate the delivery and pick-up
			 fees as a means to avoid the rental tax.
(c) When a lessor engaged in leasing or
			 renting tangible personal property is required to provide installation or setup
			 services as part of the leasing or rental contract, the gross proceeds derived
			 therefrom, including charges for the installation or setup, will be subject to
			 the tax. When there is a separate, optional agreement for installation or setup
			 of the leased property, the rental tax will not apply to the gross proceeds
			 derived therefrom. (Thyssenkrupp Safeway, Inc. v. State of Alabama (Admin. Law
			 Div. Docket No. S. 08-401, Final Order entered March 18, 2009))