NY TSB-A-15(23)S Sales Tax 2015-05-26

Are charges for recovering propane from old or unusable tanks and returning it to the customer subject to NY sales tax?

Short answer: No. The propane-reclamation service is not subject to sales or use tax. Except for the special gas/utility tax under Tax Law sections 1105(b) and 1105-A, propane is not treated as tangible personal property for sales-tax purposes, so recovering and returning it is not the taxable service of producing, fabricating, or processing tangible personal property under section 1105(c)(2). And because the work is done primarily to salvage the propane for the customer's reuse or resale -- not to maintain or repair the tanks (the company doesn't repair or refurbish them) -- it is not a taxable service of maintaining, servicing, or repairing tangible personal property or real property under section 1105(c)(3) or (5). So the lump-sum charge, covering mobilization, evacuating the old tanks, returning the recovered propane, and demobilization, is not taxable.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

The Petitioner recovers propane left in old or unusable tanks and gives the propane back to the customer in a usable tank. Tanks range from 48-gallon (200 lb) to 1-million-gallon. The tanks have to be emptied before they can be repaired or refurbished (though the propane could also just be burned off). The Petitioner does not repair or refurbish the tanks. It charges one lump sum covering mobilization (prepping/driving its trucks to the site), evacuating the old tanks, returning recovered propane, and demobilization. The reclamation is done at the customer's site; the Petitioner does not own the tanks.

The Office of Counsel concluded the service is not taxable:

Propane isn't taxable tangible personal property here. Except for the gas/utility tax under sections 1105(b) and 1105-A, propane is not considered tangible personal property for sales/use tax (section 1101(b)(6)). So recovering it is not the taxable service of producing, fabricating, or processing tangible personal property under section 1105(c)(2).
It's salvage, not repair/maintenance. Because the work is done primarily to salvage the propane for the customer's reuse or resale -- not to maintain or repair tangible personal property or real property -- it is not taxable under section 1105(c)(3) or (5).

So the lump-sum charge is not subject to sales tax.

What this means for you

Gas/propane reclamation services

Recovering a customer's propane (or similar gas that isn't TPP for sales-tax purposes) and handing it back is a nontaxable service -- it's not processing tangible personal property and not a repair/maintenance service, as long as the purpose is to salvage the gas, not to fix the tank.

Watch the line into repair work

The key fact was that the Petitioner doesn't repair or refurbish the tanks. If your charge instead covered maintaining, servicing, or repairing the tank (tangible personal property) or real property, that part could be taxable under 1105(c)(3) or (5). And note propane is taxed under the gas/utility tax (1105(b)/1105-A) -- a different regime from this service question.

Common questions

Q: Do I charge sales tax to recover and return a customer's propane?
A: No. Propane isn't tangible personal property for this purpose, and recovering it isn't processing or repair -- the salvage service isn't taxable.

Q: What if I also repair or refurbish the tanks?
A: Repair/maintenance of the tank (tangible personal property) could be taxable under section 1105(c)(3). Here the company didn't repair tanks, so the service stayed nontaxable.

Q: Isn't propane ever taxed?
A: Yes -- propane is subject to the separate gas/utility tax under sections 1105(b) and 1105-A. That's different from this reclamation-service question.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

Tax Law section 1101(b)(6) (propane is not tangible personal property except for the gas/utility tax)
Tax Law section 1105(c)(2) (sales tax on producing, fabricating, processing tangible personal property)
Tax Law section 1105(c)(3) (sales tax on installing, maintaining, servicing, repairing tangible personal property)
Tax Law section 1105(c)(5) (sales tax on maintaining, servicing, repairing real property)

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2015.htm
Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a15_23s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(23)S
Sales Tax
May 26, 2015

Office of Counsel
Advisory Opinion Unit

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE

ADVISORY OPINION

PETITION NO. S130917A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTED “Petitioner”. Petitioner asks whether charges for the service of recovering
propane gases that are in old or unusable tanks of its customers and providing the propane back to its
customers in bulk are subject to State and local sales and use taxes. We conclude that Petitioner’s
services are not subject to sales and use taxes.
Facts
Petitioner states that it is in the business of recovering propane that is in old or unusable tanks and
giving back the propane to its customers in a usable tank. The propane tanks from which the Petitioner
removes the propane range in size from 48 gallon tanks (which is equal to 200 pounds of propane) to 1
million gallon tanks. The propane tanks from which Petitioner removes the propane must be emptied
before they can be repaired or refurbished. However, Petitioner notes that there are other means to
dispose of the remaining propane in the tanks, including burning off the remaining propane. Petitioner
does not engage in the repair or refurbishing of the propane tanks. The service Petitioner provides allows
for the propane to be saved in a safe and environmentally friendly manner and allows financial savings to
the Petitioner’s customers as they retain usable propane that can be used or sold.
Petitioner does not own the tanks and the reclamation of the propane is done at its customer’s
premises. Petitioner charges one lump sum that includes mobilization (Petitioner’s trucks prepping at
Petitioner’s location and going to the customer’s site), evacuation of the old or unusable propane tanks,
providing recovered gallons of propane to its customer, and demobilization (breaking down Petitioner’s
equipment and returning to Petitioner’s location).
Analysis
Except for purposes of the tax imposed by Tax Law §§ 1105(b) and 1105-A on sales of gas and
gas service (utilities), propane is not otherwise considered to be tangible personal property for the
purposes of sales and use taxes, See Tax Law § 1101(b)(6). See TSB-A-07(25)S. Therefore, the
reclamation service provided by Petitioner is not the service of producing, fabricating, or processing of
tangible personal property for purposes of the tax imposed by Tax Law § 1105(c)(2). In addition, because
the services provided by Petitioner are done primarily to salvage the propane for reuse or resale and not
for maintenance or repair of tangible personal property, Petitioner’s service is not taxable under Tax Law

-2-

TSB-A-15(23)S
Sales Tax
May 26, 2015

§ 1105(c)(3) or (5). Therefore, Petitioner’s charges for the services of reclaiming propane for its
customers are not subject to sales tax.

DATED: May 26, 2015

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.