Equipment Lease Agreement Template

Use our equipment lease agreement to allow another party to temporarily rent your equipment.

equipment lease agreement template

Updated June 5, 2024
Written by Sara Hostelley | Reviewed by Brooke Davis

An equipment lease agreement lets a company or person owning machinery, tools, or other items rent them to another party in exchange for regular payments. Depending on the industry, the anticipated usage, and the parties’ needs, equipment leases can be as short as a day or as long as multiple years.

This legal document protects the person who owns the equipment and the person renting the equipment by explaining each party’s responsibilities. It’s also advantageous to both parties, as it allows the owner to profit from the equipment they’ve purchased and lets the renter access complex or expensive equipment without buying it outright.

What Type of Equipment Can You Lease?

Equipment lease agreements can outline the terms and conditions for renting the following equipment types:

Equipment Rental Tax Laws – By State

Each state has its own set of tax regulations regarding equipment rentals. Learning these laws is essential for owners and renters, enabling them to adhere to the relevant regulations and effectively plan for their tax responsibilities.

State Equipment Rental Tax Rate
Law/Website
Alabama • 4%. Ala. Admin. Code r. 810-6-5-.09
Alaska • 0% state sales tax. Some local municipalities may levy a tax on rentals. Alaska State Assessor
Arizona • 0%. No sales tax for renting equipment.
Arkansas • 6.5%. Arkansas Economic Development Commission
California • 7.5%.
• Local jurisdictions may impose up to an additional 1% tax.
• If the tangible personal property being rented out is in substantially the same form as when the lessor acquired it, and if the lessor has already paid use tax based on the purchase price or sales tax reimbursement, then no additional use or sales tax is due on the lease.
California City & County Sales & Use Tax Rates and Sales and Use Tax Regulations
Colorado • No sales tax on equipment rentals if the lease term is less than 36 months and the lessor has paid use or sales tax on the acquisition of the rental property. The lessor may request permission from the Department of Revenue to collect the tax from the lessee in lease terms of 36 months or less.
• Different rules apply to motor vehicles.
Colorado Department of Revenue
Connecticut • 6.35%.
• The lessee must pay any associated state sales tax in addition to a 2.75% rental surcharge.
Connecticut Department of Revenue Services
Delaware • No state sales tax.
• The lessee must pay a lease/use tax of 1.9914%.
Del. Code tit. 30 § 4301
District of Columbia • Ranges from 6% to 10.25% depending on the item being rented. Office of the Chief Financial Officer
Florida • 6%.
• Counties can impose an additional discretionary sales surtax on rented equipment.
• Rental equipment where the owner also furnishes the operator and supplies is exempt from sales tax.
Florida Department of Revenue
Georgia • 4%. Georgia Department of Revenue
Hawaii • Hawaii doesn't technically have a sales tax. Instead it imposes a general excise tax (GET) on businesses, rather than customers. The statewide GET rate in Hawaii is 4%. Hawaii Department of Taxation and Hawaii GET Tax
Idaho • 6%. Idaho State Tax Commission
Illinois • 6.25%.
• Local municipalities may add up to 4.75% in sales and use tax.
Illinois Department of Revenue
Indiana • 2.25% tax rate for heavy equipment rentals.
• Motor vehicles are subject to Indiana state sales tax (7%) and auto rental excise tax.
• Lessees in Marion County must also pay a supplemental auto rental excise tax.
• No sales tax on equipment rentals if they come with an operator.
Heavy Equipment Rental Excise Tax and Rental and Leasing of Personal Tangible Property
Iowa • 6%.
• Machinery that is used by contractors and builders in the process of new construction, remodeling, or alteration of existing structures is generally exempt from the rental sales tax.
• Local jurisdictions may impose an additional 1% sales tax.
Iowa Department of Revenue and Iowa Admin Code § 701-219.21
Kansas • 6.5%.
• Equipment rented with an operator is exempt from sales tax.
Kansas Department of Revenue and Kan. Stat. § 79-3703
Kentucky • 6%. Kentucky Department of Revenue
Louisiana • 4.45%.
1 Rentals with an operator are not taxable.
La. Revenue and Taxation § 47:321.1 and Louisiana Department of Revenue FAQ
Maine • 5.5%. Maine Revenue Services
Maryland • 6%. Comptroller of Maryland
Massachusetts • 6.25%. Massachusetts Department of Revenue
Michigan • 6%.
