COMAR 03.06.01.28 — § 28

.28 Lease of Tangible Personal Property, Digital Codes, Digital Products, Data or Information Technology Services, and Software Publishing Services.
A.
In this regulation, “lease” means:
(1)
The transfer of possession, absolutely or conditionally by any means, of tangible personal property, digital codes, or digital products for a consideration, by way of lease, rental, royalty agreement, or grant of a license for use; and
(2)
A license for use of a data or information technology service or a software publishing service as defined in
Regulation .48 of this chapter
.
B.
“Lease” is included within the statutory definition of the term “sale” and is thus subject to the tax in the absence of a specific exemption or exclusion.
C.
Each lease payment period is considered a separate lease, and thus a separate sale, for the purpose of determining when the tax is to be collected or paid.
D.
The tax applies to the entire lease payment if property acquired by lease is within this State at any time during that lease payment period, regardless of where the lease was transacted or possession of the property taken.
E.
The tax applies to the entire lease payment if the property, digital code, digital product, or taxable service acquired by lease is used within the State at any time during that lease payment period regardless of where the lease was transacted or possession of the property, the digital code, or the digital product was taken, or where the taxable service was delivered.
F.
A transaction involving the utilization of equipment with an operator supplied by the owner is a lease if control over the utilization of the equipment passes to the customer, but is not a lease if the transaction is for the performance of a specific job in a manner to be determined by the owner or his operator. In this transaction, the burden is on the parties to establish that no lease occurred. When the billing for this transaction is on a time basis, it is presumed that control passed for the time indicated and that the transaction is a lease. This presumption may be rebutted only by clear and convincing evidence, such as a written contract, that at the time the transaction was entered into each party contemplated that the agreement was for the completion of a specific job rather than for the provision of a particular piece of equipment with an operator for a particular purpose for as long as necessary. The fact that the owner issued a resale certificate to buy the equipment tax free is evidence that a subsequent transaction involving that equipment is a lease.
G.
Service Charges.
(1)
In this section, “nontaxable service” means any service other than a taxable service as defined in
Tax-General Article, §11-101(m), Annotated Code of Maryland
.
(2)
The tax applies to the entire lease payment if a charge for lease or rental of tangible personal property or digital products includes a charge for a nontaxable service, whether the charge for a nontaxable service is separately stated or not, if the dominant purpose of the transaction is to obtain the tangible personal property or digital product and the nontaxable service is a mandatory charge imposed by the vendor as a condition of renting the item or is incidental and is not the dominant purpose of the transaction. For example, a charge for the lease of a portable toilet that includes a mandatory charge for cleaning is subject to the tax whether the cleaning charge is separately stated or not. The dominant purpose of the lease of the toilet is to provide a specific item of tangible personal property and not to provide cleaning or servicing of the toilet. Separately stated charges for the nontaxable services enumerated in
§H(2) of this regulation
are excluded from taxable price.
(3)
The tax does not apply to a charge for a nontaxable service that includes a charge for lease or rental of tangible personal property or digital product, whether the charge for the tangible personal property or digital product is separately stated or not, or whether the charge is mandatory or not, if the dominant purpose of the transaction is to obtain a nontaxable service, and the provision of the tangible personal property or digital product is incidental to the nontaxable service. For example, a charge for trash removal service where a trash receptacle is provided in conjunction with the trash removal service is not a taxable lease of tangible personal property. The dominant purpose of the lease is to remove trash from a premise and not to lease a trash receptacle.
(4)
The tax applies to the entire lease payment if a charge for a lease of a taxable service includes a charge for a nontaxable service if the charge for the nontaxable service is not separately stated, if the dominant purpose of the transaction is to obtain the taxable service, and the nontaxable service is a mandatory charge imposed by the vendor as a condition of, or incidental to, receiving the taxable service and not the dominant purpose of the transaction. For example, a vendor charges a software developer for publishing a non-custom software application, which is a taxable software publishing service, and includes a charge for customer support, which is a nontaxable service. The dominant purpose for the lease of the software publishing service is to provide the software to end users, not to provide customer support. The entire lease payment is subject to the sales and use tax if the charge for customer support is not separately stated.
(5)
The tax does not apply to a charge for a lease of a nontaxable service that includes a charge for a lease of a taxable service that is not separately stated, if the dominant purpose of the transaction is to obtain the nontaxable service, and the provision of the taxable service is incidental to the nontaxable service.
H.
Computation of Tax.
(1)
The tax applies to the value in money of the consideration of any kind required to be paid to the lessor under the terms of the lease, except as provided in
§G(3) of this regulation
. Included in the taxable price are charges for required maintenance or required insurance agreements, reimbursement for registration fees, taxes, and other expenses of the owner, passed on to the lessee, and all charges for an operator of leased equipment including waiting time, overtime, guaranteed time, travel time, and holiday pay.
(2)
The following charges, if separately stated and identified, are not a part of the taxable price:
(a)
Installation charges;
(b)
Charges for professional services, unless the services are taxable services;
(c)
Late payment charges, but not any charges included in a timely payment even though computed in a manner similar to the computation of interest or finance charges;
(d)
Delivery charges, including charges for an operator to get the item to the lessee at the beginning of the lease and to return the item to the owner at the expiration of the lease;
(e)
Charges for an amount directly attributable to any personal property tax on the leased property if the lease is noncancellable except for cause and is for a period exceeding 1 year.
I.
Except as provided in
Regulation .49 of this chapter
, a person who buys tangible personal property, a digital code, a digital product, or a taxable service for the dual purpose of leasing it to others and also for personal use, or who buys tangible personal property, a digital code, a digital product, or a taxable service with the sole intention of leasing it but in fact also employs the property or digital product for personal purposes, shall pay the tax on the purchase price and shall also collect the tax on all leases. The fact that the buyer may simultaneously or subsequently offer this property or digital product for outright sale does not create an exemption for the original purchase.