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Rental or Leasing Tax

Rental tax is a privilege tax levied on the lessor for the leasing or renting of tangible personal property.

The gross receipts, including any rental tax invoiced, from the leasing or rental of tangible personal property are subject to the State rental tax at the following rates:

  • Automotive vehicles:  1.5%
  • Linens/Garments:  2.0%
  • Other:  4.0%

This tax is due on true leases – those leases in which the title to the property is retained by the lessor at the end of the lease agreement or when the lessee has an option to purchase the item at the end of the lease agreement for the fair market value of the item.

Conditional sales leases are those in which the title of the property is transferred to the lessee at the end of the lease agreement or when the lessee has an option to purchase the item at the end of the lease agreement for $1 or a nominal amount with no option to return the leased item without purchasing. Conditional sales leases are subject to sales tax.

When equipment is under the control of and operated by employee of lessor, then the transaction is considered a service rendered and is not subject to rental tax.

Rental tax returns and remittances are due monthly on or before the 20th day of the month for the previous month’s rentals. However, a taxpayer may elect to file and pay state rental tax quarterly when the total state rental tax for which the taxpayer is liable averages less than $200 per month during the preceding calendar year. The election to file and pay quarterly shall be made in writing to the ADOR no later than February 20 of each year. Also, if a taxpayer’s total state rental tax liability during the preceding calendar year is $10 or less, the taxpayer may file local rental tax on a calendar year basis. No discounts apply for timely filing.

Note: If paying via EFT, the EFT payment information must be transmitted by 4:00 p.m. (Central Standard Time) on or before the due date, to be considered timely paid.

Local rental tax is levied in the same manner as the State rental tax; these rates vary.

Local rental tax is due monthly with returns and remittances to be filed on or before the 20th day of the month for the previous month’s rentals. However, a taxpayer may elect to file and pay state-administered local rental tax quarterly when the total state rental tax for which the taxpayer is liable averages less than $200 per month during the preceding calendar year. The election to file and pay quarterly shall be made in writing to the ADOR no later than February 20 of each year. Also, if a taxpayer’s total state rental tax liability during the preceding calendar year is less than $10, the taxpayer may elect to file state rental tax on a calendar year basis. No discounts apply for timely filing.

Note: If paying via EFT, the EFT payment information must be transmitted by 4:00 p.m. (Central Standard Time) on or before the due date, to be considered timely paid.