If my cleaning company buys garbage bags and trash liners to remove trash from a customer's building, do I owe sales tax on those bags, even if I bill the customer separately for them?

Plain-English summary

A company providing building cleaning services to airlines and airport terminal operators — including trash removal — asked whether its purchases of garbage bags and trash can liners were subject to sales tax. The Department drew a line based on who ends up using the bags.

Cleaning and maintaining real property is itself a taxable service in New York (Tax Law §1105(c)(5)). Normally, supplies a service provider buys to perform that service can be purchased tax-free "for resale," but only if the supplies become a physical part of the customer's property or are actually handed over to the customer along with the service. Bags the company uses itself — filling them with garbage it collects and hauls away — don't become part of the customer's property and are never really transferred to the customer; they get thrown out with the trash. So the company is the "retail purchaser" of those bags and owes sales tax when it buys them, regardless of whether it separately bills the customer for supplies on its invoice.

It's different for bags the company furnishes to the customer for the customer's own use in areas the company doesn't clean — those bags really are handed over to the customer, so the company can buy them tax-free for resale, but then must charge the customer sales tax on what it charges for them. The company bears the burden of proving which bags fall into which bucket (for example, with an invoice breaking out bags sold separately from bags used in the cleaning service); without that proof, tax is due on the entire purchase.

What this means for you

Cleaning, janitorial, and maintenance companies

Supplies you consume yourself while performing a taxable maintenance service (trash bags, cleaning chemicals, etc.) are taxable purchases for you — you can't dodge that by separately listing a supply charge on your invoice if you're the one using up the supplies. Only items you genuinely hand over to the customer for the customer's own use can be bought tax-free for resale (and then you collect tax from the customer instead).

Businesses that both perform a service and sell related supplies

Keep records that clearly separate what you consume in performing the service from what you actually deliver to the customer to keep — an invoice itemizing units sold to the customer is the kind of proof the Department looks for. Without it, the whole purchase is presumed taxable.

Accountants and tax professionals

This is a straightforward application of the "actually transferred" resale test under 20 NYCRR §526.6(c) to consumable supplies used in an enumerated taxable service, reinforced by the general presumption in Tax Law §1132(c) that all purchases are taxable absent proof otherwise. Note it tracks the same "actually transferred" concept applied to packaging materials in TSB-A-09(34)S, a companion opinion issued the same day.

Common questions

Q: We bill our customer separately for supplies like trash bags — does that make our purchase of them tax-free?
A: Not if you're the one using the bags to perform the cleaning/trash-removal service. Separate billing doesn't change the fact that the bags never left your control for the customer's own disposition.

Q: What if we give the customer a supply of bags for the customer's own use in areas we don't service?
A: Those bags really are transferred to the customer. You can buy them tax-free for resale, but then you must charge the customer sales tax when you sell them.

Q: How do we prove which bags were used by us versus transferred to the customer?
A: Keep records — for example, an invoice that separately lists the number of bags and liners actually sold to the customer, apart from the trash removal service charge.

Q: What happens if we can't tell the two categories apart?
A: All purchases are presumed taxable absent proof otherwise, so without adequate records, tax is due on the full amount paid for the bags and liners.

Q: Does this ruling apply to any cleaning company's supply purchases?
A: Not automatically. An advisory opinion binds the Department only as to the taxpayer who requested it and only on the facts described, though the resale/actually-transferred test it applies reflects settled Department policy.

Citations and references

Statutes and regulations:

• Tax Law §1105(c)(5) (tax on maintaining/servicing real property)
• Tax Law §1101(b)(4)(i) (resale exclusion)
• Tax Law §1132(c) (presumption of taxability)
• 20 NYCRR §526.6(c) (resale for property transferred with a taxable service)

Cited cases and opinions:

• Matter of Custom Management Corporation v. Tax Commn., 148 AD2d 919
• Paris Maintenance, TSB-A-00(14)S
• Jeffrey J. Coren, CPA, TSB-A-99(34)S
• Ruston Paving Co., TSB-H-87(222)S
• Matter of Fannon & Osmond Photography, Inc., Tax Appeals Tribunal, July 19, 1990

Source

• Landing page: NY Sales Tax Advisory Opinions, 2009
• Original opinion: TSB-A-09(35)S

