Charges for Maintenance Taxable as Part of Lease Proceeds

Sep 25th, 2014

A Louisiana Court of Appeals ("Court") recently ruled that the charge for cleaning rented portable toilets was taxable as part of the rental of the toilets.

The taxpayer provided waste management services, including leasing portable toilets and holding tanks. The taxpayer offered cleaning and sanitation services for these leased items. Customers were not required to purchase these services, but customers who chose not to purchase cleaning and sanitation services had to pay a higher rental fee.

The City of Baton Rouge taxes sales and leases of tangible personal property. It does not tax sales of cleaning services. The city sales tax applies to the gross proceeds of a sale or lease.

The Court ruled that the taxpayer's charges for its services were part of the gross proceeds from the lease of tangible personal property. The essence of the transaction between the taxpayer and its customers was a taxable lease. The charge for services could not be separated from the charge for the lease. The charge for services was therefore taxable.