Rental of Equipment with Operator Services

The Department presumes that providing equipment along with an operator to a construction contractor is a retail sale unless it can be demonstrated that the business providing the equipment with operator is responsible for installing, connecting, or affixing construction materials or equipment to land or improvements. (See exception for concrete pumping).

Example A
A business is hired by a prime contractor to provide a crane and a crane operator to work under the direction of the prime contractor to move construction materials and equipment to various locations at the construction site. The business providing the crane and crane operator must charge sales tax to the prime contractor because this activity is considered the rental of equipment with an operator (not a construction service) since that business has no responsibility to actually install or affix materials or equipment to the real property under construction.  In addition, the charges for this service are taxable under the retailing B&O tax classification.  The crane business cannot accept a reseller permit or a resale certificate from the prime contractor. 

Subcontractor Services

If the business providing the equipment and operator is contractually responsible for the completed construction, such as installing, connecting, or affixing materials to land or buildings, then it must report its income based on the nature of the activities performed (i.e., wholesaling, government contracting, or public road construction, as the case may be).  For a custom construction contract, a business providing the equipment and operator can accept a reseller permit or resale certificate from the prime contractor and not collect sales tax. In this limited case, it reports under the wholesaling B&O tax classification and sales tax does not apply.

However, where the construction is taxable as government contracting or public road construction, the charges for providing the subcontractor services are taxable under the government contracting or public road construction B&O tax classification (not wholesaling).  Subcontractor services performed in Indian Country for a prime contractor are subject to B&O tax under the wholesaling classification. The subcontractor does not qualify for exemption for construction in Indian Country unless they have contracted directly with the Tribe or a Tribal member.

Example B
A crane operator is hired by a prime contractor to install the HVAC system on the top of a commercial building and must bolt the HVAC system to the roof top framework. In this case, the business providing the equipment and operator is taxable as a subcontractor and may accept a reseller permit or resale certificate from the prime contractor and report under the wholesaling B&O tax classification (sales tax will not apply).

Working Directly for Landowner

Fees for providing equipment with an operator to a landowner (e.g., speculative builder) is taxable as a retail sale regardless of whether such services are considered rental of equipment with operator services or “subcontractor services.”   

Concrete Pumping

The Department presumes that concrete pumping services are construction services (not the rental of equipment with an operator).  The charges for this service are taxed based on the nature of the activities performed.  Charges for construction services performed for a landowner/speculative builder are generally retail sales.  Charges for construction services performed for another contractor are taxed under wholesaling, if a resale certificate or reseller permit is obtained, government contracting, public road construction, etc., as the case may be.

For further information, see our Construction Tax Guide and the Indian Tax Guide.