Is a roll-off dumpster trash-removal service subject to Illinois sales tax as a lease of the dumpster, or is it a nontaxable waste-disposal service?

Plain-English summary

A trash-disposal company that provides roll-off dumpsters to residential and contractor customers asked the Illinois Department of Revenue to confirm that its services are not subject to Illinois sales tax. The company argued that it does not "rent" or "lease" dumpsters -- customers sign a service agreement (not a rental agreement), cannot move or use the dumpster independently, and the dumpster is simply a tool the company uses to collect and haul away waste. The company drew a contrast with true equipment rentals, where a customer takes independent possession of a tool for a set period and can use it however they like.

The Department disagreed with that framing. Effective January 1, 2025, under Article 75 of Public Act 103-592, businesses that transfer tangible personal property by lease as an incident of a sale of service are subject to the Service Occupation Tax on that property. A "lease" under 35 ILCS 115/2 is defined broadly as a transfer of possession or control (or a license to use) tangible personal property for a fixed or indeterminate term for consideration -- regardless of what the parties call the transaction. The Department found that the roll-off dumpster is leased to the customer as an incident of the waste-removal service, because without the service the dumpster has little to no value to the customer on its own.

That conclusion does not mean the whole charge is automatically taxed as a straightforward retail lease. Instead, because the dumpster is transferred incident to a service, the transaction falls under the Service Occupation Tax Act (35 ILCS 115), which gives servicemen several possible ways to calculate their liability depending on their "cost ratio" -- the ratio of the annual cost of the tangible personal property (the dumpsters) to total annual gross receipts from service transactions.

The Department laid out the four possible calculation methods and told the company it must first determine its cost ratio to figure out which one applies: (1) Service Occupation Tax on a separately stated dumpster charge; (2) Service Occupation Tax on 50% of the entire bill if the dumpster charge isn't separately stated; (3) Service Occupation Tax on cost price, if registered as a de minimis serviceman (cost ratio under 35%); or (4) Use Tax paid to suppliers (or self-assessed), if the company is an unregistered de minimis serviceman that doesn't otherwise have to register under Section 2a of the Retailers' Occupation Tax Act.

What this means for you

Roll-off dumpster and waste-hauling businesses

Calling your dumpster charge a "service fee" instead of a "rental" will not, by itself, avoid Illinois tax. The Department looks at the substance of the transaction: if you're transferring possession or control of a dumpster (or any tangible personal property) to a customer as part of a service, that's a "lease" under 35 ILCS 115/2, and the Service Occupation Tax Act applies to what you transfer. You need to calculate your cost ratio -- the annual cost of your dumpsters divided by your annual gross receipts from waste-removal services -- to know which of the four tax-calculation methods you must use.

If your cost ratio is 35% or higher

You're not eligible for de minimis treatment. If you separately state the dumpster charge on customer invoices, you owe Service Occupation Tax on that stated price (but never less than your cost price for the dumpster). If you don't separately state it, you must apply Service Occupation Tax to 50% of the entire bill instead.

If your cost ratio is under 35%

You may qualify as a de minimis serviceman. If you're registered (or required to register) for Retailers' Occupation Tax on another part of your business, you pay Service Occupation Tax on your dumpster's cost price and collect Service Use Tax from customers. If you're not registered and aren't required to be, you instead pay (or self-assess and remit) Use Tax on the dumpster's cost price to your suppliers -- and you are not authorized to collect any tax from your own customers in that scenario.

Common questions

Q: Does calling the transaction a "waste removal service" instead of a "rental" make it exempt?
A: No. The Department looks past the label. Because the dumpster is transferred to the customer (even temporarily, and even bundled with hauling/disposal) as part of the service, it counts as a "lease" incident to a sale of service under 35 ILCS 115/2, and the Service Occupation Tax Act applies.

