SENATE BILL REPORT

                                    SB 5773

                             AS OF MARCH 12, 1991

Brief Description:  Exempting from sales tax certain rental or leased property.

SPONSORS:Senator Cantu.

SENATE COMMITTEE ON WAYS & MEANS

Staff:  Terry Wilson (786‑7715)

Hearing Dates:March 4, 1991

BACKGROUND:

Property that is purchased for resale is exempt from the retail sales tax because it is not a retail sale.  For the same reason, the renting and leasing of tangible personal property for resale without intervening use by the lessee is not subject to the retail sales tax.

The renting and leasing of personal property to consumers is subject to sales tax.  Only one sales tax applies to the rental.  If the lessee uses the rented personal property in making another retail sale, the lessee must collect tax on the charge to the lessee's buyer.  Since the charge includes the tax paid on the rented property, it appears that the sales tax is imposed twice.  This situation occurs when rented personal property is used to make another retail sale.

SUMMARY:

The renting or leasing of tangible personal property is exempt from retail sales and use taxes if the property is used in making another retail sale.

Appropriation:  none

Revenue:  none

Fiscal Note:  requested February 19, 1991

TESTIMONY FOR:  None

TESTIMONY AGAINST:  None

TESTIFIED:  No one