Are a tire shop's recycling fees -- both what it charges customers and what it pays haulers -- subject to sales tax?

Plain-English summary

Monroe Muffler Brake Inc. sells and installs tires. When it sells or installs tires and keeps the customer's old tires, it charges a $1.50 recycling fee (plus sales tax) per tire. Customers who keep their own tires aren't charged. Sometimes people who didn't buy new tires ask the shop to recycle old tires, and are charged the same fee. The shop then pays outside companies about 75 cents per tire to haul the tires away. The shop asked whether these fees are subject to sales tax.

The Department gave a transaction-by-transaction answer:

• Recycling fee tied to a tire sale/install = taxable. When the customer buys or has tires installed and the shop retains the used tires, the $1.50 fee is a charge for servicing tangible personal property, taxable under Tax Law 1105(c)(3) and 20 NYCRR 527.5.
• Recycling fee for a mere drop-off = not taxable. When "other individuals" simply drop off tires without buying or installing new ones, the fee is not taxable, because that standalone transaction isn't a service subject to tax. (It isn't trash removal from the customer's property, since the shop doesn't pick tires up from the customer's premises.)
• Hauling fees the shop pays = taxable, and not a resale. The 75-cents-per-tire the shop pays outside companies to remove tires from the shop's own premises is a trash/garbage removal service, taxable under Tax Law 1105(c)(5) and 20 NYCRR 527.7. The shop can't buy this for resale, because it isn't providing garbage removal from its customers' real property. So the shop owes sales tax on those hauling charges.

What this means for you

Auto shops and tire dealers

A "recycling" or "disposal" fee you add as part of a taxable tire sale or installation is itself taxable -- it's part of servicing tangible personal property. But a standalone disposal fee for someone just dropping off tires (no sale/install) may not be taxable.

You pay tax on your own dumpster/hauling service

Paying a carter to remove waste from your premises is a taxable trash-removal service. You cannot claim resale on it just because you charge customers a recycling fee -- you're the consumer of the removal service for your own property.

The resale test looks at whose property is serviced

The shop couldn't resell the hauling service because it wasn't removing tires from its customers' property. Resale of a real-property service generally requires that you re-provide that same service to your customer's property.

Common questions

Q: Is the recycling fee I charge on a tire sale taxable?
A: Yes -- when it's tied to selling or installing tires and keeping the old ones, it's taxable as servicing tangible personal property under section 1105(c)(3).

Q: What if someone just drops off old tires and pays the fee?
A: That standalone recycling fee is not taxable, because it isn't a service subject to tax under the Tax Law.

Q: Can I buy the hauling service tax-free for resale?
A: No. You're paying to remove tires from your own premises, so you're the consumer -- the removal service is taxable to you and isn't a resale.

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

Citations and references

• Tax Law section 1105(c)(3) (sales tax on servicing tangible personal property)
• Tax Law section 1105(c)(5) (sales tax on trash/garbage removal from real property)
• 20 NYCRR 527.5 (installing/servicing tangible personal property)
• 20 NYCRR 527.7 (maintaining real property; trash and garbage removal)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_44s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-93 (44)S
Sales Tax
August 13, 1993

