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Business Taxes Law Guide—Revision 2024

Sales and Use Tax Annotations


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330.0000 Leases of Tangible Personal Property—In General—Regulation 1660

Annotation 330.2843

(a) In General


330.2843 Services/Deliveries in Conjunction with Rentals. The following covers the application of tax to the leasing of oil well equipment and tools as well as servicing of such leased items:

(1) The lessor makes a separately stated charge for service personnel's visit to the customer's site pursuant to a tool lease agreement. The service personnel provide advisory service to assist the lessee in the proper utilization of the tools.

If such services are a mandatory condition to leasing the taxpayer's tools, the charges are taxable as services which are part of the sale (lease). On the other hand, if the customer is not required to acquire the taxpayer's services with the tools as a condition of his lease, tax would not apply to the charges for service.

(2) In delivering tools to the lessee by the service personnel, the taxpayer makes a mandatory separate round trip charge on the invoice.

The separate itemization on the invoice of a round trip mileage charge does not qualify for exclusion from the taxable measure as separately stated transportation charges. A round trip mileage charge will not suffice as a separately stated transportation charge since a portion of such charges is for the service personnel's return trip. Accordingly, such a charge is taxable even if the lease commences prior to transportation to the customers.

(3) As a condition of the lease, the lessee must pay for the first eight hour period or fraction thereof. This charge and the charge for "additional periods" and the "misrun charges" include the charge for the taxpayer's technical specialist.

The lessee's agreement is to pay these charges as a condition precedent to the lease of the tools and, accordingly, the charges are taxable. However, the "call back or retrieving charge" which applies if the technical specialist is released by the customer and later returns at the customer's request is an exempt charge for services. 10/29/82; 1/3/83.