Q: Is the entire trash-removal charge taxed, or just the dumpster portion?
A: The ruling addresses the tangible personal property (the dumpster) transferred incident to the service. How much of the bill is taxed depends on whether the dumpster charge is separately stated and on the company's cost ratio -- it could be the separately stated price, 50% of the entire bill, or the dumpster's cost price, depending on which method applies.

Q: What is a "cost ratio" and why does it matter?
A: It's the annual cost price of the tangible personal property (here, the dumpsters) transferred to customers, divided by total annual gross receipts from service transactions. If that ratio is 35% or more, the company must use Service Occupation Tax on the separately stated price or 50% of the bill. If it's under 35%, the company may qualify as a de minimis serviceman and instead owe (or self-assess) Use Tax on the dumpster's cost price.

Q: Can other roll-off dumpster or similar service companies rely on this ruling?
A: No. This is a Private Letter Ruling binding on the Department only as to the specific taxpayer that requested it, and only to the extent the facts it gave were complete and accurate. It expires 10 years from issuance under 2 Ill. Adm. Code 1200.110(e), or sooner if the law or facts change. Other businesses can look to it as an illustration of the Department's reasoning but cannot rely on it directly.

Q: When did this rule take effect?
A: January 1, 2025, under Article 75 of Public Act 103-592, which extended Service Occupation Tax and Retailers' Occupation Tax treatment to property transferred by lease.

Citations and references

Statutes and rules:

• 35 ILCS 120/2 (Retailers' Occupation Tax on lessors' gross receipts from leases, as amended by Article 75 of P.A. 103-592)
• 35 ILCS 115/2 (Service Occupation Tax Act -- "transfer" includes a lease on/after 1/1/2025; definition of "lease")
• 35 ILCS 115/3 (Service Occupation Tax on property transferred by lease as an incident of a sale of service)
• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax imposed on retail sales)
• 86 Ill. Adm. Code 150.101 (Use Tax on tangible personal property purchased at retail)
• 86 Ill. Adm. Code 140.101 (Service Occupation Tax on property transferred incident to sales of service)
• 86 Ill. Adm. Code 140.105(c) (cost ratio calculation)
• 86 Ill. Adm. Code 140.106 (tax base for separately stated price or 50% of bill methods)
• 86 Ill. Adm. Code 140.108 (unregistered de minimis servicemen pay Use Tax to suppliers)
• 86 Ill. Adm. Code 140.109 (registered de minimis servicemen; 35% cost-ratio threshold)
• 86 Ill. Adm. Code 150.110 (useful life used to determine cost price of leased property)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure and expiration)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2025.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2025/st25-0001-plr.pdf

Original ruling text

ST 25-0001-PLR

2/4/2025

LEASING

Effective January 1, 2025, persons engaged in the business of leasing tangible
personal property at retail (“lessors”) in Illinois are subject to State and local
retailers’ occupation tax on the gross receipts from leases of tangible personal
property made in the course of business. See 35 ILCS 120/2 as amended by Article
75 of Public Act 103-592. (This is a PLR.)

February 28, 2025
NAME
COMPANY1
ADDRESS
EMAIL
Dear NAME:
This letter is in response to your letter dated January 8, 2025, in which you requested
information. The Department issues two types of letter rulings. Private Letter Rulings
(“PLRs”) are issued by the Department in response to specific taxpayer inquiries concerning
the application of a tax statute or rule to a particular fact situation. A PLR is binding on the
Department, but only as to the taxpayer who is the subject of the request for ruling and only
to the extent the facts recited in the PLR are correct and complete. Persons seeking PLRs
must comply with the procedures for PLRs found in the Department’s regulations at 2 Ill.
Adm. Code 1200.110. The purpose of a General Information Letter (“GIL”) is to direct
taxpayers to Department regulations or other sources of information regarding the topic
about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
https://tax.illinois.gov/ to review regulations, letter rulings and other types of information
relevant to your inquiry.
Review of your request disclosed that all the information described in paragraphs 1
through 8 of Section 1200.110 appears to be contained in your request. This Private Letter
Ruling will bind the Department only with respect to, COMPANY1 for the issue or issues
presented in this ruling and is subject to the provisions of subsection (e) of Section 1200.110
governing expiration of Private Letter Rulings. Issuance of this ruling is conditioned upon the
understanding that neither COMPANY1 nor a related taxpayer is currently under audit or
involved in litigation concerning the issues that are the subject of this ruling request. In your
letter you have stated and made inquiry as follows:
I am writing on behalf of COMPANY1 which operates a business that provides
trash disposal services involving roll-off dumpsters. We are seeking a private
letter ruling from the Illinois Department of Revenue (the “Department”) to
clarify whether our services are subject to Illinois sales tax under 35 ILCS 120
(the “Act”). Specifically, we are requesting guidance on whether our charges

