About Heavy Equipment Rental Tax (HERT)
In 2018, the Legislature passed House Bill (HB) 4139, establishing the Heavy Equipment Rental Tax (HERT). The 2 percent tax applies to the rental price of heavy equipment and tools when rented from a qualified heavy equipment (QHE) rental provider. QHE rental providers must register with DOR annually. For 2019, QHE rental providers must register by December 31, 2018. The tax went into effect on January 1, 2019. The rental tax essentially replaces the current personal property tax on heavy equipment and tools that are held primarily for rent. Revenue from the rental tax is dedicated to Oregon counties and local jurisdictions. DOR may keep up to 5 percent of revenue for administrative costs. The rental tax applies specifically to the short-term rental of heavy equipment and tools when rented from a QHE rental provider.
Registration
To register for a heavy equipment rental tax account, go to
Revenue Online. Under Quick Links, click "Register and apply" from the Registrations menu and then select "Register for a business tax."
You'll need the following information to complete the registration process:
- Name, mailing address, and federal tax identifier of the entity you are registering. The federal identifier may be a federal employer identification number (FEIN), Social Security number (SSN), or individual taxpayer identification number (ITIN).
- Name, mailing address, and federal identifier (FEIN, SSN, or ITIN) of all company owners and officers.
- The date you began renting taxable equipment after January 1, 2018.
- A Revenue Online account login or a valid email address to create a Revenue Online account.
Returns & Payments
QHE rental providers are required to collect and remit the tax for each rental facility location by county. Tax returns and payment are due quarterly. QHE rental providers must be logged-in to Revenue Online to file a return. Zero returns are required, and standard late penalties and interest apply.
Quarterly filing due dates
If due date is a weekend or holiday, the return is due the next business day.
Additional information
Am I a qualified heavy equipment rental provider?
To meet the required threshold to be a “qualified" provider, over 50 percent of the revenue that was earned from renting personal property during the prior fiscal year must have been earned specifically from renting heavy equipment, attachments, associated trailers, and other equipment and tools that:
- Are mobile (meaning that the item can be moved from worksite to worksite);
- Can be used for construction, mining, earthmoving, or industrial applications; and
- Rented without an operator but typically require an operator for use.
When determining whether the minimum +50 percent threshold has been met, rental revenue received from the following transactions is excluded:
- Renting equipment with an operator;
- Renting equipment for a single, defined term of more than 365 days;
- Renting equipment from a facility located outside of Oregon; and
- Renting equipment to an affiliate.
Anyone meeting the above requirements is considered a qualified heavy equipment rental provider, required to register with DOR annually. (For further info on determining whether a business is a qualified provider, refer to OAR 150-307-0900.
A rental provider with no rental revenue from their prior fiscal year must still register if they expect to meet the +50 percent threshold in the next year.
What equipment and tools are subject to tax?
Once a rental provider has determined that they meet the threshold to be a “qualified heavy equipment rental provider," the rental tax applies to all heavy equipment, heavy equipment attachments, associated trailers, and other equipment and tools that they rent that meet the following conditions:
- Mobile (can be moved from worksite to worksite);
- Can be used for construction, mining, earthmoving, or industrial activities;
- Would otherwise be subject to property tax; AND
- Are rented for a term less than 365 days, or under an open-ended or undefined rental term.*
*When determining the length of a rental agreement, each term and any extensions or amendments extending the rental agreement beyond the initial term are considered
separately. See OAR 150-307-0905 and OAR 150-307-0920. Equipment that is subject to HERT is exempt from property tax.
The rental price does NOT include:
- Delivery and pick-up fees;
- Damage waivers;
- Environmental mitigation fees; AND
- An operator's services (if the equipment is rented with an operator).
Frequently Asked Questions
Equipment and tools rented for a single defined term of 365+ days
Any equipment or tools rented for a single, defined term of 365 consecutive days or more, is NOT subject to rental tax. The equipment/tools ARE subject to property tax and must be reported to the appropriate county assessor.
Note: When determining the total length of a rental agreement, the initial rental term and any extensions or amendments extending the agreement are considered separately. For example, equipment is rented for a six-month term and the agreement is later extended for an additional seven months. Each term is considered separately. While the length of the total rental agreement exceeds 365 consecutive days, the two rental terms are both less than 365 days, and thus the rental is subject to HERT. OAR 307-150-0920: Long Term Rental Agreements, provides specific details and examples.