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S930308A

On March 8, 1993, a Petition for Advisory Opinion was received from Monroe Muffler Brake
Inc., P.O. Box 22720, Rochester, New York 14692.
The issue raised by Petitioner, Monroe Muffler Brake Inc., is whether the fees paid by
Petitioner to various companies for recycling used tires acquired by Petitioner from its customers are
subject to sales tax.
Petitioner is a retailer and installer of repair parts and tires for cars and trucks. When
Petitioner sells and installs tires, customers are charged a tire recycling fee of $1.50 plus applicable
New York State sales tax for each used tire retained by Petitioner. Some customers do retain their
tires and, as such, are not charged the recycling fee. In some cases, individuals ask Petitioner to
recycle their tires even though they did not purchase new tires. It is Petitioner's policy to charge these
individuals the same fee to recycle these tires. Petitioner then subcontracts the recycling of the tires
to various companies who are paid on the average 75 cents per tire for its removal.
Section 1105(c) of the Tax Law provides, in part, as follows:
Sec. 1105.
Imposition of sales tax.--.., there is hereby imposed and there
shall be paid a tax ... upon:
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(c) The receipts from every sale, except for resale, of the following services:
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(3) Installing tangible personal property, excluding a mobile home, or
maintaining, servicing or repairing tangible personal property, including a mobile
home, not held for sale in the regular course of business, whether or not the services
are performed directly or by means of coin-operated equipment or by any other
means, and whether or not any tangible personal property is transferred in
conjunction therewith...
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(5) Maintaining, servicing or repairing real property, property or land, as such
terms are defined in the real property tax law, whether the services are performed in
or outside of a building, as distinguished from adding to or improving such real
property, or land, by a capital improvement as such term capital improvement is
defined in paragraph nine of subdivision (b) of section eleven hundred one of this

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TSB-A-93 (44)S
Sales Tax
August 13, 1993
chapter, but excluding services rendered by an individual who is not in a regular trade
or business offering his services to the public.
Section 527.5 of the Sales and Use Tax Regulations provides, in part, as follows:
§527.5 Installing, repairing, servicing and maintaining tangible personal property
(Tax Law, §1105(c)(3))
(a) Imposition
(1) The tax is imposed on receipts from every sale of the services of installing,
maintaining, servicing or repairing tangible personal property, by any means
including coin-operated machines, whether or not any tangible personal property is
transferred in conjunction with the services.
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(3) Maintaining, servicing and repairing are terms used to cover all activities that
relate to keeping tangible personal property in a condition of fitness, efficiency,
readiness or safety or restoring it to such condition.
Section 527.7 of the Sales and Use Tax Regulations provides, in part, as follows:
§527.7 Maintaining, servicing or repairing real property
(Additional statutory authority: Tax Law, §1105(c)(5))
(a) Definitions
(1) Maintaining, servicing and repairing are terms which are used to cover all
activities that relate to keeping real property in a condition of fitness, efficiency,
readiness or safety or restoring it to such condition. Among the services included are
services on a building itself such as painting; services to the grounds, such as lawn
services, tree removal and spraying; trash and garbage removal and sewerage service
and snow removal.

(b)

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Imposition

(2) All services of trash or garbage removal are taxable, whether from inside or
outside of a building or vacant land.

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TSB-A-93 (44)S
Sales Tax
August 13, 1993
Example 3: A carting firm picks up trash and garbage at its
customers' premises and dumps the materials at sites away from its
customers' premises. Receipts from the sale of this service are
taxable. (emphasis added)
In instances where the customers are purchasing and/or having tires installed, the "recycling
fee" of $1.50 per tire charged to customers by Petitioner for retaining their used tires is a charge for
servicing tangible personal property. Therefore, such "recycling fee" is subject to State and local
sales and use taxes pursuant to Section 1105(c)(3) of the Tax Law and Section 527.5 of the Sales Tax
Regulations. In instances where "other individuals" merely drop off tires for recycling and do not
purchase and/or have tires installed, such "recycling fee" is not taxable since such transaction is not
a service subject to tax under the Tax Law. Since Petitioner does not remove said tires from its
customers' or other individuals premises the aforesaid service is not a trash or garbage removal
service taxed under Section 1105(c)(5) of the Tax Law.
Pursuant to Section 1105(c)(5) of the Tax Law and Section 527.7 of the Sales and Use Tax
Regulations Petitioner, by contracting with various companies to remove the tires from its property,
is purchasing a trash or garbage removal service. However this service is not being purchased for
resale since Petitioner is not providing a trash or garbage removal service to its customers whereby
it maintains or services its customers real property by physically removing such tires from its
customers premises. Therefore, the 75 cent per tire fees paid by Petitioner to the various companies
to remove the tires from its property are subject to State and local sales and use taxes.

DATED: August 13, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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