How did Louisiana tax temporary portable-toilet rentals, cleaning and sanitation, and separately stated delivery and pickup charges?

Plain-English summary

Temporary portable-toilet facilities were taxable rentals, not nontaxable sanitation services.

The taxable base included the rental charge plus waste-removal, cleaning, and sanitation charges, whether or not those services appeared as separate invoice lines. The Department treated them as operating and maintenance costs of the leased property.

Under the Department's position when the ruling was issued, separately stated delivery and pickup charges were excluded from the rental tax base.

How the sample transaction was treated

The customer received possession and use of a movable portable toilet for one week without acquiring title. That made the arrangement a lease or rental of tangible personal property.

The provider's visits to remove waste and sanitize the facility did not change the transaction into a nontaxable service. Those costs kept the leased facility usable and were included in gross proceeds.

Provider purchases and transition rule

Portable toilets and other durable property acquired exclusively for lease or rental could be purchased tax-free under La. R.S. 47:301(10)(a)(iii).

Because some providers had previously treated themselves as nontaxable service businesses and paid tax when buying the units, the Department allowed qualifying dealers to apply the ruling prospectively from September 19, 2006. A dealer using that prospective treatment could not also claim that its earlier units had been acquired tax-free for rental.

Common questions

Q: Was the portable-toilet charge taxable?

A: Yes, as a lease or rental of tangible personal property.

Q: Were cleaning and waste-removal charges taxable?

A: Yes, even when separately stated.

Q: Were delivery and pickup taxable?

A: The ruling excluded separately stated delivery and pickup charges under the Department's position at that time.

Q: Could providers buy rental units tax-free?

A: Yes, when the units were acquired exclusively for lease or rental as tangible personal property.

Citations and references

• La. R.S. 47:301(7)(a), (10)(a)(iii), and (16)(a)
• La. R.S. 47:302(B), 47:321(B), 47:331(B), and 47:306(A)(2)(a)
• LAC 61:I.4303.B.1.e — rental operating and maintenance costs
• McNamara v. Patterson Services, Inc., 382 So. 2d 971 (La. App. 1st Cir. 1980)
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 06-013

Original ruling text

Revenue Ruling
No. 06-013
September 19, 2006
Sales and Use Tax
Furnishing of Portable Toilet Facilities
The purpose of this revenue ruling is to discuss the state sales tax treatment of transactions for the furnishing of temporary portable toilet facilities. Facts A company arranges for a portable toilet facility to be located on its property for a period of one week. The owner of the portable toilet delivers it to the customer’s desired location. The owner returns to the customer’s location on day 3 and on day 5 to remove waste and to sanitize the facility. The owner returns to the customer’s location at the end of the week to empty and sanitize the facility and to pick up and return the facility to the owner’s location. Charges for delivery, waste removal, sanitation, and transportation back to the owner’s location are listed as separate line items on the owner’s invoice to the user of the portable toilet facility. Issue Is the state sales tax due on the furnishing of the portable toilet facilities? If so, are the separate charges for periodic waste removal and sanitation, delivery and pick up of the property within the taxable base? Analysis La. Rev. Stat. Ann. § 47:302(B), 321(B), 331(B), and the sales tax ordinance of the Louisiana Tourism Promotion District each levy a tax on “the gross proceeds derived from the lease or rental of tangible personal property … where the lease or rental of such property is an established business, or part of an established business, or the same is incidental or germane to the said business” and upon “the monthly lease or rental price paid by lessee or rentee, or contracted or agreed to be paid by lessee or rentee to the owner of the tangible personal property.” La. Rev. Stat. Ann. § 47:301(7)(a) defines the term “lease or rental,” in pertinent part, as “the leasing or renting of tangible personal property and the possession or use thereof by the lessee or renter, for a consideration, without transfer of the title of such property”. La. Rev. Stat. Ann. § 47:301(16)(a) defines the term “tangible personal property,” in pertinent part, as “personal property which may be seen, weighed, measured, felt or touched, or is in any other manner perceptible to the senses.” The portable toilet is clearly classifiable as “tangible personal property” because it is movable and is perceptible to the senses. The transaction for the use of the facility is a “lease or rental” because the customer pays a consideration for the right to use the property without acquiring the title to the property. La. Admin. Code tit. 61:I.4303(B)(1)(e) provides that “operating expenses and maintenance costs for keeping leased property in repair cannot be deducted from gross proceeds in arriving at the taxable base.” Under this section of the Louisiana Administrative Code, the charges to the customer for waste removal and sanitation of the portable toilets are included in the taxable base.

Revenue Ruling No. 06-013
Page 2 of 2

The department, at this time, is following the judicial decision in McNamara v. Patterson Services, Inc., 382 So. 2d 971(La. App. 1 Cir. 1980) in which the First Circuit Court of Appeal concluded that charges by the lessor for delivery to the customer’s location of leased or rented property do not form part of taxable “gross proceeds.” At this time the department does not apply sales tax to any separately stated charges for the delivery and pick up of the leased or rented property. Conclusion Transactions for the furnishing for consideration of the temporary use of portable toilet facilities are taxable as leases and rentals. The taxable base will include the charges for the lease or rental, as well as any charges for the cleaning and sanitation of the facilities, regardless of whether those charges are or are not separately stated. Any separately stated charges for the delivery and pick up of the property are excludible from the taxable base on the lease or rental of the property. The tax on leases and rentals must be remitted by the 20th of the months following the months in which payments for leases and rentals are collected, as provided by La. Rev. Stat. Ann. § 47:306(A)(2)(a). The portable toilet facilities and other durable tangible personal property that providers acquire for the exclusive purpose of lease or rental as tangible personal property are eligible for tax-free purchase, as provided by La. Rev. Stat. Ann. § 47:301(10)(a)(iii). Ruling Is Prospective Because of their on-site visits for waste removal and sanitation of facilities, some in the industry have considered themselves as providers of non-taxable services, rather than as lessors or rentors of tangible personal property. For dealers who have not collected the sales tax on these transactions, but who themselves paid the sale or use tax on the portable toilet facilities as property being used in rendering non-taxable services, this ruling will be applied prospectively from the date of issuance. Dealers who elect to apply this ruling prospectively will not be recognized as eligible to have made tax-free purchases or importations of portable toilet facilities, as provided by La. Rev. Stat. Ann. § 47:301(10)(a)(iii). All dealers, however, will be required to collect the sale or use tax on leases and rentals of portable toilet facilities as of the effective date of this ruling, regardless of whether the sales or use tax was paid on particular units of property that are leased or rented after the effective date. For more information regarding this topic, taxpayers should contact the Taxpayer Services Division at 225.219.7356. Cynthia Bridges Secretary By:

Raymond E. Tangney
Senior Policy Consultant
Policy Services Division

A Revenue Ruling is written to provide guidance to the public and to Department of Revenue employees. It is issued under LAC 61:III.101.C to apply principles of law to a specific set of facts. A Revenue Ruling does not have the force and effect of law and is not binding on the public. It is a statement of the Department's position and is binding on the department until superseded or modified by a subsequent change in statute, regulation, declaratory ruling, or court decision.