Ruling 2010-1, Photo booths

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).

June 23, 2010