COMPANY1
Page 2
February 28, 2025
for trash disposal involving the use of roll-off dumpsters that typically remain
at a customer’s home or business for more than one day constitute a “Lease”
as defined under the Act should be taxed. We do not believe we are
conducting a rental service, but rather providing a waste disposal service with
the dumpster as an accessory to the service.

1. Statement of Facts and Relevant Information:
   Identification of Interested Parties:
   •

Taxpayer: COMPAN1Y, a company providing trash disposal
services using roll-off dumpsters to gather the materials for
residential
and
contractor
customers
in
Illinois.

•

Interested parties: The business serves residential customers and
contractors in need of waste removal/disposal services. We
provide a roll-off dumpster as part of our service, which is removed
and replaced as necessary to facilitate the disposal of waste.

Business Reasons for the Transaction:
At COMPANY1, we provide comprehensive trash removal services, which
include the following core elements:
1.

2.

Waste Disposal Service: We provide a waste removal service for
residential and contractor customers, which includes the delivery of a
collection container, removal, and disposal of trash, construction
debris, or other waste materials.
Roll-Off Dumpsters as Part of the Service: The roll-off dumpster, or
container, is a removable part of the truck used to hold and transport
(like a dump truck, but with a removable bed). The container is
provided to customers to enable them to aggregate and load their
waste materials at their own pace which may be several days. The
dumpster is not “rented” to the customer but rather is a part of the
waste removal service we provide. We retain ownership of the
container, and it is removed by us once the customer has completed
filling it. The customer signs a service agreement, rather than a rental
agreement, and is not allowed to move, adjust, or transport the
container.

Unlike a typical rental service, where a customer would have independent use
of a piece of tangible personal property, including the transportation of such

COMPANY1
Page 3
February 28, 2025
property for a set period of time without ancillary service, our service includes
the use of the dumpster solely for the purpose of aggregation for waste
removal. The customer may not use the dumpster outside of the waste
disposal process, and the cost for the use of a dumpster is included as part of
the overall trash removal service. A dumpster is merely a tool used to collect
trash over a period of time that will eventually be emptied by our company.
Detailed Description of the Transaction:
•

•

Pricing: Our pricing structure is as follows:
o Current Base fee: $$$ for the full waste removal service, which
includes the use of the roll-off dumpster, delivery, pickup, and
travel for the disposal of the waste (for residential customers up
to # days and up to # days for contractors).
o If the service period exceeds the allocated time (# days for
residential, # days for contractors), an additional charge is
applied in order to:
 Dissuade prolonged use of the container
 To recover opportunity costs of not being able to service
another waste removal job
o Additional charges may include fuel surcharges, labor
surcharges, or tonnage fees associated with the disposal of the
waste.
Taxability Concerns: We seek guidance on whether any part of or the
entire charge for the service, which includes the use of the roll-off
dumpster, should be subject to sales tax. Our belief, in line with the
STATE Department of Revenue, is that we are providing a waste
removal service, not a rental service. While the dumpster is part of the
service, the container is considered a necessary part of the process of
waste removal, not a rental item.

