Does a Connecticut photo booth business owe sales tax on the charge for a booth and attendant at a wedding or event?

Plain-English summary

A business rents out a photo booth for weddings, corporate events, and parties. It sends an attendant who delivers, sets up, and later removes the booth and is on hand to help, but guests operate the booth themselves (step in, pull the curtain, press a button, get a printed photo strip). The host pays a single, non-separately-stated charge for both the booth and the attendant, based on how long the booth is available (plus setup time), owed regardless of how much guests actually use it. DRS was asked whether that charge is a taxable rental of tangible personal property.

DRS ruled it is taxable. Under Conn. Gen. Stat. § 12-407(a)(2)(J), the "leasing or rental of tangible personal property of any kind" is a "sale" subject to Connecticut sales and use tax. Applying the "true object" test drawn from the Connecticut courts (American Totalisator Co. v. Dubno; White Oak Corp. v. DRS), DRS found the true object of the contract is the rental of the booth, not a service.

The key wrinkle is the operator exclusion. Conn. Agencies Regs. § 12-425-25(d) lets a lessor exclude a separately stated, reasonable charge for an operator it supplies with leased equipment. But here the guests operate the booth, not the attendant — so the attendant is not an "operator," there is no operator compensation to exclude, and the entire charge is a taxable rental. Because the booths are used exclusively for rental, the business may buy them without tax using a resale certificate under Conn. Agencies Regs. § 12-426-25(e).

What this means for you

Event and party-rental businesses

If you rent equipment — photo booths, inflatables, AV gear, tables and chairs — and the customer or their guests operate it, Connecticut treats the charge as a taxable rental of tangible personal property, even when you also deliver, set up, and staff it. Bundling an attendant into one non-itemized price doesn't make it a service; the true object is the rental. Taxable gross receipts include delivery, setup, and service charges, whether or not separately stated (Conn. Agencies Regs. § 12-425-25(c)).

When a staffed charge can be carved out

The one way to exclude a person's charge is the narrow operator exclusion: the operator must actually run the equipment, the charge must be separately stated and reasonable, and — for the deal to become a nontaxable service — the owner must retain complete control and discretion over how the job is done (§ 12-425-25(d)). An attendant who merely helps guests use a self-operated machine doesn't meet that test.

Event hosts

Expect Connecticut sales tax on a photo-booth (or similar equipment) rental for your event. The tax applies to the full contracted charge, and it's owed even if your guests barely use the booth.

Accountants and tax professionals

This is the classic true-object / rental-vs-service line, decided on who controls and operates the equipment. Watch § 12-425-25(d): "operator" means someone operating the equipment while the owner retains discretion — not an on-site helper. Equipment bought exclusively for rental is a purchase for resale (§ 12-426-25(e)).

Common questions

Q: Is renting out a photo booth taxable in Connecticut?
A: Yes. It is a rental of tangible personal property under Conn. Gen. Stat. § 12-407(a)(2)(J), so the charge is subject to Connecticut sales and use tax.

Q: We include an attendant — doesn't that make it a service?
A: Not here. The guests operate the booth, so the attendant is not an "operator" under Conn. Agencies Regs. § 12-425-25(d). The true object of the contract is the rental of the booth, and the whole single charge is taxable.

Q: Does it matter that the charge isn't split between booth and attendant?
A: No — that cuts toward tax. Gross receipts from a rental include service and other charges "whether or not separately stated" (§ 12-425-25(c)). To exclude an operator's pay, it must be separately stated, reasonable, and the operator must run the equipment.

Q: Can we buy our photo booths without paying tax?
A: Yes, if they're used exclusively for leasing or rental. You may issue a Resale Certificate under Conn. Agencies Regs. § 12-426-25(e) and collect tax from customers instead.

Q: Does this ruling apply to my business?
A: Not automatically. A Connecticut Ruling binds DRS only for the taxpayer and facts it addressed. A genuinely operator-run, owner-controlled job could be analyzed as a nontaxable service instead.

Citations and references

Statutes:

• Conn. Gen. Stat. § 12-407(a)(2)(J) (leasing or rental of tangible personal property is a taxable "sale")

Regulations:

• Conn. Agencies Regs. § 12-425-25(a) (rental of TPP is a taxable sale; the lessor must register and collect tax)
• Conn. Agencies Regs. § 12-425-25(c) (gross receipts include maintenance, installation, delivery and similar charges, whether or not separately stated)
• Conn. Agencies Regs. § 12-425-25(d) (operator exclusion; owner-control test for a service contract)
• Conn. Agencies Regs. § 12-426-25(e) (resale certificate for property used exclusively for rental)

Cases:

• American Totalisator Co. v. Dubno, 210 Conn. 401 (1989)
• White Oak Corporation v. Department of Revenue Services, 198 Conn. 413, 503 A.2d 582 (1986)
• Smedley Crane Service, Inc. v. Crystal, 43 Conn. Supp. 5 (1993)

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 2010-1

Original ruling text

Ruling 2010-1, Photo booths

FACTS :

A business provides a photo booth for entertainment at events such as weddings, corporate events and birthday parties.  The business provides a photo booth attendant who delivers and sets up the photo booth at the event, and, at the conclusion of the event, takes down and removes the photo booth. A photo booth is never provided without an attendant.  The host is responsible for providing or arranging for a stable, level location for the photo booth capable of supporting the weight of the photo booth and a standard electrical outlet within ten feet of the location.

