On January 1, 2022, Substitute Senate Bill 5628 went into effect in Washington state.
The bill implements a heavy equipment rental tax equal to 1.25% of the rental price of heavy equipment. There is close interplay between property rentals subject to the 1.25% tax and the new property tax exemption for heavy equipment rental property that must be claimed by April 30, 2022.
Washington businesses that receive more than 50% of their revenue from the rental of heavy equipment must now charge customers a 1.25% tax on the price of each in-state rental of heavy equipment.
The tax applies to rentals of heavy equipment rental property that are:
Examples include:
The heavy equipment rental tax is in addition to any applicable retail sales taxes. Businesses must enumerate the state retail sales tax and the heavy equipment rental tax when both apply.
This tax will be reported under the Heavy Equipment Rental Tax field in the Other Taxes section of the Combined Excise Tax Return. It will be remitted alongside retail sales tax and business and occupation tax.
The tax generally doesn’t apply in the following circumstances:
There’s a new property tax exemption for heavy equipment rental property effective for the 2021 personal property tax assessment year. The exemption applies to the same types of equipment subject to the 1.25% heavy equipment rental tax.
To claim the personal property tax exemption, businesses must submit an Application for Exemption of Heavy Equipment Rental form, along with a personal property tax listing, to a county assessor by April 30, 2022.
Companies planning to claim a personal property tax exemption for certain heavy equipment should be aware of the 1.25% heavy equipment rental tax applied to each rental of that same property.
For more information on how the new legislation may affect you, contact your Moss Adams professional.
You can also visit our State and Local Tax Services for additional resources.
Special thanks to Alex Pettibone, state and local tax senior, for his contributions to this article.