Example of How Dumpsters Differ from Other Rental Tools:
To further illustrate how the dumpster service differs from typical rental
transactions, consider the following comparison:
•

Example 1 – Roll-Off Dumpster Service: The roll-off dumpster we
provide is used exclusively for the purpose of aggregation and waste
disposal. The customer is not renting the dumpster for independent
use. Instead, they are paying for a full-service trash removal service,
which includes the use of the dumpster as an essential tool for waste
collection. Once the dumpster is filled, we promptly remove it,

COMPANY1
Page 4
February 28, 2025

•

ensuring proper disposal of the waste, at which point the container is
no longer in the customer’s possession. The transaction is a servicebased contract where the equipment is a tool used by the service
provider to accomplish a specific task (e.g., waste removal,
landscaping, construction). The customer pays for the outcome or
result of the service, not for the independent use of the equipment.
Example 2 – Rental of Tools or Equipment: A typical rental
transaction, such as renting a power tool or construction equipment,
involves the customer taking possession of the tool for an agreed-upon
period of time. The customer has control over the item during the rental
period and is responsible for using it, maintaining it, and returning It by
the agreed-upon time. They can move the tool/equipment, perform
functions with it, and use it independently during the agreed upon
period. The tool or equipment is not necessarily tied to any service
beyond the temporary use of the item, and the rental charge is for the
independent use of that item.

In contrast, our roll-off dumpster is not rented for the customer’s independent
use; it is provided as a part of the overall waste removal service. The customer
does not retain use of the container beyond the duration of the waste removal
process, and the charge is primarily for the service of disposing of waste, not
for renting the container.

2. Relevant Contracts and Agreements:
   •

•

Customer Agreements: We have standard service agreements (as
opposed to rental agreements) with customers that clearly outline our
services, fees, and the use of the roll-off dumpsters as part of the waste
disposal service.
Franchise Agreement: As a franchisee of the COMPANY2 system, we
follow operational guidelines and pricing structures set by the franchisor
for waste removal services, which includes the use of the dumpsters as
part of the overall service.

3. Tax Period as Issue and Pending Audit or Litigation:
   •
   •

Tax Period at Issue: We are inquiring about the taxability of our services
for the period beginning January 1, 2025, when the Act took effect.
Audit or Litigation: No audit or litigation is pending with the Department
regarding this issue.

4. Prior Rulings:

COMPANY1
Page 5
February 28, 2025
To the best of our knowledge, the Department has not previously issued a
private letter ruling on this issue for COMPANY1, or any predecessor entity.
We have not submitted a similar request to the Department, nor have we
withdrawn any ruling request on this issue.

5. Supporting Authorities:
   We understand that Illinois law treats the rental of tangible personal property
   as taxable under the “lease” definition. However, we believe that our service
   is not a lease or rental but rather a comprehensive trash removal service that
   includes the use of the dumpster as a necessary tool for disposal (similar to
   residential trash bins). We are requesting clarification on whether our charges
   for the entire waste removal service are subject to sales tax, and whether the
   provision of the dumpster as part of this service should be treated as taxable.
   •

Supporting Authorities:
o Illinois Compiled Statutes, 35 ILCS 120/1 (Sales Tax Law).
o Illinois Department of Revenue Publication FY-2025-15 (Sales Tax
Application to Leases and Rentals of Tangible Personal Property).

6. Contrary Authorities:
   In stark contrast to STATE Department of Revenue customer service
   representatives, upon inquiring with customer service representatives from
   the Illinois Department of Revenue, they have stated that the “rental portion”
   of our roll-off service is taxable. As there appears to be significant gray area
   about roll-off dumpster services, we would appreciate the Department’s
   guidance on how Illinois law applies to these transactions.
7. Trade Secret Information:
   Pricing and price structure is included in this request and therefore, we
   request this information to be deleted from the publicly disseminated version
   of the private letter ruling.
8. Signature of the Taxpayer or Representative:
   •