Guests are allowed to take an unlimited number of photographs during the event. Guests enter the photo booth, pull the curtain, and press a button to take a photograph.  The photo booth immediately prints photographs on photo-strips. While guests may use the photo booth to take photographs without any assistance from the attendant, the attendant is available to assist guests encountering any difficulty in using the photo booth, and to help guests in creating a scrapbook for the event. No charge is made to guests at an event.

There is a single, non-separately stated charge to the host of the event for both the photo booth and the attendant. The charge is based on the length of time that the photo booth is available for use at the event plus the length of time required before the event for setup and calibration of the photo booth. The charge is due irrespective of the amount of use made of the photo booth by guests at the event. If there is a photo booth equipment malfunction, the business is obligated to refund to the host the portion of the charge that corresponds to portion of the contracted-for time during which the photo booth is inoperable. The host is also responsible for any damage to photo booth equipment caused by the host or guests.

ISSUE :

Whether the charge for the photo booth and the attendant is for the rental of tangible personal property under Conn. Gen Stat. §12-407(a)(2)(J)?

RULING:

The charge for the photo booth and the attendant is for the rental of tangible personal property under Conn. Gen Stat. §12-407(a)(2)(J) and is subject to Connecticut sales and use taxes.

DISCUSSION:

“‘Sale’ or ‘selling’ mean and include … (J) The leasing or rental of tangible personal property of any kind whatsoever …” Conn. Gen. Stat. §12-407(a)(2). “The rental or leasing of tangible personal property for a consideration in this state is a sale and is subject to the tax. The lessor is a retailer who must register with the Commissioner of Revenue Services for a permit and collect the tax. The tax is imposed upon the gross receipts from the rental or leasing of tangible personal property. Such retailers shall pay the taxes so collected in the manner and form as other retailers licensed to sell tangible personal property.” Conn. Agencies Regs. §12-425-25(a).

“‘Gross receipts’ shall include the total amount of payment, royalties or periodic payments received for the leasing or rental of tangible personal property. Said amount shall include all charges including but not limited to maintenance and service contracts, cancellation charges, installation service and transportation charges for delivery to the lessee, whether or not such amounts are separately stated.” Conn. Agencies Regs. §12-425-25(c). “Gross receipts do not include the amount charged for the operator where the lessor supplies an operator for the leased property if the amount charged is for the compensation of the operator, is reasonable and is segregated in the invoice. A reasonable charge is one based upon the prevailing rate in the area. However, where an operator is supplied with the equipment, the contract is entered into for a specific job or operation, and where the owner of the equipment through the operator retains complete control over the equipment and retains discretion as to when and how to perform, said contract will be one for services and not for lease.” Conn. Agencies Regs. §12-425-25(d).

In a case involving whether tangible personal property was purchased to be resold to a customer (in that case, the State of Connecticut) or, instead, was purchased for the purchaser’s own use in fulfilling its agreements with its customer, the Connecticut Supreme Court noted:

A conclusion as to whether the personal property in question was acquired by the plaintiffs for their own use in fulfilling their agreements with the state and therefore subject to a use tax or was purchased for resale to the state and consequently not subject to the imposition of a use tax requires a determination of the true object of the contracts between the parties. [Citations omitted] “The court must look to the intention of the parties to the contract to determine whether the items in a contract are held for resale or were purchased for a different purpose.” White Oak Corporation v. Department of Revenue Services, 198 Conn. 413 , 422, 503 A.2d 582 (1986). “That intention is to be ascertained from the language used, interpreted in the light of the situation of the parties and the circumstances surrounding them.” United Aircraft Corporation v. O'Connor, supra, 538.

American Totalisator Co. v. Dubno , 210 Conn. 401, at 406 (1989).

Here, the true object of the contract between the photo booth business and the event host is the rental of tangible personal property. There is a single, non-separately stated charge to the host of the event for both the photo booth and the attendant. The charge is based on the duration of the event. While guests are allowed to take an unlimited number of photographs during the event, the charge is due whether or not guests at an event make any use of the photo booth. Guests at an event operate and control the photo booth. The attendant is not an operator, as the term is used in Conn. Agencies Regs. §12-425-25(d). Because the attendant is not an operator, there is no “amount charged … for the compensation of the operator,” as the phrase is used in Conn. Agencies Regs. §12-425-25(d). Smedley Crane Service, Inc. v. Crystal, 43 Conn. Supp. 5 (1993).

The photo booth business may purchase photo booths that are used exclusively for leasing or rental purposes without payment of tax by issuing a Resale Certificate as provided in Conn. Agencies Regs. §12-426-25(e).

LEGAL DIVISION

June 23, 2010