Are portable-toilet rentals with waste removal exempt from NY sales tax when the customer is performing a capital improvement?

Plain-English summary

The petitioner rents portable toilet facilities (from basic fiberglass units to upscale units with tile floors and porcelain sinks), charged by the day/week/month, with weekly cleaning and waste removal included (extra cleanings for a fee). Its construction-industry customers put the units at job sites that lack running water or usable toilets while building capital improvements. It asked whether its charges are exempt because the customers are doing capital-improvement projects.

The Office of Counsel concluded the charges are taxable:

• Portable toilets + waste removal = a taxable real-property service. Following TSB-A-08(55)S, providing portable toilets in conjunction with waste removal is part of a taxable waste-removal service -- a form of "maintaining, servicing or repairing real property" enumerated in Tax Law 1105(c)(5) (Waste Management of New York).
• No capital-improvement exclusion for this. Nothing in 1101(b)(9), 1105(c)(5), or the regulations (20 NYCRR 527.7) extends the capital-improvement exclusion to waste-removal services used in conjunction with a capital-improvement project. The regulation's examples (527.7 #4 and #5) cover construction debris removed from the site -- debris created by the construction work or from demolishing existing structures -- which is not the same as portable-toilet waste.
• The trash-removal exclusion (541.7) doesn't apply either. That exclusion has four criteria, including that the contractor generated the trash/debris by its own work on the property. Portable-toilet waste doesn't meet that criterion.

So the petitioner's sales and rentals of portable toilet facilities and the related waste removal are subject to State and local sales tax.

What this means for you

Portable-sanitation and waste-removal companies

Renting portable toilets with cleaning/pumping is a taxable real-property service, and you should charge sales tax on the whole arrangement -- including the rental. The fact that your customer is a contractor building a capital improvement does not make your service exempt. The capital-improvement and trash-removal exclusions are aimed at hauling away the construction debris the contractor itself generated, not at the sanitation service you provide to the crew.

Contractors renting these units

Don't assume your capital-improvement project flows an exemption down to the porta-john vendor. Expect to pay sales tax on those rentals, and don't issue a capital-improvement certificate for them.

Common questions

Q: We rent portable toilets to construction crews building capital improvements -- is that exempt?
A: No. Portable toilets with waste removal is a taxable real-property service (1105(c)(5)), and the capital-improvement exclusion doesn't reach it.

Q: Is the rental portion taxable, or just the cleaning?
A: Both. The provision of the units and the related waste removal are treated together as a taxable waste-removal service.

Q: Why doesn't the trash-removal exclusion apply?
A: That exclusion is for debris the contractor generated by its own construction work. Portable-toilet waste isn't construction debris, so it fails the test.

Citations and references

• Tax Law section 1105(c)(5) (maintaining/servicing/repairing real property; waste removal)
• Tax Law section 1101(b)(9) (definition of capital improvement)
• 20 NYCRR section 527.7 (services to real property; capital improvement)
• 20 NYCRR section 541.7 (trash/debris removal exclusion criteria)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2012.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a12_17s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-12(17)S
Sales Tax
July 11, 2012

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S111219A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name redacted. Petitioner asks whether charges for the service and use of its portable toilets to
its customers engaging in capital improvements are considered a capital improvement-related
service that is excluded from sales and use tax. We conclude that Petitioner’s products do not
qualify for a capital improvement exclusion.
Facts
Petitioner states that it provides portable toilet facilities to its customers. These facilities
range from traditional fiberglass portable toilets to upscale facilities which include tile floors and
porcelain sinks. Petitioner charges its customers by the day, week, month, etc. Cleaning and
waste removal is provided one time each week and is included in the charge for customers who
have the facilities a week or more. Customers may request additional cleaning and waste
removal for an additional fee.
Petitioner asks whether its charges to customers for portable toilet facilities are exempt if
the customers are in the construction industry and engaged in capital improvement projects as
defined under Tax Law §1101(b)(9). Petitioner notes that its customers in this industry provide
the facilities to their employees in connection with capital improvement projects because the
customers’ employees usually work an eight hour day. The projects have no running water or
usable toilet facilities. Petitioner further notes that it delivers the facilities to the construction site
and that the cleaning and waste removal is done at the construction site when the toilets are there
for more than a week.
Analysis
The Department issued an Advisory Opinion (TSB-A-08(55)S), which provided that the
“provision of portable toilets in conjunction with waste removal services is part of the taxable
waste removal service.” The opinion further stated “[c]harges for both the portable toilet service
and the trash removal service were deemed to be charges for waste removal services, and taxable
under Tax Law section 1105(c)(5).” Petitioner does not contest that opinion; rather, it asks
whether the provision of an otherwise taxable service is exempt when provided “in conjunction
with the performance of a capital improvement.”
Petitioner’s charge for the facilities to its customers for their use would be considered
subject to sales and use tax. See Tax Law § 1105(c)(5). The performance of waste removal

-2-

TSB-A-12(17)S
Sales Tax
July 11, 2012

services is a form of “[m]aintaining, servicing or repairing real property, property or land,”
which is an enumerated service, and receipts from its sale are accordingly subject to sales and
use tax under Tax Law section 1105(c)(5). (See Waste Management of New York, Inc. [Waste
Management], Tax Appeals Tribunal, March, 21. 1991).
Petitioner claims that, because its customers may be performing capital improvement
projects under Tax Law section 1101(b)(9), its charges for portable toilets and related services
should be exempt. However, Tax Law sections 1101(b)(9) and 1105(c)(5) and the regulations
thereunder (Reg. Sec. 527.7) provide no extension of the capital improvement exclusion to waste
removal services that are used in conjunction with capital improvement projects. The examples
set forth in Reg. Sec. 527.7 (#4 and #5) are not analogous to the provision of portable toilet
facilities. Those examples relate to debris removed from the construction site that was created
from actual construction activities or debris removed from the demolition of structures already
on the construction site. The provision of the portable toilet facilities and accompanying waste
removal is not construction debris removed from the site. Accordingly, the provision of the
portable toilet facilities and accompanying waste removal would not qualify for such exemption.
Further, Petitioner’s provision of portable toilet facilities to its customers would not
qualify for the exclusion under Reg. Sec. 541.7 as a purchase of the service of trash or debris
removal. Reg. Sec. 541.7 provides four criteria for this exclusion to apply, the second of which
is that “the contractor generated the trash or debris to be removed from such real property,
property or land as a result of such work.” The provision of the portable toilet facilities does not
meet that criterion. As a result, this exclusion would not be applicable under these
circumstances.
Accordingly, Petitioner’s sales (which includes rentals) of portable toilet facilities and
related waste removal services are subject to State and local sales tax.

DATED: July 11, 2012

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy 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. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.