Levy and amount of tax.

(a) In addition to all other taxes now imposed by law, there is hereby levied and shall be collected as herein provided a privilege or license tax on each person engaging or continuing within this state in the business of leasing or renting tangible personal property at the rate of four percent of the gross proceeds derived by the lessor from the lease or rental of tangible personal property; provided, that the privilege or license tax on each person engaging or continuing within this state in the business of leasing or renting any automotive vehicle or truck trailer, semitrailer, or house trailer shall be at the rate of one and one-half percent of the gross proceeds derived by the lessor from the lease or rental of such automotive vehicle or truck trailer, semitrailer, or house trailer; provided further, that the tax levied in this article shall not apply to any leasing or rental, as lessor, by the state, or any municipality or county in the state, or any public corporation organized under the laws of the state, including, without limiting the generality of the foregoing, any corporation organized under the provisions of Sections 11-54-80 through 11-54-101; provided further, that the privilege or license tax on each person or firm engaging or continuing within this state in the business of the leasing and rental of linens and garments shall be at the rate of two percent of the gross proceeds derived by the lessor from the lease or rental of the linens and garments.

(b) Notwithstanding the above, nothing shall prohibit a lessor subject to a state or local privilege or license tax from passing the amounts on to a lessee by adding the taxes to the leasing price or otherwise; provided, however, that all amounts passed on to the lessee shall be includable in the gross proceeds derived from the lease of tangible personal property which shall be subject to the privilege or license tax owed by the lessor.

Provided, however, the authority to pass on the amounts of the privilege or license tax granted in this subsection shall not apply to the leasing or renting of tangible personal property to the State of Alabama or a municipality or county in the state, unless the flat amount collected by the lessor includes both the tax and the leasing fee.

(c) The state and applicable local privilege or license taxes applicable to a lease or rental transaction to which a lessor is subject shall be determined as follows:

(1) Except for automotive vehicles as provided in subdivision (2), the following shall apply:

a. When tangible personal property is delivered to the lessee by the lessor or his or her agent, the privilege or license tax levy shall be determined based on where the property is delivered.

b. When tangible personal property is picked up at the lessor's rental location by the lessee or his or her agent, the privilege or license tax levy shall be determined based on the rental location.

(2) For automotive vehicles required to be registered pursuant to Section 32-6-61, each lease payment is considered a separate lease transaction and occurs in the location as provided below and the following rules shall apply:

a. The privilege or license tax levy on any nonrecurring gross proceeds due at the inception of the lease to a new motor vehicle dealer or a used motor vehicle dealer licensed pursuant to Section 40-12-391, including any capitalized cost reduction or other fee that is retained by the dealer in connection with its initiation of the lease, shall be determined based on the location of the dealer where the lease was initiated.

b. The privilege or license tax levy on gross proceeds other than those described in paragraph a., including the initial lease or rental payment and all subsequent lease or rental payments, shall be determined based on the garage address of the lessee as provided to the county licensing official. The lessor is considered to be engaging or continuing within this state in the business of leasing or renting tangible personal property when its lessee has a garage address within this state.

(Acts 1971, 1st Ex. Sess., No. 96, p. 166, §2; Act 2001-636, p. 1242, §3; Act 2019-89, §1.)