Construction Accounting Article -
Connecticut Sales and Use Tax - Surcharge Imposed on Rental of Machinery (on or after July 1, 2005)

Target Audience: Construction Industry Professionals in Connecticut, Tax Information Interest, Rental Companies

For Connecticut sales and use tax purposes, a 1.5% surcharge is imposed on machinery rented within the state by a rental company to a lessee for a period of fewer than 31 days. The surcharge is imposed on the total amount the rental company charges for the machinery rental, it mirrors the existing 3% surcharge on car and truck rentals, and is in addition to any tax otherwise applicable to such a transaction. Moreover, the surcharge (1) is included in the company's sales and use tax receipts, (2) must be collected by the machinery rental company from the renter, and (3) must be separately stated on the machinery rental contract.

"Machinery" is defined as heavy equipment without an operator that may be used for construction, mining, or forestry, including but not limited to bulldozers, earth-moving equipment, well-drilling machinery and equipment, or cranes. A "rental company" is any business entity that is engaged in the business of renting such machinery and has a rental fleet of at least five pieces of machinery in Connecticut.

The surcharge reimburses the rental company for Connecticut property taxes and Department of Motor Vehicles registration and titling fees actually paid on the equipment. Any surcharge amounts collected in excess of those costs must be remitted to the Department of Revenue Services by February 15th each year. Reporting, payment, and penalty provisions applicable to the existing surcharge are extended to the newly enacted surcharge.

Find out how our expertise in construction accounting can add value to your business. Email us or call us at 1 (888) 875-9770.

related links

Construction Newsletters & Articles

Specialized Construction Services

Construction Contract Audits

Construction Resources

Auditing & Accounting

Seminars & Events