Original ruling text

New York State Department of Taxation and Finance

TSB-A-09(35)S
Sales Tax
August 19, 2009

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S081201B

On December 1, 2008, the Department of Taxation and Finance received a Petition for Advisory
Opinion from name and address redacted. Petitioner asks whether its purchases of garbage bags and trash
can liners are subject to sales tax. Petitioner’s purchases of garbage bags and trash can liners are taxable
because Petitioner will use and consume the bags in providing a taxable maintenance service.
Facts
Petitioner provides building cleaning services to various airlines and airport terminal management
companies in New York. Petitioner’s maintenance service includes trash removal.
Petitioner purchases garbage bags and trash can liners in bulk. At a customer’s request, Petitioner
will furnish the customer with a supply of garbage bags and/or trash can liners. Petitioner will use some of
the bags and liners furnished to a customer to provide trash removal services to the customer. Petitioner’s
customer has the right to use the garbage bags and trash can liners in areas where Petitioner provides no trash
removal services.
Petitioner bills its customers separately for labor charges and charges for tangible personal property,
but its sales invoice does not list separate charges for each type of tangible personal property. The charge for
tangible personal property covers cleaning supplies used by Petitioner, bathroom supplies such as hand soap,
paper towels, toilet paper, and urinal screens, and garbage bags and trash can liners. Petitioner’s customers
have the option of purchasing any of these items of tangible personal property from third parties.
Analysis
Petitioner is in the business of providing building cleaning services that are subject to sales tax under
Section 1105(c)(5) of the Tax Law as the maintenance and servicing of real property. In accordance with
Section 1101(b)(4)(i) of the Tax Law and Section 526.6(c) of the Sales and Use Tax Regulations, tangible
personal property purchased for use in performing the services subject to tax under Section 1105(c)(5) of the
Tax Law may be purchased for resale, when the property so resold becomes a physical component of the
property upon which the services are performed or when the property is to be actually transferred to the
purchaser of the service in conjunction with the performance of the taxable service.
Since Petitioner is selling a service subject to tax under Section 1105(c)(5) of the Tax Law, it may
purchase for resale items that will become a component part of the building serviced or will actually be
transferred to its customers. However, if such items of tangible personal property are actually consumed by
Petitioner in the performance of its cleaning services, they cannot be purchased for resale and are subject to
sales tax. In this case, the garbage bags and trash can liners used to collect and remove garbage from
customers' premises do not become component parts of the customers' property, nor are they actually
transferred to Petitioner's customers in conjunction with the performance of Petitioner's cleaning activities
(see Paris Maintenance, Adv Op Comm T&F, March 29, 2000, TSB-A-00(14)S; Jeffrey J. Coren, CPA,
Adv Op Comm T&F, June 24, 1999, TSB-A-99(34)S; Ruston Paving Co., Dec State Tax Commn.,

-2-

TSB-A-09(35)S
Sales Tax
August 19, 2009

September 15, 1986, TSB-H-87(222)S). Therefore, Petitioner is the retail purchaser of the garbage bags and
trash can liners used to collect and remove garbage from customers' premises and owes sales tax on the
purchases.
Sales and compensating use tax is due on purchases of garbage bags and trash can liners used to
collect and remove garbage from customers' premises, even though Petitioner separately bills its customers
for those supplies. When Petitioner furnishes both its service and the supplies to its customers, the provision
of the supplies is connected to the provision of the service and cannot be considered a separate transaction
for sales tax purposes (see Matter of Custom Management Corporation v. Tax Commn., 148 AD2d 919).
The garbage bags and trash can liners furnished to a customer that Petitioner does not use to collect
and remove garbage from customers' premises are actually transferred to the customers. Therefore, these
garbage bags and trash can liners are purchased for resale and are not subject to sales tax. Petitioner is
selling these garbage bags and trash can liners to its customers and must collect sales tax on the receipts for
those sales.
All purchases of tangible personal property are presumed subject to sales tax. Tax Law § 1132(c).
Petitioner is responsible for identifying the garbage bags and trash can liners that it actually transfers to its
customers (i.e., identifying the garbage bags and trash can liners that Petitioner does not use to provide trash
removal services). An example of sufficient proof would be an invoice issued to a customer that lists the
number of bags and liners sold to the customer separately from the trash removal services. If Petitioner
cannot identify the garbage bags and trash can liners that it actually transfers to its customers, sales tax is due
on the full amount it paid for the garbage bags and trash can liners (see Matter of Fannon & Osmond
Photgraphy, Inc., Tax Appeals Tribunal, July 19, 1990.

DATED: August 19, 2009

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion.