Are a waste-management consultant's fees and pass-through hauling charges subject to sales tax?

Plain-English summary

The petitioner is a waste-management consulting firm: it advises business clients on the best way to manage their waste but performs no waste removal itself. It acts as its clients' agent in dealing with haulers -- it signs hauler agreements as agent for the client (legally binding the client), the haulers invoice it as agent, it pays them from a trust account holding client funds (each client separately accounted for), and it passes through hauler charges without markup, adding its own management fee. It asked whether any of its services are taxable.

The Office of Counsel concluded none of the enumerated services are taxable.

• It's a genuine agent, not a reseller. The facts establish a real agency (Hooper Holmes): written client agency agreements, contracts signed as agent, haulers billing it as agent, payment from client funds, and no markup. As an agent, it isn't reselling the hauling service (Waste Technology Services).
• Consulting isn't an enumerated service. Waste-management consulting isn't on the Tax Law 1105(c) list, so the management fee isn't taxable.
• Result: the firm doesn't sell waste-removal or other taxable services, so it owes no sales tax and need not collect tax from clients on the pass-through charges or its fee.
• Caveat: this presumes the firm has no affiliation with the waste-disposal companies; if it does, the conclusion may not hold.

What this means for you

Consultants and brokers who buy services for clients

Pure advisory/consulting work isn't a taxable enumerated service. And when you buy a taxable service (like hauling) as a disclosed agent -- written agency, contracts and invoices in the agency capacity, client funds, no markup -- you aren't reselling it, so the pass-through isn't taxable and you don't collect tax. The contrast is 09(49)S, where a contractor bought in its own name, bore cost risk, and didn't disclose agency, and so owed the tax.

Get the agency mechanics right

The exemption lives in the details: write the agency down, sign and bill in the agency capacity, hold client funds in trust, and don't mark up the third-party charge. Affiliation with the service provider can undo the analysis.

Common questions

Q: We pass hauling charges through to clients -- do we collect tax on them?
A: Not if you act as the client's disclosed agent with no markup. As an agent you aren't reselling the service, so the pass-through isn't a taxable sale by you.

Q: Is our consulting/management fee taxable?
A: No. Waste-management consulting isn't an enumerated taxable service under 1105(c).

Q: What if we're affiliated with the haulers?
A: Then this conclusion may not apply -- the opinion expressly assumes no affiliation.

Citations and references

• Tax Law section 1105(c) (enumerated taxable services; consulting not listed)
• Tax Law section 1105(c)(5) (trash/garbage removal services)
• Matter of Hooper Holmes v Wetzler, 152 AD2d 871 (agency requires manifestation/control)
• TSB-A-98(15)S (Waste Technology Services; agent not reselling)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2009.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a09_51s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-09(51)S
Sales Tax
November 12, 2009

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

PETITION NO. S090504A

On May 4, 2009, the Department of Taxation and Finance received a Petition for Advisory Opinion
from name and address redacted. Petitioner asks whether any of its waste management services are subject
to sales and use tax. None of the services it provides that are enumerated in its application for an advisory
opinion are subject to sales tax.
Facts
Petitioner provides waste management consulting services to clients engaged in business activities.
Petitioner advises its clients as to the proper, most efficient, most economical and most ecologically
appropriate means of managing their waste. Petitioner does not perform any waste removal services itself.
Petitioner acts as the representative of its clients in their relationship with waste haulers and other service
providers. It enters agreements with waste removal companies that specifically state that Petitioner acts as
agent for its client. These agreements are legally binding on Petitioner’s client. The waste removal company
invoices Petitioner as agent of its client for services rendered at the client’s locations. This invoice includes
any applicable taxes. Petitioner bills its client on a monthly basis for the services rendered by waste removal
companies, i.e., Petitioner’s invoice lists the amounts due various waste removal companies. Petitioner’s
invoice also includes a fee for the management services Petitioner provides. The client remits a check to
Petitioner in payment of the invoice, which Petitioner deposits in a bank account established for the sole
purpose of holding clients’ funds in trust pending payments to contractors. Petitioner pays contractors
directly from this account. Each client’s funds are separately accounted for on Petitioner’s books: each
client’s account is debited or credited as payments are made or received on behalf of the client. In sum,
Petitioner will pass through to a client without markup the fees charged by waste removal companies that
have a contractual relationship with the client through a written agreement signed by Petitioner as agent of
the client.
Analysis
The application of sales tax to Petitioner's receipts depends on whether Petitioner acts in a
representative capacity as agent for the waste generator, its client. To establish an agency relationship there
must be a “manifestation” that Petitioner consents to act on behalf of the client, subject to its control, and that
the client authorizes the fiduciary relationship. (See, Matter of Hooper Holmes v Wetzler, 152 AD2d 871, lv
den, 75 NY2d 706; Matter of Swet, Dec Tax App Trib, February 22, 1991, TSB-D-91(10)S.) Based on the
facts in this Opinion, Petitioner is acting as agent on behalf of its clients in regard to the purchase of waste
disposal services. It has agreements with its clients to act as purchase agent, it identifies itself as agent for its
clients in its contracts with the waste disposal companies, these companies bill Petitioner as agent, Petitioner
pays these bills from funds obtained from its clients, and Petitioner does not mark up the charges billed by
the waste disposal companies. Since Petitioner acts as agent, it is not reselling the services provided by the
waste disposal companies. Waste Technology Services, Inc., Adv Op Comm T & F, March 3, 1998,
TSB-A-98(15)S. The waste management consulting services provided by Petitioner are not enumerated
taxable services under Tax Law §1105(c). Accordingly, Petitioner’s management fee is a receipt for a

-2-

TSB-A-09(51)S
Sales Tax
November 12, 2009

service that is not subject to sales tax. In sum, Petitioner does not sell waste removal services or other
taxable services; therefore, it is not required to collect New York State sales tax from its clients.
The analysis in this Opinion presumes that Petitioner has no affiliation with the waste disposal
companies providing services to Petitioner’s clients. If Petitioner has an affiliation with waste disposal
companies, the conclusion reached in this Opinion would not necessarily apply.

DATED: November 12, 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.