Is a chemical-waste disposal company's service taxable, are its separately stated transportation charges taxable, and can it buy its equipment tax-free as production machinery?

Plain-English summary

Cecos International, Inc. removes, treats and disposes of hazardous ("non-safe") chemical waste. It characterizes what it does as "the manufacture and production of safe waste," and asked three questions: (1) is its service taxable; (2) are its separately stated transportation charges (where it hires independent carriers) taxable; and (3) is its purchase or rental of equipment and machinery taxable?

The Department held all three are taxable.

• The service is taxable trash removal. In tax terms, Cecos performs trash/debris removal, a service taxed under § 1105(c)(5). Regulation 20 NYCRR 527.7(b)(2) is explicit: "All services of trash, garbage or debris removal are taxable." The waste-treatment-equipment regulation Cecos pointed to (§ 528.13(d)) is about buying equipment, not about the taxability of the removal service.
• The transportation charges are part of the taxable receipt. A "receipt" is the whole charge for a taxable service and includes every component, including transportation (§ 1101(b)(3)). The rule letting a seller carve out separately stated transportation charges applies only to sales of tangible personal property, not to the sale of a taxable service — so Cecos's transportation charges stay in the taxable base even though it used independent carriers and stated them separately.
• The equipment is taxable to buy or rent. Purchases and rentals of tangible personal property are taxable under § 1105(a) (a rental is a "sale" under § 1101(b)(5)). Cecos claimed the § 1115(a)(12) production exemption and the § 528.13(d) waste-treatment-equipment exemption. Both require production of tangible personal property for sale by a manufacturer. Even accepting Cecos's "manufacture of safe waste" label, that process doesn't create a product made to sell — so neither exemption applies.

What this means for you

Trash, garbage and debris removal is a taxable service in New York — full stop. The regulation sweeps in removal "from inside or outside of a building, a construction site or vacant land." Dressing it up as treatment, processing, or "manufacturing" doesn't change the classification.

Separately stating transportation doesn't help on a taxable service. The transportation carve-out is a rule for sales of goods. When you sell a taxable service, everything you charge — including what you pay outside carriers and pass through — is part of the taxable receipt.

The production-machinery exemption requires producing goods for sale. Section 1115(a)(12) (and the waste-treatment-equipment exemption within it) is for manufacturers making tangible personal property to sell. If your "output" is disposed-of waste rather than a product you sell, your equipment purchases and rentals are taxable.

Common questions

Q: We treat and neutralize the waste — isn't that manufacturing, not trash removal?
A: The Department classified the receipts as a trash-removal service under § 1105(c)(5). Calling the process "manufacture and production of safe waste" didn't move it out of that taxable category.

Q: We separately state the transportation we pay to independent carriers. Why is it taxed?
A: Because you're selling a taxable service, not goods. Under § 1101(b)(3) the receipt includes all components of the charge, transportation included. The separate-statement exclusion only applies to sales of tangible personal property.

Q: Doesn't the waste-treatment-equipment exemption cover our machinery?
A: No. That exemption (20 NYCRR 528.13(d)) sits inside the § 1115(a)(12) production exemption and is limited to a "manufacturer" producing tangible personal property for sale. A disposal operation that doesn't make a product to sell doesn't qualify.

Citations and references

Statutes, regulations and authority:

• Tax Law § 1105(c)(5) — tax on maintaining, servicing or repairing real property, which covers trash/debris removal
• Tax Law § 1101(b)(3) — "receipt" is the full charge for a taxable service, including transportation and other components
• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1101(b)(5) — a "sale" includes a rental or lease
• Tax Law § 1115(a)(12) — exemption for machinery/equipment used directly and predominantly to produce tangible personal property for sale
• 20 NYCRR 527.7(b)(2) — all trash, garbage or debris removal services are taxable
• 20 NYCRR 528.13(d)(1)(i) — waste-treatment-equipment exemption, limited to equipment purchased by a manufacturer

