Is hazardous-waste cleanup and hauling to a disposal site taxable, is a separately stated transportation charge taxable, and can the company buy its supplies for resale?

Plain-English summary

West Central Environmental Corp. cleans up hazardous waste and hauls it to approved disposal sites, billing labor, equipment, and materials (special gloves, clothes, etc.), with a separate charge for freight from the cleanup site to the disposal site. It asked (I) whether it must charge tax on the transportation, and (II) whether it must pay tax on the supplies it uses.

The Department held the service and the freight are both taxable, and left the supplies question to the audit.

• Issue I — it's taxable trash removal, freight included. Tax Law § 1105(c)(5) taxes services of maintaining/servicing/repairing real property, and 20 NYCRR § 527.7(b)(2) makes "all services of trash, garbage or debris removal" taxable. Hazardous-waste cleanup and transport is such trash removal (Cecos International, Inc. v. State Tax Commission). The taxable "receipt" (§ 1101(b)(3)) includes all components of the charge, including transportation, and the § 1101(b)(3) exclusion for the cost of transporting tangible personal property sold at retail does not apply to trash-removal receipts. So the separately stated transportation charge is taxable.
• Issue II — resale vs. consumed supplies (a fact question). Under 20 NYCRR § 526.6(c), property that becomes a physical component part of, or is actually transferred to the customer with, the taxable § 1105(c)(5) service can be bought for resale (tax-free). But property the firm merely consumes performing the service and does not transfer to the customer is taxable — like the painter's used drop cloths and sandpaper in Example 9. Whether West Central's materials are resold or consumed is a question of fact to be resolved in the audit in which it arose.

What this means for you

Hazardous-waste cleanup and hauling is taxable trash removal in New York — and you can't strip out the freight. Because "all" trash, garbage, and debris removal is taxable, the whole charge is taxable, and a separately stated transportation charge is part of the taxable receipt. The special exclusion for shipping goods sold at retail doesn't reach a trash-removal service.

Your supplies split into resale-eligible and taxable. Materials that become part of the treated property or that you actually hand over to the customer as part of the taxable service can be bought for resale. Things you use up doing the job and leave behind (protective gear, consumables) are taxable to you — the painter's-drop-cloth rule.

Expect a facts-and-records inquiry. Whether a given item was resold or merely consumed turns on the facts, and in an audit you'll need records showing which is which.

Common questions

Q: Do we charge sales tax on hazardous-waste cleanup and hauling?
A: Yes. New York treats it as taxable trash/debris removal under § 1105(c)(5), and the entire charge — including a separately stated transportation charge — is taxable.

Q: We bill the freight to the dump separately. Isn't transportation exempt?
A: Not here. The exclusion for transporting tangible personal property sold at retail doesn't apply to trash-removal receipts, so the freight is part of the taxable receipt.

Q: Can we buy our materials and supplies for resale?
A: Only those that become part of the property serviced or are actually transferred to the customer with the taxable service. Supplies you consume and leave behind are taxable to you. Which is which is a factual question resolved in the audit.

Citations and references

Statute, regulation, and case:

• Tax Law § 1105(c)(5) — taxes services of maintaining, servicing, or repairing real property
• Tax Law § 1101(b)(3) — defines "receipt" to include all components of the charge for a taxable service (including transportation); its exclusion for transporting tangible personal property sold at retail does not apply to trash-removal receipts
• 20 NYCRR § 527.7(b)(2), (b)(4) — all trash, garbage, or debris removal is taxable; taxability of real-property services depends on the end result (repair/maintenance taxable, capital improvement not)
• 20 NYCRR § 526.6(c) — resale exclusion; property that becomes a component part of, or is transferred to the customer with, the taxable service can be bought for resale, but property consumed and not transferred is taxable (Example 9, painter's drop cloths and sandpaper)
• Cecos International, Inc. v. State Tax Commission, 126 A.D.2d 884, 511 N.Y.S.2d 174 (1987)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1988.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a88_16s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-88 (16)S
Sales Tax
February 22, 1988

