Starting January 1, 2019, Indiana will implement a new excise tax on the rental of heavy equipment and construction equipment. The new Indiana excise tax will be assessed on equipment that is rented without an operator and from a location in Indiana, and the tax will be 2.25% of the gross retail rent value.
During the legislative session for 2018, the Indiana General Assembly enacted and the Governor signed into law House Enrolled Act No. 1323. The law imposes an excise tax of 2.25% of the gross retail income received by the retail merchant on heavy equipment rentals starting on January 1, 2019.
Heavy rental equipment is defined as property:
- owned by a person or business that is in the business of renting heavy equipment, including any attachments;
- is classified under 532412 of the North American Industry Classification System Manual in effect on January 1, 2018;
- not subject to registration for use on a public highway; and
- not intended to be permanently affixed to any real property.
This new Indiana excise tax applies to heavy rental equipment without an operator such as:
- Bulldozer rental or leasing
- Construction machinery and equipment rental or leasing
- Crane rental or leasing
- Earth moving equipment rental or leasing
- Forestry machinery and equipment
- Heavy construction equipment rental
- Logging equipment rental or leasing
- Oil field machinery and equipment rental or leasing
- Oil well drilling machinery and equipment rental or leasing
- Welding equipment rental or leasing
- Well drilling machinery and equipment rental or leasing
The Indiana excise tax is not applied if:
- The equipment is rented for mining purposes or heavy equipment that is eligible for a property tax abatement deduction during the calendar year it is rented
- The rentee is the US Government, the state of Indiana, a political subdivision or an agency or instrumentality of an aforementioned entity
- It is a transaction of sub-rent from a rentee to another person and the rentee was liable for the tax imposed
What is Excise Tax?
Excise tax, sometimes referred as “duty,” is a tax on use or consumption of certain products. They can be included in the price of a product, such as gasoline, cigarettes and alcohol, as well as be imposed on some activities, like gambling. Both the federal government and state governments can impose excise tax.
To report excise taxes, businesses will need to file Form 720 quarterly. Form 720 needs to be filed quarterly, and it is due a month after the end of each quarter.
- Quarter 1 (January 1 – March 31): File by April 30
- Quarter 2 (April 1 – June 30): File by July 31
- Quarter 3 (July 1 – September 30): File by October 31
- Quarter 4 (October 1 – December 31): File by January 31
How is an excise tax different from a sales tax?
There are two main differences between excise tax and sales tax are:
- There are a few specific goods that have an excise tax, whereas sales tax is applied to just about everything you purchase
- Excise tax is placed on the production of goods, while sales tax applies to the sale of goods
Where applicable, the manufacturer will pay excise tax because it occurs during the production. On purchases with sales tax, the end user pays the sales tax.
If you are a construction or heavy rental equipment business in Carmel, Westfield or the greater Indianapolis area needing help with your tax preparation, or would like to know more about the new Indiana excise tax, request your free consultation with Watson CPA today!