Oklahoma Administrative Code › Title 710 - Oklahoma Tax Commission › Chapter 65 - Sales and Use Tax › Subchapter 1 - General Provisions › Section 710:65-1-11 - Rentals and leases of tangible personal property

Current through Vol. 41, No. 20, July 1, 2024
(a)
Rental or lease of tangible
				personal property taxable.
The gross receipts or gross proceeds derived
				from the rental or lease of tangible personal property are subject to sales
				tax.
(b)
"Rental" or "lease"
				defined. "Lease"
or
"rental"
, as used in this Section,
				shall have the same meaning as set out in
				710:65-1-2.
(c)
Computation of the tax.
The
				tax shall be computed on the gross amount without any allowance for service,
				laundering, cleaning, maintenance, insurance, property taxes, etc., whether
				paid by the lessor or lessee. However, if the rental or lease charge is based
				on the retail value of the property at the time of entering the lease agreement
				and the life expectancy of the property, and the rental charge is separately
				stated from the service in the bill or invoice delivered to the lessee, tax
				shall be due only on the rental amount.
(d)
Taxability of vendor payments for
				insurance and property taxes.
The tax must be computed on the gross
				amounts of any charges billed to the purchaser to reimburse the vendor for
				insurance premiums or for property taxes paid.
(e)
Taxability of charges for damage
				waivers.
An optional charge for a damage waiver or a similar instrument
				that acts as a waiver of the lessor's right to collect from the lessee for any
				damage to the property is not considered part of the gross lease or rental
				charge, if separately stated.
(f)
Payment of tax by a contractor or lessor on equipment subsequently leased
				or rented.
Payment of a sales or use tax by a contractor or other lessor
				on equipment purchased for his/her own use and so used does not exempt
				subsequent rentals or leasing of the equipment from the sales tax.
(g)
Furnishing equipment with an
				operator.
The furnishing for a charge of equipment with an operator
				shall be considered a service and not subject to sales tax. Persons purchasing
				equipment for the purpose of furnishing said equipment with an operator must
				pay sales or use tax at the time the equipment is purchased.
(h)
Purchases by a vendor for renting
				or leasing.
Purchases by a vendor of tangible personal property for
				purposes of renting or leasing same are exempt from sales tax. If such
				equipment purchased exempt from taxation is rented with an operator or the
				vendor uses such equipment to perform a service, but the equipment remains in
				the rental inventory, the vendor should pay sales tax on the
"sales
				value"
, pursuant to
OAC
710:65-1-2.
(i)
Purchases of repair parts.
Purchases of repair parts made by a vendor who is engaged in renting or leasing
				tangible personal property, where the parts are to be incorporated into the
				tangible personal property subsequently rented or leased, are considered
				purchases for resale and may be purchased exempt from sales tax. Items such as
				oil, filters, and the like, which are purchased by the lessor, and are
				incorporated into the property transferred to the lessee, whether as part of
				the rental or lease agreement, or as separately billed items, are also included
				in the exemption described in this subsection.
(j)
Time of incidence of tax on
				leases.
(1) A lease of tangible
				personal property is a series of transactions in time units defined by the
				agreement of the parties. Gross receipts generated therefrom are taxable at the
				rate in effect at the time the payment must be or is made. The initial
				obligation to pay becomes fixed upon the transfer of possession of the tangible
				personal property unless the agreement specifically sets forth another time.
				Subsequent obligations to pay become fixed either by the terms of the
				agreement, trade practices of the lessor, or practice in a course of
				dealing.
(2) A lease of tangible
				personal property normally imposes upon the lessee multiple obligations. Each
				of these obligations may be treated separately by the agreement. The incidence
				of taxation upon each payment under the agreement will be determined by the
				obligation for which payment is made and the time at which such obligation to
				pay in fact arose.
(3) Some
				obligations to pay arise by the execution of an agreement while other
				obligations arise by reason of the voluntary activities of the parties during
				the term of the agreement. For example, the lease of an automobile for a fixed
				period of months may give rise to an unconditional obligation to pay a minimum
				monthly amount and an additional obligation to pay for all miles driven in
				excess of a specified amount. [
See:
68 O.S. §§
										1352,
				1354
				]