The cost of a heavy equipment operators' services
If a qualified heavy equipment rental provider rents equipment with an operator, the cost of the operator's service is not subject to tax. Refer to OAR 150-307-0910: Cost of Operator's Service for further info.
Rentals to federal and/or tribal government instrumentalities
Per, OAR 150-307-0915: HERT Exemptions, equipment and tools rented to a federal or tribal government instrumentality are not subject to tax. This exemption applies only if the rental is paid for by the tribe or federal government. The rental provider must document the tax-exempt nature of the rental and keep the documentation for their records.
Note: The exemption for federal and tribal governments does not apply if equipment and tools are rented to a third party or contractor doing work for the tribal or federal government instrumentality. For example:
- Equipment rented to, and paid for by, a federal government contractor is subject to tax, even if the contractor is using the equipment on a federal project.
- Equipment rented to a private sector construction company is subject to tax, even if the company is using the equipment for a tribal project on tribal land.
OAR 150-307-0915 provides more details and examples on federal & tribal exemptions from HERT. Note that this rule also aligns with property tax exemptions for tribal property in OAR 150-307-0220: Qualifications for Exemption of Indian Properties
No. A qualified heavy equipment rental provider cannot charge HERT for equipment and tools that would not otherwise be subject to property tax (see above, or OAR 150-307-0905).
Example: Vehicles that are registered with the DMV are generally exempt from property tax[1]. DCA Rental Company (a qualified provider) is renting a trailer to a customer for 3 weeks. Because the trailer has been titled and registered with the DMV, it is already exempt from property tax, and therefore exempt from HERT. DCA Rental Company may not charge the 2 percent rental tax.
Yes. Qualified rental providers sometimes rent equipment from other qualified rental providers to re-rent that equipment to their customer. The rental tax applies to each taxable transaction.
Example: Palisades Rental Company, a qualified provider, rents taxable equipment to Mt. Pleasant Rentals (another qualified provider) under a short-term or open-ended/undefined rental agreement. This transaction is taxable – Palisades Rental Company must charge and collect the 2 percent rental tax from Mt. Pleasant Rentals. If Mt. Pleasant Rentals then rents that piece of equipment to their customer under a short-term or open-ended/undefined rental agreement, they must also collect the 2 percent rental tax on that transaction.
Transaction 1: Palisades Rental Company (qualified provider) to Mt. Pleasant Rentals = Taxable
Transaction 2: Mt. Pleasant Rental Company (qualified provider) to Customer = Taxable
This varies. Qualified rental providers sometimes lease equipment (often through the manufacturer or a financing company) and rent it to their customers. There are multiple types of leases, some of which may provide the lessee with legal ownership of the equipment. If the lease agreement provides the qualified provider with ownership rights, then the qualified provider should collect the 2 percent tax when renting the equipment. To determine whether the lease agreement provides ownership rights, the qualified provider should look at the lease. Indications that the lease provides ownership rights include:
- It is a capital or finance lease in which the lessee has an option to purchase the equipment for a nominal price at the conclusion of the lease term.
- The lessee acquires equity in the equipment.
- The lessee is responsible for all taxes and charges imposed on ownership for the equipment.
- Direct financing or leverage lease that meets the criteria of Financial Accounting Standards Board Statement #13.
- Before HERT went into effect (January 2019), the lessee had to report and pay property tax on the equipment.
If the qualified provider is unsure whether they have ownership rights under the lease, they should contact the leasing company.
Yes. The rental tax applies based on the location where the equipment is rented from, not where the customer ultimately uses the equipment. For example, equipment that is rented from a rental facility in Portland, Oregon is subject to the rental tax, even if the customer uses the equipment in Vancouver, Washington.
Yes. Qualified rental providers must file their annual property report with the appropriate counties. Only report the items that are NOT subject to HERT. Qualified rental providers are not required to inform their county assessor that they are subject to HERT, but the agency strongly urges that they do so to avoid inadvertent double assessment.
No. You must register with DOR and collect and remit the tax if you meet the requirements.