• An additional 2% tax may apply to renters of heavy equipment.
• No sales tax on equipment rentals if they come with an operator.
• The lessor may choose to pay tax on the acquisition of the property rather than collecting tax from the lessee at the time of rental.
Michigan Department of Treasury and Heavy Equipment Excise Tax
Minnesota • 6.875%. Minnesota Department of Revenue
Mississippi • 7% for tangible personal property.
• 1.5% for farm tractors, logging equipment, and manufacturing machinery.
• Varying rates for other equipment.
Mississippi Department of Revenue
Missouri • 4.225%.
• If the lessor pays tax on the purchase price, the impending lease of the property isn't subject to tax.
Missouri Secretary of State
Montana • No state sales tax.
• 4% tax for rental vehicles, but some vehicle sales are exempt, such as those vehicles being rented for 30 or more continuous days.
Mont. Admin. R. 42.14.1202
Nebraska • 5.5%.
• Sales tax is not imposed on the rental and use of manufacturing machinery and equipment.
Nebraska Legislature and Neb. Rev. Stat. § 77-2704.22
Nevada • 6.85%. Nevada Department of Taxation
New Hampshire • 0%. No state sales tax (including for equipment rentals).
New Jersey • 6.625%. New Jersey Division of Taxation
New Mexico • 4.875%. N.M. Code R. § 3.2.1.17
New York • 4%.
• The sales tax won't apply if the rental comes with an operator, but the rental may still be subject to a service tax.
New York Department of Taxation and Finance
North Carolina • 4.75%.
• Local jurisdictions may impose an additional tax rate of 1.2%.
NC Gen. Stat. § 153A-156 and North Carolina Department of Revenue
North Dakota • 5%.
• Rented equipment is exempt from the sales and use tax in some instances if the equipment is used for direct manufacturing.
North Dakota Office of State Tax Commissioner and ND Admin Code § 81-04.1-01-23
Ohio • 5.75%. Ohio Department of Taxation
Oklahoma • 4.5%.
• Equipment may be exempt from sales tax if it is rented with an operator of the vendor.
Okla. Admin. Code § 710:65-1-11
Oregon • 2% for heavy equipment rentals. ORS § 307.872
Pennsylvania • 6%.
• It doesn't apply if the vendor provides the equipment for use using their operator without direction from the customer.
Pennsylvania Department of Revenue and Sales and Use Tax Bulletin 2021-05
Rhode Island • 7%. Rhode Island Division of Taxation
South Carolina • 7%.
• 2.5% for heavy equipment rentals.
• The heavy equipment rental fee does not apply for rentals to federal or state governments.
South Carolina Department of Revenue and SC Code § 56-31-60
South Dakota • 4.2%. South Dakota Department of Revenue
Tennessee • 7%.
• There is no sales and use tax when the equipment is provided with an operator.
Tennessee Department of Revenue
Texas • 6.25%.
• Local jurisdictions may impose an additional tax of up to 2%.
34 Tex. Admin. Code § 3.294
Utah • 4.85%.
• No tax levied if the business rents the equipment and provides an operator.
Utah State Tax Commission
Vermont • 6%. Vermont Department of Taxes
Virginia • 5.3%.
• There may be additional local taxes depending on where the equipment is rented.
Virginia Department of Taxation
Washington • No sales tax on equipment rentals if they come with an operator.
• 1.25% for heavy equipment rentals.
Washington Department of Revenue
West Virginia • 6%.
• 2.5% for heavy equipment rentals.
W. Va. Code § 11-5-15
Wisconsin • 5%. Wis. Stat. § 77.52
Wyoming • 4%.
• Local jurisdictions may approve additional taxes of up to 2%.
Wyoming Department of Revenue
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How to Write an Equipment Lease Agreement

Step 1 – Gather Both Parties’ Contact Information

List each party involved in the lease, which can be a company or an individual:

This section clearly identifies both parties involved in the equipment rental agreement, ensuring they’re aware of each other’s roles, responsibilities, and contact information.

Step 2 – Establish the Lease Type

The most common types of equipment rental agreements are:

After you and the other party agree on a lease type, you can record the start date. If you settle on an interval lease, indicate how many days’ notice is required for termination.

Step 3 – Describe the Equipment

Provide a detailed description of the leased equipment, including the following information:

This detailed description serves as a legal record, protecting both parties and preventing any confusion or swapping of the equipment.

Step 4 – Determine the Payments and Deposits

Choose Payment Methods

Agree on how the renter will make payments to the equipment owner. Possible options include:

Rental Costs and Schedule