Does a dumpster rental business have to charge Illinois sales tax on the rental, delivery, and waste-removal charges, or is it a nontaxable sale of service?

Plain-English summary

A dumpster rental company asked the Illinois Department of Revenue whether it could treat its business as a nontaxable "sale of service" — since it delivers a dumpster, picks it up, and hauls away the waste — rather than charging sales tax on the rental of the dumpster itself. The company reasoned that because the cost of the dumpster is a small (less than 35%) share of the total price once spread across many customers, the whole transaction should be a tax-exempt service.

The Department's answer: renting out a dumpster is a "lease" of tangible personal property, and effective January 1, 2025, under 35 ILCS 115/3 (as amended by Public Act 103-592, Article 75), businesses that make sales of service are subject to Illinois Service Occupation Tax on tangible personal property they transfer by lease as an incident of that service — including leases in effect, entered into, or renewed on or after that date. This closes the door on treating a leased dumpster as tax-free just because the service (delivery and waste removal) is the bulk of what's being sold.

That said, the Department did not say the whole bill is taxable at full price. Under the Service Occupation Tax Act, a "serviceman" who transfers property incident to a service can calculate its liability one of four ways: tax on the separately stated selling price of the property, tax on 50% of the entire bill if the price isn't separately stated, or — if the business qualifies as a "de minimis" serviceman (property cost under 35% of gross receipts from service, 75% for pharmacists and graphic arts producers) and registers accordingly — tax (or, if not required to register, Use Tax) on its own cost price for the dumpster instead of the customer-facing price.

In short, the letter confirms that a service business cannot escape Service Occupation Tax merely because the tangible property (the dumpster) is a minor part of the transaction; it must instead apply the correct one of the four calculation methods, with the de minimis methods offering the lowest tax base (cost price) rather than an outright exemption.

What this means for you

Dumpster rental and similar service-with-equipment businesses

If your business delivers, leases, and later removes tangible personal property (like a dumpster) as part of a bundled service, the "de minimis" share of the property in your total price does not make the transaction tax-exempt. Since January 1, 2025, leasing that property incident to your service triggers Service Occupation Tax under 35 ILCS 115/3, and you need to pick the applicable calculation method rather than assuming no tax is owed.

Businesses evaluating whether they are "de minimis" servicemen

If the tangible personal property you transfer is genuinely a small part of your business (under 35% of annual gross receipts from service transactions, or 75% for pharmacists and graphic arts producers), you may register as a de minimis serviceman and pay tax based on your own cost price for the property rather than the price charged to the customer — but you still must register and remit tax (or Use Tax, if not required to register), collecting Service Use Tax from customers where applicable.

Accountants and tax professionals advising service businesses

Watch for clients who treat a lease of equipment bundled into a service as automatically nontaxable. The relevant test is whether tangible personal property is transferred "as an incident of a sale of service" (86 Ill. Adm. Code 140.101), and since January 1, 2025 that expressly includes property transferred by lease (35 ILCS 115/2, 115/3). Then confirm which of the four tax-base methods in 86 Ill. Adm. Code 140.106, 140.108, and 140.109 applies.

Common questions

Q: Does renting out equipment as part of a service always mean no sales tax is owed?
A: No. If tangible personal property (like a dumpster) is transferred by lease as an incident of a sale of service, and the lease is in effect, entered into, or renewed on or after January 1, 2025, it is subject to Service Occupation Tax under 35 ILCS 115/3, regardless of how small that property's cost is relative to the total bill.

Q: If the dumpster's cost is under 35% of the total charge, is the business automatically exempt?
A: No. Being under the 35% threshold can qualify a business as a "de minimis" serviceman, which changes how tax is calculated (potentially using the business's own cost price as the tax base), but it does not eliminate the tax obligation altogether — the business must still register as required and pay Service Occupation Tax or Use Tax.

Q: What are the four ways a serviceman can calculate Service Occupation Tax liability?
A: (1) tax on the separately stated selling price of the property transferred; (2) tax on 50% of the entire bill to the customer if the price isn't separately stated; (3) for registered de minimis servicemen, tax on their own cost price; or (4) for de minimis servicemen not required to register under Section 2a of the Retailers' Occupation Tax Act, Use Tax on their own cost price (paid to suppliers, with no tax collected from customers).

Q: Can the tax base ever be less than the property's cost price?
A: No. Under 86 Ill. Adm. Code 140.106, both the separately-stated-price method and the 50%-of-bill method require that the tax base never be less than the serviceman's cost price for the tangible personal property transferred.

Q: Is this letter binding on the Department for other taxpayers?
A: No. This is a General Information Letter, not a Private Letter Ruling. It merely directs the requester to relevant statutes and regulations, is not a statement of Department policy, and is not binding on the Department. See 2 Ill. Adm. Code 1200.120.

Citations and references

• 35 ILCS 115/3 (Service Occupation Tax on tangible personal property transferred by lease incident to a sale of service, effective Jan. 1, 2025, per Public Act 103-592, Art. 75)
• 35 ILCS 115/2 (definition of "transfer" to include a lease, effective Jan. 1, 2025)
• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax on retail sales of tangible personal property)
• 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 tangible personal property transferred incident to sales of service)
• 86 Ill. Adm. Code 140.106 (tax base: separately stated selling price or 50% of entire bill, not less than cost price)
• 86 Ill. Adm. Code 140.109 (de minimis serviceman registration and 35%/75% thresholds)
• 86 Ill. Adm. Code 140.108 (de minimis serviceman not required to register pays Use Tax to suppliers)

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/st25-0002-gil.pdf

Original ruling text

ST 25-0002-GIL

01/17/2025

SERVICE OCCUPATION TAX

Effective January 1, 2025, 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
as amended by Article 75 of Public Act 103-592.
January 17, 2025
NAME
EMAIL
Dear NAME:
This letter is in response to your letter dated January 13, 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.
The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your letter you have stated and made inquiry as follows:
Dear Sir or madam,
I am inquiring about a question that has arisen under the new requirement to
charge sales tax on the lease of tangible personal property and am looking for
guidance.
The business is a dumpster rental business. Initially, I was thinking sales tax
would apply on the lease of the dumpster and the business could break out
the delivery and disposal fees on the invoice and those charges would not be
subject to tax. But on further research, I am now thinking that perhaps the
dumpster rental business is a service business and the dumpster rental is de
minimis. In this case, the company delivers the dumpster and picks it up
when the customer is done and removes of the waste. I have not been able to
find any specific exemption of taxation for waste removal services in Illinois. I
understand that if the delivery and removal was not included at all and was

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January 17, 2025
the customer’s responsibility, then the dumpster rental would be taxable. But
in the case I have described, the cost of the dumpster (when spread out
among many customers) would be minimal (less than 35%) of the total price
charged to the customer for the rental and disposal. Am I thinking correctly
that the dumpster rental is a sale of service and thus sales tax is not required
to be charged? Instead the business continues to pay tax on the purchase of
the dumpster as it always has. Thank you for your assistance.
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 relatively insignificant
or incidental 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

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January 17, 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
incident to 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. Such de minimis servicemen handle their tax liability by paying Use Tax

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January 17, 2025
to their suppliers. If their suppliers are not registered to collect and remit tax, the servicemen
must register, self-assess and remit Use Tax to the Department. The servicemen are
considered to be the end-users 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.
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,
Alexis K. Overstreet
Deputy General Counsel
AKO