Are crane leases and rentals with an operator subject to sales tax?

Act 11 of the 2024 Third Extraordinary Session of the Louisiana Legislature repealed La. R.S. 47:301(7)(k) effective January 1, 2025. La. R.S. 47:301(7)(k) provided a sales and use tax exclusion for the lease or rental of cranes and related equipment with operators. However, the repeal of La. R.S. 47:301(7)(k) does not automatically mean that all leases or rentals of cranes with operators have become taxable. Leases and rentals of cranes with operators are now treated the same as other leases and rentals with operators.

LAC 61:I.4301 “Lease or Rental” (c)(i) and (ii) address leases and rentals with operators and remains LDR’s position on this question. This regulation provides:

(c)(i) A lease or rental does not include providing tangible personal property with an operator who provides some additional service for a fixed or indeterminate period of time when the essence of the transaction is the performance of a service. The essence of the transaction is to provide a service when obtaining the tangible personal property is not an end in and of itself but rather furnishes the mechanism through which a service is provided.

(ii) In order to determine the essence of a transaction involving both the performance of a service and the providing of tangible personal property, the facts and circumstances of each transaction must be examined. The following factors suggest, but are not necessarily conclusive, that the essence of the transaction is for the performance of a service:

(a) In order for the tangible personal property to perform as designed, the owner's operator maintains control over the property. This level of control by the owner’s operator involves more than maintaining, inspecting, or setting-up the property;

(b) The contract between the owner of the property and the person receiving the services and property provides for the performance of a specific job that requires services for a certain number of hours or until completion of a specific job;

(c) The performance of the job using the tangible personal property is conducted in a manner determined by the owner of the property;

(d) The owner of the tangible personal property is responsible for choosing the particular piece of property to be used in the transaction; or

(e) The owner of the tangible personal property has a standard business practice of not allowing customers to rent the property separately from the services provided.

If the facts and circumstances indicate that the essence of the transaction is the performance of a service then the lease or rental of a crane with an operator will be treated as a non-taxable service.