Equipment Leasing and Finance Association - Equiping Business for Success

Taxation

Issue Overview

ELFA members contribute state and local tax revenue to governments across the country, paying sales and use taxes, personal and real property taxes, and general business taxes such as corporate income and gross receipts taxes. ELFA monitors state tax legislation of particular interest to the equipment leasing and finance industry, in addition to general tax legislation impacting the broader business community, such as changes to tax rates, collection and administration, and the Streamlined Sales Tax Project, to name a few.

ELFA also provides a State Tax Manual for members. This easily navigated reference guide, designed to aid equipment finance companies in tax compliance and planning, provides a comprehensive state-by-state analysis of sales and property taxes. The database can be searched by category or keyword, or can be browsed by state. Access the State Tax Manual.

Resources & Advocacy Materials

Sales and Use Taxation


  • Maine | Opposition Testimony for Legislation Threatening to Double Sales Tax.
    In May 2017, ELFA submitted opposition comments for Maine LD 1589, which amounts to double taxation resulting from failure to include a resale exemption when shifting from upfront sales tax collection on the lessors purchase of equipment to collection on the rental payments.
  • Colorado | Sales Tax Collection in Local Jurisdictions. In 2013, the Colorado Department of Revenue changed policy by declaring an out-of-state lessor that leases property in a local jurisdiction has created an obligation to collect sales tax in that local jurisdiction. Prior to this change in policy, out-of-state lessors were only required to collect a use tax (a lower rate) which excluded many state administered city and county taxes. ELFA questioned this reverse in policy in an ELFA Letter To The Colorado Department of Revenue concerning state administered local sales tax on leases that are not vehicles. Reasoning behind the policy change was provided in a Colorado Department of Revenue Response to ELFA. The Department subsequently posted a notice delaying implementation until July 1, 2015. Accordingly, for leases that start on or after July 1, 2015, the Department of Revenue policy requires out-of-state lessors to collect the higher sales tax rate on equipment leases in Colorado based on the location of the equipment. Motor vehicle leases still follow policy outlined in Colorado Department of Revenue’s “Notice: Local Tax Jurisdiction Nexus for Leased Property.
  • Illinois | Sales Tax Regulations. In the wake of the November 2013 Illinois Supreme Court decision in Hartney Fuel Oil Company v. Hamer, 2013 IL 115130 that invalidated the state's regulation on sourcing for local sales tax and prompted release of new sourcing rules, ELFA submitted comments to the Illinois Department of Revenue.
  • North Carolina | 2011 Sales Tax Decrease. The North Carolina Department of Revenue has issued guidance for lessors that the July 1, 2011 state sales and use tax rate decrease to 4.75 percent applies to all existing equipment leases. ELFA members should examine the North Carolina guidance for complete information, especially local tax application.
  • North Carolina | 2009 Sales Tax Increase. ELFA received guidance from the North Carolina Attorney General's Office on the proper application to existing lease contracts of the 2009 1 percent sales and use tax increase in response to ELFA’s request.
  • Sales Taxation on Personal Property Taxes Collected. ELFA has sought guidance from several states to the application of sales and use tax on personal property tax collected by a lessor from a lessee, including seeking guidance in Idaho (State Tax Commission response to ELFA request), District of Columbia (Office of Tax and Revenue response to ELFA request), and Utah (Tax Commission response to ELFA request). 
  • Streamlined Sales Tax Project. The SSTP is a voluntary multi-state compact to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance (read more about why SSTP is important for leasing here). ELFA supports and is an active participant in the SSTP, and has issued comments as SSTP relates to various states (such as ELFA comments on the alabama Streamlined Commission Preliminary Report in January 2012, or ELFA comments on the recertification of Kansas and West Virginia in September 2011).
  • Puerto Rico | Institution of Sales and Use Tax System. In 2006 Puerto Rico instituted a sales and use tax system to replace an underperforming general excise tax on imported goods (official English translation of the regulations here). During the legislative process, ELFA filed comments on Puerto Rico’s implementation of the sales and use tax.

General Business Taxation


  • Illinois | Request for Guidance Regarding 2014 Sourcing Regulations. In July 2014, ELFA formally requested implementation guidance regarding recently enacted sourcing rules. The request included 12 questions that arose in response to industry comments and were intended to demonstrate the high degree of uncertainty resulting from the new regulations.
  • Michigan | Replacement of the Michigan Business Tax. The Michigan Business Tax (MBT) that established problematic barriers to true leasing has been replaced by the Corporate Income Tax as presented in HB 4361 and HB 4362. HB 4361 replaced the complexities of the MBT with a 6 percent corporate income tax and eliminated a number of income and business tax exemptions. HB 4362 was companion legislation. Bank leasing subsidiaries will be taxed by the Net Capital Tax under the unitary reporting concept. ELFA member involvement was the key to years of collaborative advocacy with the Michigan Bankers Association.

Personal Property & Inventory Taxation


  • Illinois | Cook County Tax Defeated in Court. In August 2014, in Reed Smith v Cook County Department of Revenue, the Appellate Court of Illinois, First Judicial District struck down a Cook County, Illinois non-titled tangible personal property use tax on tangible personal property used in the county that was purchased outside of Cook County (e.g., computers, furniture, pencils, construction materials, equipment, etc.).