Taxpayer Signature:
NAME
Owner

COMPANY1
Page 6
February 28, 2025
COMPANY1
We respectfully request that the Department provide us with a private letter
ruling confirming that our charges for trash removal services, which include
the use of roll-off dumpsters, are not subject to Illinois sales tax, as the
dumpster is an accessory to the waste disposal service, not a rental item.
Thank you for your attention to this matter. We look forward to your guidance.
DEPARTMENT’S RESPONSE:
The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this
State in the business of selling tangible personal property at retail to purchasers for use or
consumption. See 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is imposed on the privilege
of using, in this State, any kind of tangible personal property that is purchased anywhere at
retail from a retailer. See 86 Ill. Adm. Code 150.101. These taxes comprise what is
commonly known as “sales” tax in Illinois.
The provision of a service in Illinois that is not accompanied by the transfer of tangible
personal property is generally not subject to Retailers’ Occupation Tax or Service
Occupation Tax liability. The sale of service that is accompanied by a transfer of tangible
personal property would be subject to liability under the Service Occupation Tax Act.
Effective January 1, 2025, in accordance with the provisions of Article 75 of Public Act
103-592, persons engaged in the business of making sales of service are subject to State
and local service occupation tax on all tangible personal property transferred by lease as an
incident of a sale of service. See 35 ILCS 115/3. A “lease” is defined as a transfer of the
possession or control of, the right to possess or control, or a license to use, but not title to,
tangible personal property for a fixed or indeterminate term for consideration, regardless of
the name by which the transaction is called, but does not include a lease entered into merely
as a security agreement that does not involve a transfer of possession or control from the
lessor to the lessee. On and after January 1, 2025, for purposes of State and local service
occupation taxes, the term “transfer” includes a lease. See 35 ILCS 115/2. The tax applies
to tangible personal property transferred by lease by persons engaged in the business of
making sales of service in which leases are in effect, entered into, or renewed on or after
January 1, 2025. The serviceman who is a lessor must remit for each tax return period only
the tax applicable to that part of the selling price actually received during such tax return
period. See 35 ILCS 115/3.
Under the Service Occupation Tax Act, businesses providing services (i.e.
servicemen) are taxed on tangible personal property transferred as an incident to sales of
service. See 86 Ill. Adm. Code 140.101. Tangible personal property that is transferred to the

COMPANY1
Page 7
February 28, 2025
service customer may result in either Service Occupation Tax liability or Use Tax liability for
the serviceman depending upon the serviceman’s activities. The serviceman’s liability may
be calculated in one of four ways:
(1)

Service Occupation Tax on the separately stated selling price of tangible
personal property transferred incident to service;

(2)

Service Occupation Tax on 50% of the servicemen’s entire bill;

(3)

Service Occupation Tax on the servicemen’s cost price if the servicemen are
registered de minimis servicemen; or

(4)

Use Tax on the servicemen’s cost price if the servicemen are de minimis and
are not otherwise required to be registered under Section 2a of the Retailers’
Occupation Tax Act.

Using the first method, servicemen may separately state the selling price of each
item transferred as a result of the sale of service. The tax is then calculated on the separately
stated selling price of the tangible personal property transferred. If the servicemen do not
separately state the selling price of the tangible personal property transferred, they must
use 50% of the entire bill to the service customer as the tax base (the second method
described above). Both of the above methods provide that in no event may the tax base be
less than the servicemen’s cost price of the tangible personal property transferred. See 86
Ill. Adm. Code 140.106.
The third way servicemen may account for their tax liability only applies to de minimis
servicemen who have either chosen to be registered or are required to be registered because
they incur Retailers’ Occupation Tax liability with respect to a portion of their business. See
86 Ill. Adm. Code 140.109. Servicemen may qualify as de minimis if they determine that the
annual aggregate cost price of tangible personal property transferred as an incident of the
sale of service is less than 35% of the total annual gross receipts from service transactions
(75% in the case of pharmacists and persons engaged in graphics arts production).
Registered de minimis servicemen are authorized to pay Service Occupation Tax (which
includes local taxes) based upon their cost price of tangible personal property transferred
as an incident of the sale of service. Such servicemen should give suppliers resale
certificates and remit Service Occupation Tax using the Service Occupation Tax rates for
their locations. Such servicemen also collect a corresponding amount of Service Use Tax
from their customers, absent an exemption.
The final method of determining tax liability may be used by de minimis servicemen
that are not otherwise required to be registered under Section 2a of the Retailers’
Occupation Tax Act. (referred to as “unregistered de minimis servicemen”). Such de

