A trash-removal company charges customers separately for containers. Does it pay sales tax when it buys those containers, or are they bought for resale?

Plain-English summary

Standard Commercial Cartage, Inc., is a commercial trash-removal company. It offers trash pick-up (priced by volume and frequency) and, for an additional charge, supplies containers (priced by size). Most customers pay for both, but about 6% took no containers and about 3% took containers without pick-up. On the invoice, the pick-up charge and the container charge are combined into one figure. The company asked whether it owes sales tax when it buys the containers.

The Department held the containers are purchased for resale — no tax on the company's purchase.

• The key question: rental or part of the service? Section § 1105(a) taxes retail sales of tangible personal property, but § 1101(b)(4) excludes sales for resale, and § 1101(b)(5) says a "sale" includes any rental, lease, or license to use. So if the company rents the containers to customers, its purchase of them is a purchase for resale.
• A separate fee schedule makes it a rental — even if the invoice combines the charges. Normally, separately stating a container-rental charge shows the containers are resold. But even without separated billing, where a trash-removal vendor actually operates under a fee schedule with separate fees for service and for rental, that is enough to find the containers are rented to customers and thus bought for resale (citing City of Rome, TSB-H-81(86)S). That was the case here.
• Result: buy the containers tax-free with a resale certificate. Assuming the containers are used only as described, no tax is due on the company's purchases, for both State and local tax. The company gives its vendors a completed Resale Certificate (Form ST-120).

What this means for you

Re-rented equipment is bought for resale, not taxed to you. If you supply equipment to customers for a separate charge as a rental, a "sale" includes that rental — so your own purchase of the equipment is a purchase for resale, and you buy it tax-free with an ST-120. (You then collect tax on the rental charge to your customer.)

A separate fee schedule can carry the day even if the invoice lumps charges together. The Department looked past the combined invoice line to how the company actually priced — separate amounts for service and for container rental. Keep your rate schedule clear so the rental character of the charge is provable.

Match the treatment to how the item is really used. The ruling assumed the containers are used solely as described (rented to customers). If items are instead consumed in performing your service, the analysis is different.

Common questions

Q: I charge customers a separate fee for the dumpsters/containers I drop off. Do I pay tax when I buy them?
A: Generally no — that separate charge is a rental, which is a "sale," so you buy the containers for resale (tax-free with Form ST-120) and collect tax on the rental to your customer.

Q: My invoice combines the pick-up and container charges into one number. Does that ruin the resale treatment?
A: Not necessarily. If you actually operate under a fee schedule with separate service and rental fees, the Department can still treat the containers as rented — and thus bought for resale.

Q: What form do I give my supplier?
A: A completed Resale Certificate (Form ST-120).

Citations and references

Statutes:

• Tax Law § 1105(a) — tax on receipts from retail sales of tangible personal property
• Tax Law § 1101(b)(4) — "retail sale" excludes sales for resale
• Tax Law § 1101(b)(5) — a "sale" includes any rental, lease, or license to use

Authority cited:

• City of Rome, Advisory Opinion, TSB-H-81(86)S

Forms referenced:

• Form ST-120 — Resale Certificate

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a82_40s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82(40)S
Sales Tax
November 24, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S811118A

On November 18, 1981 a Petition for Advisory Opinion was received from Standard
Commercial Cartage, Inc., 263 Washington Avenue, St. James, New York 11780.
The issue raised herein is whether the purchase of refuse containers provided to customers
of Petitioner's trash removal service is subject to sales tax.
Petitioner is a commercial trash removal company. Petitioner offers to its customers the
service of trash removal alone, the fee for this service being based on the volume of trash and
frequency of pick-up. For an additional charge the customer is supplied with containers, the fee for
each container dependent on its size. While the bulk of its customers pay for both trash pick-up and
the use of containers, some 6% of its customers during 1981 did not avail themselves of containers,
while some 3% took containers without the service of trash pick-up. While the fee charged to each
customer is the sum of the charge for pick-up and the charge for containers, the two are amalgamated
on the invoices presented to the customers.
Section 1105(a) of the Tax Law imposes the State sales tax on the receipts from retail sales
of tangible personal property. Section 1101(b)(4) of the Tax Law excludes from the definition of
"retail sales" sales for resale. The term "sale" is defined, in section 1101(b)(5) of the Tax Law, to
include any "rental, lease or license to use."
It follows from the foregoing that the dispositive question herein is whether Petitioner rents
the containers to its customers or merely supplies them as part of its service. In the usual case, where
trash pick-up and container rental fees are separately stated on the invoices issued to customers it is
held that the containers are purchased for resale and may thus be purchased without payment of tax.
However, where a vendor of the service of trash removal in actuality operates within the context of
a fee schedule providing for separate fees for service and rental, that is sufficient, even in the absence
of a separation of charges in the billing, to warrant a finding to the effect that the containers are
rented to the customers, and thus purchased for resale. City of Rome, Advisory Opinion, TSB-H­
81(86)S. Such is the case in the present instance. Under the facts presented by Petitioner, and
assuming the trash containers to be utilized solely as there described, no tax is due on Petitioner's

ROBERT W. BOUCHARD, ACTING COMMISSIONER
GABRIEL B. DiCERBO , DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (8/82)

-2­
TSB-A-82(40)S
Sales Tax
November 24, 1982

purchases of the trash containers. This conclusion is applicable to both State and locally imposed
sales taxes. In order to avail itself of this exclusion Petitioner should present its vendors with a
properly completed Resale Certificate (Form ST-120).

DATED: April 12, 1982

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau