Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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330.0000 LEASES OF TANGIBLE PERSONAL PROPERTY—IN GENERAL—Regulation 1660

Annotation 330.3539.100

(b) RENTAL RECEIPTS—ITEMS INCLUDED AND EXCLUDED

330.3539.100 Rock Crushing Operations. A company's receipts were made up of an hourly unit charge for crushing rock and other road-based materials, plus a separately stated move-in and move-out equipment charge. The company believes that its operations actually amounted to a rental of fully operated equipment. The workmen who operate the equipment and who are generally on the payroll of the company consist of:

(1) The Loader. (It is not uncommon for the lessee to provide its own tractor and loader).

(2) Crusher operator. (The master labor agreement requires that an oiler and generator operator be provided with every crusher operator. The company's lessees have, as a matter of convenience and efficiency, uniformly employed all three of these persons as a team.)

(3) The oiler.

(4) The generator operator.

(5) The laborer. (On occasion is provided by the lessee).

It is claimed that the right to control the work of all five persons, while on the job, rests with the lessee who controls when the people start or stop work, the rate of their work, when they take breaks and to what size to reduce the material being crushed. It also is claimed that the lessee has the right to hire and fire employees subject to the company's review and approval. The company believes that the rock-crushing transactions are leases of fully operated tax paid equipment.

The information presented does not indicate that the company's customers had the right to use the property. The equipment was operated by personnel in the general employment of the company and they received their instruction's from a supervisor in its general employment. While it is claimed that the customers had the right to direct the employees when to begin work, when to stop, etc., how much rock to load, it has been judicially determined that such limited authority does not establish an employment relationship. It must also be conceded that the customer did not have the right to select or discharge the workmen. They could only request the company to do so. It is concluded that the activity should be classified as a taxable processing of tangible personal property by the company as an independent contractor. 6/14/74.