Missouri: Portable Toilet Rentals are Taxable Rentals of Tangible Personal Property

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Detailed Missouri Development

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The Missouri Administrative Hearing Commission recently addressed the taxability of portable toilet rentals.  The taxpayer at issue, Gotts To Go, rented portable toilets and mobile office trailers, and provided related services to customers. When a toilet was rented, the taxpayer delivered it, picked it up at the end of the rental period, and cleaned and serviced the toilets on an as-needed basis or by special call.  With rentals of a short duration, the taxpayer might not service the toilets during the rental period.  When it purchased the toilets initially, the taxpayer did not pay sales, tax and it did not charge customers sales tax on the toilet rentals. After an audit, the taxpayer was assessed sales tax and interest on the rental of the portable toilets.

Under Missouri law, sales and use tax is imposed on rentals of taxable tangible personal property when the business renting the property did not pay sales tax on the initial purchase. The taxpayer, however, argued that the true object of its transactions was the provision of a nontaxable service. On appeal, the Administrative Hearing Commission ruled that the taxpayer’s customers were “primarily seek[ing] the use of the rental of a tangible, portable toilet unit.” In reaching this conclusion, the Commission noted that the taxpayer’s website stated that it rented clean sanitary “units,” and the taxpayer informed interested customers that it had “portable toilets” available for rent. Furthermore, there were times when the taxpayer did not provide cleaning services during the course of a rental and would only provide services on an as-needed or special call basis.  The taxpayer also argued that even if its rental was taxable, it was exempt under a sales and use tax exemption for “[m]achinery, equipment, appliances and devices purchased or leased and used solely for the purpose of preventing, abating or monitoring [air] and water pollution.”   The Commission rejected this argument, noting that the taxpayer did not purchase toilets for the “sole” purpose of abating water pollution, but rather purchased them to use in a for-profit business. For more information on Gott v. Director of Revenue, please contact John Griesedieck at 312-665-3024.

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Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US