DRS: OCG-1, Office of Counsel Guidance Regarding the Rental Surcharge

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

450 Columbus Blvd.
Hartford CT 06103-5032
OCG-1
 
Office of Counsel Guidance

Regarding the Rental Surcharge


This publication is intended to provide immediate guidance on emerging issues created by the changes to the Motor Vehicle and Machinery Rental Surcharge that were made by P.A. 15-244.  The Department of Revenue Services (DRS) will update this guidance as it receives additional questions.  Any information added after the initial publication will include the date on which the information was added.  This guidance is binding on the DRS only until superseded or modified by a change in statute, regulation, court decision, ruling or other formal publication.

 

Question 1:  What impact does the change to the definition of “rental company” contained in Conn. Gen. Stat. §12-692(a)(3) have on companies that were collecting the rental surcharge on motor vehicles and machinery?

Answer:  The definition of “rental company” was amended by P.A. 15-224, §107, to provide that a company must receive at least 51% of its total annual revenue from rental income, excluding retail or wholesale sales of rental equipment.  Based upon the legislative history, the legislature added this language with the intention of limiting the number of companies that would qualify as rental companies that could collect the rental surcharge.  For this reason, a company must be in the business of renting passenger motor vehicles, rental trucks without a driver, or machinery, under the prior definition of machinery that referenced the rental of heavy equipment used in construction, forestry, or mining, in order to collect the rental surcharge.

Question 2:  What year should a company use to determine whether more than 51% of its annual revenue is rental income?

Answer:  A company should use its most recently completed year for which a Connecticut corporation business tax return, composite income tax return, or individual income tax return has been filed.

Example: A company’s tax year ends on December 31. As of July 1, 2015, the most recently completed year for which a tax return was filed would either be the 2014 tax year, if already filed, or the 2013 tax year, if the company received an extension of time to file.

Question 3:  What impact does the change to the definition of “machinery” contained in Conn. Gen. Stat. §12-692(a)(5) have on companies that were collecting the rental surcharge on machinery?

Answer:  The definition of “machinery” was amended by P.A. 15-224, §107, to provide that machinery means all equipment owned by a company that qualifies as a rental company.  Equipment should be given its commonly understood meaning and include the implements (machinery and tools) used in an operation or activity.  Such activities include, but are no longer limited to, construction, mining and forestry.

Question 4:  Will the rental of storage bins be subject to the 1.5% rental surcharge?

Answer:  No, storage bins are not an implement used in an operation or activity.  Therefore, they are not included in the definition of machinery.

Question 5:  Will the rental of motor vehicles that would otherwise be subject to the 3% surcharge now be subject to the 1.5% surcharge in addition to or instead of the 3% surcharge?

Answer:  No.  The change to the definition of machinery does not impact the motor vehicle rental surcharge.  Accordingly, motor vehicles that were subject to the 3% surcharge remain subject to the 3% motor vehicle surcharge.

Question 6:  Will the rental of motor vehicles that would otherwise be excluded from the 3% surcharge now be subject to the 1.5% surcharge?

Answer:  No.  “Machinery,” “passenger motor vehicle” and “rental truck” are separately defined terms.  The change to the definition of “machinery” does not impact the definition of “passenger motor vehicle” or “rental truck,” and does not expand the scope of the vehicles that are subject to the surcharge.  Accordingly, motor vehicles that are currently excluded from the definition of passenger motor vehicle or rental truck remain excluded from the rental surcharge.

Question 7:  If a rental company (Company A) rents equipment to another rental company (Company B) for lease to a consumer, which rental company should collect the rental surcharge?

Answer:  Under these facts, neither rental company should collect the rental surcharge.  The definition of lessee, which excludes other rental companies from being subject to the rental surcharge, prohibits Company A from collecting the rental surcharge from Company B.  The definition of equipment, which requires ownership of the equipment, prohibits Company B from collecting the rental surcharge from the consumer.


Additional Questions Regarding the Revisions to the Rental Surcharge Statutes: Send an e-mail to the DRS Office of Counsel at legal.division@po.state.ct.us

For Further Information Regarding Registration, Filing or Collection: Call the DRS during business hours, 8:30 a.m. to 4:30 p.m., Monday through Friday:

·         1-800-382-9463 (Connecticut calls outside the Greater Hartford calling area only); or

·         860-297-5962 (from anywhere).

TTY, TDD, and Text Telephone users only may transmit inquiries anytime by calling 860-297-4911.

For Forms and Publications: Visit the DRS website at www.ct.gov/DRS


OCG-1
Rental Surcharge
Issued: 10/16/2015