COMPANY1
Page 8
February 28, 2025
minimis servicemen handle their tax liability by paying Use Tax to their suppliers. If their
suppliers are not registered to collect and remit tax, the servicemen must register, selfassess and remit Use Tax to the Department. The servicemen are considered to be the endusers of the tangible personal property transferred incident to service. Consequently, they
are not authorized to collect a “tax” from the service customers. See 86 Ill. Adm. Code
140.108.
The cost ratio is a measure of the amount of tangible personal property transferred
with a service. It is calculated by comparing the serviceman’s product cost to his total
income from services. The cost of materials that are not transferred to customers incident
to a service, such as those sold at retail, removed from inventory for use, or incorporated
into repairs of real estate, must be excluded when determining the cost ratio. See 86 Ill.
Adm. Code 140.105(c). To calculate the cost price of the tangible personal property
transferred by lease, a serviceman must first determine the useful life of the tangible
personal property. The useful life is the useful life or recovery period allowed under federal
law for like kind of property. See 86 Ill. Adm. Code 150.110. The serviceman must then
divide the price initially paid to its supplier for the item by its useful life. Finally, convert the
cost price into whatever time period is used for the lease (e.g. years or months). The result
is the cost price for each rental payment. The serviceman must multiply the cost price for
each rental payment by the duration of the lease during the year to determine the annual
product cost used to determine cost ratio. This method to determine cost price for each
rental payment must also be used in calculating Service Occupation Tax liability using the
first three methods described above. This cost price is used as long as the serviceman
transfers such tangible personal property by lease as an incident of a sale of service and is
not limited to the useful life of the item.
The transactions you describe in your letter constitute waste removal services in
which a dumpster is leased as an incident of the sale of waste removal service. This is so
because, without the waste removal service, the dumpster is of little to no value to the
customer. As such, the provisions of the Service Occupation Tax Act would apply to these
transactions.
It does not appear that your company is registered under Section 2a of the Retailers’
Occupation Tax Act. Further, engaging in the transactions described in your letter would not
require your company to register under Section 2a. Therefore, the third method of
calculating tax liability under the Service Occupation Tax Act would not apply.
You must calculate your cost ratio to determine whether you are de minimis. If your
annual costs for the dumpsters make up 35% or more of the total annual gross receipts from
your waste removal service transactions, you would be subject to Service Occupation Tax
using one of the first two methods of calculating the tax listed above. If the price to lease
the dumpster is not separately stated, you must assess the Service Occupation Tax on 50%

COMPANY1
Page 9
February 28, 2025
of the entire bill to your service customers. The tax base may not be less than your cost price
of the tangible personal property transferred. If your annual costs for the dumpsters make
up less than 35% of the total annual gross receipts from your waste removal service
transactions, you would be a de minimis unregistered serviceman and would owe Use Tax
to your suppliers of the dumpsters. If your suppliers do not collect Use Tax from you on
these transactions, you must self-assess and remit Use Tax to the Department. There is no
need to register with the Department for sales tax if you are a de minimis unregistered
serviceman.
The factual representations upon which this ruling is based are subject to review by
the Department during the course of any audit, investigation, or hearing and this ruling shall
bind the Department only if the factual representations recited in this ruling are correct and
complete. This Private Letter Ruling is revoked and will cease to bind the Department 10
years after the date of this letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or
earlier if there is a pertinent change in statutory law, case law, rules or in the factual
representations recited in this ruling.
I hope this information is helpful. If you require additional information, please visit
our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information
Division at 800-732-8866.
Very truly yours,

Samuel J. Moore
Private Letter Ruling Chairman
SJM:AKO:sce