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S871001A

On October 1, 1987, a Petition for Advisory Opinion was received from West Central
Environmental Corp., P.O. Box 83, Rensselaer, New York 12144.
Petitioner raises two issues: I) Should Petitioner charge its customers sales tax on the cost
of transporting hazardous waste material to an approved disposal site; and II) should Petitioner be
required to pay sales tax on purchases of materials and supplies used to perform its services.
Petitioner is in the business of cleaning up hazardous waste and transporting the waste to
approved disposal sites. When Petitioner does a cleaning and disposal, it bills the customer for the
time of labor and equipment and all materials and supplies (special gloves, clothes, etc.) used to
perform its service. Petitioner charges its customers separately for freight from the cleaning site to
the disposal site.
It is Petitioner's contention that it is performing a time and materials contract and the
materials and supplies used in the job are actually sold to Petitioner's customer and, therefore,
Petitioner is purchasing them for resale. Petitioner also contends that its charges for freight are
exempt from sales tax pursuant to § 1101(b)(3) of the Tax Law which excludes from the sales tax
the cost of transporting tangible personal property sold at retail where such cost is separately stated
in a written contract, if any, and on the bill rendered to the purchaser.
Issue I
Section 1105(c)(5) of the Tax Law imposes a tax on the receipts from the services of
"maintaining, servicing or repairing real property .... " Section 527.7(b)(4) of the sales and use tax
regulations provides that "[t]he imposition of tax on services performed on real property depends on
the end result of such service. If the end result of the services is the repair or maintenance of real
property, such services are taxable. If the end result of the same service is a capital improvement to
the real property, such services are not taxable. Section 527.7(b)(2) of the Sales and Use Tax
Regulations further explains 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.
Petitioner has furnished no information which would indicate that its service of cleaning up
hazardous waste and transporting it to approved disposal sites does not constitute the services of
trash removal, the receipts from which are subject to tax pursuant to § 1105(c)(5) of the Tax Law.
See: Cecos International, Inc. v State Tax Commission, 126 AD2d 884, 511 NYS2d 174 (1987).

RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)

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TSB-A-88 (16)S
Sales Tax
February 22, 1988
The taxable receipts from the service of trash removal include that component denominated
transportation charges. 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). Accordingly, it is concluded that the transportation charges in question are
subject to sales and use tax. The exclusion contained in section 1101(b)(3) for the cost of
transporting tangible personal property sold at retail does not apply to taxable receipts from trash
removal.
Issue II
Section 526.6 of the Sales Tax Regulations provides:
(c) Resale exclusion. (1) Where a person, in the course of his business operations, purchases
tangible personal property or services which he intends to sell, either in the form in which
purchased, or as a component part of other property or services, the property or services
which he has purchased will be considered as purchased for resale, and therefore not subject
to tax until he has transferred the property to his customer.
(6) Tangible personal property purchased for use in performing services which are taxable
under section 1105(c)(1), (2), (3) and (5) of the Tax Law is purchased for resale and not
subject to tax at the time of purchase, where the property so sold (i) becomes a physical
component part of the property upon which the services are performed, or (ii) is later actually
transferred to the purchaser of the service in conjunction with the performance of the service
subject to tax.
Example 9: A painter purchases plastic drop cloths and sandpaper
and after painting a customer's premises, leaves the
used drop cloths and sandpaper at the premises. The
drop cloths and sandpaper, even though of limited or no
use after the painting, have not been purchased for
resale as they are items used by the painter in
performing a taxable service. The drop cloths and
sandpaper are not actually transferred to the purchaser
of the service in conjunction with the performance of
the service.
Since Petitioner is selling a service subject to tax under section 1105(c)(5) of the Tax
Law, it may purchase for resale those services which become a component part of the taxable
service. Moreover, Petitioner may purchase tangible personal property tax free if such tangible
personal property will become a physical component part of the property upon which the taxable
services are performed or will actually be transferred to the purchaser of the taxable

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TSB-A-88 (16)S
Sales Tax
February 22, 1988
service in conjunction with the performance of the taxable service. However, if such tangible
personal property is actually consumed by Petitioner in the performance of a taxable service and
not actually transferred to the purchaser of the service in conjunction with the performance of the
service, such tangible personal property is subject to tax.
Whether the materials and supplies here at issue are resold by Petitioner to its customers
or consumed by Petitioner itself in performing a service and not acutally transferred to the
purchaser of the service in conjunction with the performance of the service is a question of fact
which is not susceptible to resolution within the content of an advisory opinion. Inasmuch as this
question of fact has arisen within the context of an audit, it must be resolved within such context
in accordance with the regulations and explanation given above.

DATED:

February 22, 1988

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.