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a81_17s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-81(17) S
Sales Tax
September 7, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810401D

On April 1, 1981 a Petition for Advisory Opinion was received from Cecos International,
Inc., P.O. Box 619, Niagara Falls, New York 14302.
Petitioner is engaged in the business of removing, treating and disposing of non-safe
chemical waste. Petitioner characterizes its business as "the manufacture and production of safe
waste." Petitioner inquires as to: (1) whether receipts from the performance of its services are subject
to sales tax; (2) whether its separately stated transportation charges, where independent carriers are
utilized, are subject to sales tax; and (3) whether its purchase or rental of equipment and machinery
utilized in its business is subject to sales tax.
Petitioner's service, within the context of the Tax Law, constitutes the service of trash
removal, the receipts from which service are subject to tax pursuant to Section 1105(c)(5) of the Tax
Law. That provision imposes a tax on receipts from the services of "maintaining, servicing or
repairing real property . . .". Section 527.7(b)(2) of the Sales and Use Tax Regulations elucidates
such statutory language by providing that: "All services of trash, garbage or debris removal are
taxable, whether from inside or outside of a building, a construction site or vacant land." 20 NYCRR
527.7(b)(2).
Petitioner's contention that its receipts are exempt from tax by virtue of Section 528.13(d)
of such Regulations is not well-founded. That provision does not relate to receipts from the service
of trash removal, but to the purchase and use of certain waste treatment equipment.
The taxable receipts from the service of trash removal include that component denominated
transportation charges, which amount represents Petitioner's cost of arranging for the transportation
of its customers' waste materials by an independent carrier. The term "receipt" is defined as "The
amount of . . . the charge for any [taxable] service . . . ." and includes all of the components of such
charge, including expenses for transportation. Tax Law, §1101(b)(3). The exclusion of separately
stated transportation charges provided for in the cited provision of law relates solely to transportation
charges applicable to the purchase of tangible personal property, and not to the purchase of the
service of trash removal. Accordingly, Petitioner's separately stated transportation charges are
includable in its taxable receipts.
Finally, Petitioner inquires as to the taxability of its purchase and rental of the machinery and
equipment used in its operations. The Tax Law imposes a tax on the ". . . receipts from every retail
sale of tangible personal property, except as otherwise provided in this article." Tax Law, §1105(a).
The term "retail sale" includes a sale for any purpose other than resale. Tax Law, §1101(b)(4). The
term "sale" is defined to include the rental or leasing of tangible personal property. Tax Law,
§1101(b)(5). Accordingly, the receipts from Petitioner's purchase or rental of machinery and
JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-81(17) S
Sales Tax
September 7, 1981

equipment used in its operations are subject to the sales tax imposed under Section 1105(a) of the
Tax Law.
Petitioner contends that such purchases and rentals are exempt from tax by reason of Section
1115(a)(12) of the Tax Law, and the Regulations promulgated thereunder. Section 1115(a)(12)
provides for an exemption with respect to machinery and equipment purchased ". . . for use or
consumption directly and predominantly in the production of tangible personal property . . . for sale,
by manufacturing, processing . . .". Section 528.13(d) of the Sales and Use Tax Regulations, cited
by Petitioner, specifically provides for an exemption with respect to waste treatment equipment.
However, this exemption is explicitly limited in its application to such equipment "purchased by a
manufacturer." 20 NYCRR 528.13(d)(1)(i). "Manufacturer", within the context of Section
1115(a)(12) of the Tax Law, means one who is engaged in the production of tangible personal
property for sale , by manufacturing. Even if Petitioner's characterization of its process as the
"manufacture and production of safe waste" were tenable, such "manufacture and production" does
not create a product produced for the purpose of sale. Accordingly, the exemption from sales tax
provided for in Section 1115(a)(12) of the Tax Law is not applicable to Petitioner's purchase or
rental of machinery or equipment. The receipts from such purchases and rentals are accordingly
subject to tax.

DATED: August 19, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau