Are a refuse hauler's purchases of garbage collection trucks exempt from sales tax because the trucks are used only to perform its taxable trash-removal service?

Plain-English summary

Browning-Ferris Industries of N.Y., Inc. buys trucks that are designed for collecting refuse and cannot be used for any other purpose. It uses those trucks to perform trash-removal service for its customers. Browning-Ferris asked whether its purchases of the refuse trucks are subject to sales tax.

The Department held the truck purchases are taxable.

• Buying tangible personal property at retail is taxable. Section 1105(a) taxes the receipts from every retail sale of tangible personal property.
• The "retail sale" definition has narrow exclusions. Under § 1101(b)(4), a purchase is not a taxable retail sale only if the property is bought (A) for resale, or (B) for use in performing certain taxable services where the property becomes a physical component of, or is later transferred to the customer along with, the service.
• The trucks are never transferred to customers. Browning-Ferris does use the trucks to perform a service that is taxable under § 1105(c)(5), but it keeps the trucks — they don't become part of anything sold to a customer and aren't handed over to customers. So neither exclusion applies.
• Result: the truck purchases are taxable retail sales. That the trucks can only be used for refuse collection doesn't matter.

What this means for you

Tools you use to deliver a service are usually taxable to buy — even if the service is taxable too. The resale/component exclusion is for property you resell or physically transfer to the customer, not for the equipment you hold and operate. A garbage truck, a floor buffer, a repair-shop lift — you buy those at retail and pay tax.

"It has only one possible use" is not an exemption. New York's sales tax turns on how the property is used in the transaction (resold? transferred to the customer?), not on how specialized the equipment is.

Don't confuse a taxable service with an exempt input. Performing a § 1105(c)(5) trash-removal service is one taxable event; buying the truck to do it is a separate taxable purchase. Both can be taxed.

Common questions

Q: My trucks are only good for hauling garbage. Doesn't that make them exempt?
A: No. Single-purpose design has no bearing on the tax. The purchase is a taxable retail sale under § 1105(a) unless the truck is resold or transferred to your customer, which it isn't.

Q: I use the trucks to perform a taxable service. Isn't the equipment then bought "for resale"?
A: No. The resale/component exclusion in § 1101(b)(4) applies only when the property becomes a physical component of the service or is transferred to the customer with the service. Equipment you keep and operate doesn't qualify.

Q: Would it be different if I transferred equipment to the customer?
A: The opinion turns on the fact that the trucks are not transferred. Property that actually becomes part of, or is delivered to the customer with, a taxable service can fall outside "retail sale" — but that's not this situation.

Citations and references

Statutes and authority:

• Tax Law § 1105(a) — tax on receipts from every retail sale of tangible personal property
• Tax Law § 1101(b)(4) — defines "retail sale"; excludes purchases for resale or as a physical component part, and certain property transferred to the customer with a taxable service
• Tax Law § 1105(c)(5) — imposes tax on trash, refuse and similar removal services (the service the trucks perform)

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_18s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-81 (18) S
Sales Tax
September 10, 1981

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810424A

On April 4, 1981 a Petition for Advisory Opinion was received from Browning-Ferris
Industries of N.Y., Inc., 136 Sicker Road, Latham, New York 12110.
The issue raised is whether or not Petitioner's purchases of refuse collection trucks are subject
to sales tax. Petitioner states that the trucks purchased for the collection of refuse cannot be used for
any other purpose.
Section 1105(a) of the Tax Law imposes a tax on "The receipts from every retail sale of
tangible personal property, except as otherwise provided in this article."
Section 1101(b)(4) of the Tax Law defines the term "retail sales," to include "(i) A sale of
tangible personal property to any person for any purpose, other than (A) for resale as such or as a
physical component part of tangible personal property, or (B) for use by that person in performing
the services subject to tax under paragraphs (1), (2), (3) and (5) of subdivision (c) of section eleven
hundred five where the property so sold becomes a physical component part of the property upon
which the services are performed or where the property so sold is later actually transferred to the
purchaser of the service in conjunction with the performance of the service subject to tax . . . . "
While Petitioner uses the trucks in performing a service subject to tax under section
1105(c)(5) of the Tax Law, the trucks are not transferred to Petitioner's customers.
Accordingly, Petitioner's purchase of trucks constitute a retail sale the receipts from which
are subject to tax.

DATED: August 25, 1981

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

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