Is a toxic-waste cleanup company's cleanup service taxable, and are the supplies (absorbents, drums, protective gear) it uses during a cleanup subject to sales tax?

Subject

Whether the services provided by Petitioner in connection with toxic waste clean ups are subject to sales and use taxes, and whether the supplies consumed during toxic waste clean ups are subject to sales and use taxes.

What this means for you

A company cleans up toxic waste spills within New York -- from vehicle accidents, loading/unloading incidents, or industrial plant releases -- billed on a time-and-materials basis. It sends equipment (containment booms, oil-removal vacuums, earth-moving equipment) and consumable supplies (disposable protective uniforms, absorbent pads, waste drums), following procedures set by the state Department of Environmental Conservation. Legally, the containerized waste always belongs to whoever generated it, not to the cleanup company -- some customers take the containers back for their own disposal, others have the company deliver directly to a disposal site.

The cleanup service itself is taxable: New York taxes both "processing" tangible personal property someone else furnishes, and maintaining/servicing real property -- and courts have already held toxic-waste cleanup/processing work falls within these categories. There's no special sales-tax exemption for equipment used in environmental cleanup, so the company's OWN equipment purchases/rentals (booms, vacuums, earth movers) are fully taxable, just like any other business equipment. Supplies are more nuanced: disposable protective gear (uniforms, protective items) never gets transferred to the customer, so it's always taxable to the company as the ultimate consumer. But drums, absorbents, and packaging materials are different -- if the CUSTOMER retains legal ownership and responsibility for the waste (as the law generally requires the waste generator to do), those containers/absorbents count as actually transferred to the customer along with the waste, meaning the company CAN buy them tax-free for resale. Finally, if a customer holds a direct-payment permit and gives the company a copy, the company doesn't have to collect sales tax on charges to that customer at all -- the customer instead pays the tax directly to the state.

Q&A

Q: We clean up toxic waste/environmental spills for a fee -- is that service itself taxable?
A: Yes, per this opinion -- toxic waste cleanup and processing is taxable under Tax Law § 1105(c)(2) and (c)(5), following precedent (Cecos International) holding this kind of work taxable as processing/real-property-maintenance.

Q: Is there any special exemption for the equipment (booms, vacuums, earth-moving equipment) we buy or rent to do cleanup work?
A: No, per this opinion -- there's no sales-tax exemption specific to environmental cleanup equipment, so your purchase or rental of that equipment is fully taxable like any other business equipment purchase.

Q: We buy drums, absorbents, and disposable protective gear to use up during a cleanup -- can we buy any of that tax-free for resale?
A: It depends on the item, per this opinion -- protective gear/disposable uniforms are ALWAYS taxable (never transferred to the customer), but drums/absorbents/packaging materials CAN be bought tax-free for resale specifically when your customer keeps legal ownership and responsibility for the containerized waste, since those items are then considered actually transferred to the customer along with the waste.

Q: A customer gives us a copy of their direct-payment permit -- do we still need to collect sales tax from them?
A: No, per this opinion and 20 NYCRR § 532.5(a) -- once you receive a copy of the customer's direct-payment permit, your responsibility to collect tax from that customer is waived; they pay the tax directly to the Department instead.

Citations

• Tax Law § 1101(b)(4)(i) -- defines "retail sale," excluding property purchased for resale or that becomes a physical component transferred to the service purchaser.
• Tax Law § 1105(c)(2) -- imposes tax on producing, fabricating, processing, printing, or imprinting tangible personal property for a person who furnishes the property.
• Tax Law § 1105(c)(5) -- imposes tax on maintaining, servicing, or repairing real property.
• 20 NYCRR § 532.5(a) -- describes a direct payment permit, which waives a vendor's sales-tax collection responsibility once presented by the purchaser.
• Cecos International, Inc. v. State Tax Commission, 126 A.D.2d 884, aff'd 71 N.Y.2d 934 -- held waste cleanup/processing services taxable under the real-property-maintenance/processing provisions; relied on here.
• Marine Pollution Control, Adv. Op. Comm. T&F, June 13, 1991, TSB-A-91(45)S -- held a similar cleanup company is the ultimate consumer of drums/absorbents/packaging, not a reseller of them.
• Chem-Nuclear Systems, Inc., TSB-D-89(2)S -- addressed resale treatment of containers/packaging where the customer retains ownership of the waste.
• Morton L. Coren, P.C., Adv. Op. Comm. T&F, October 5, 1993, TSB-A-93(54)S -- held no sales-tax exemption exists for equipment used in toxic-waste cleanup, and that protective gear/disposable uniforms remain taxable regardless of who retains waste ownership.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1994.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a94_2s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-94 (2)S
Sales Tax
February 18, 1994

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S940107A

On January 7, 1994, a Petition for Advisory Opinion was received from Miller
Environmental Group, P.O. Box 610, Calverton, New York 11933.
The issues raised by Petitioner, Miller Environmental Group, are:
1.

Whether the services provided by Petitioner in connection with toxic
waste clean ups are subject to sales and use taxes.

2.

Whether the supplies consumed during toxic waste clean
ups are subject to sales and use taxes.

Petitioner operates a business that cleans up toxic waste spills and sites. All work is
performed within New York State. The toxic waste spills are generated by several means.
1)

A vehicle that is carrying toxic materials is involved in an accident
that causes the release of toxic materials.

2)

A vessel or motor vehicle releases toxic chemicals into the
environment during the process of loading or unloading.

3)

An industrial plant releases toxic chemicals into the environment
during operation of the facility. The release may be the result of
normal operations or during an accident.

Petitioner contracts to perform the clean up. The work is performed on a time and material
basis.
When a spill occurs, Petitioner is contacted and makes a preliminary evaluation of the
situation and sends out its own equipment, personnel and supplies to the site. The personnel use the
supplies and equipment to cure the problem. Usually absorbents are spread and collected and placed
in containers. The New York State Department of Environmental Conservation determines the
procedures to be followed. Petitioner never assumes title to the containerized waste. The law
requires that the wastes remain the property of the generator of the waste. These containers are either
delivered to a location specified by the customer or directly delivered to a disposal site. Many
customers take possession of the containerized waste and make their own disposal arrangements.
The absorbents and containers cannot be reused by Petitioner. In addition, the disposable uniforms
become contaminated and are disposed of.
Petitioner provides equipment and supplies to be used during the clean up of toxic wastes.
The equipment consists of booms that are used to contain oil spills, vacuum cleaners used to remove
oil from water, and earth moving equipment to remove contaminated soil. The supplies include

-2­
TSB-A-94 (2)S
Sales Tax
February 18, 1994
disposable uniforms and other protective items, absorbent materials, and packaging materials such
as drums which are used to contain the absorbents and waste.
Section 1101(b)(4)(i) of the Tax Law provides, in part, that:
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), (5), (7) and (8) 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.... (emphasis added)
Section 1105 of the Tax Law imposes sales tax upon:
(a)

The receipts from every retail sale of tangible personal property,
except as otherwise provided in this article.
*

(c)

*

*

Producing, fabricating, processing, printing or imprinting tangible
personal property, performed for a person who directly or indirectly
furnishes the tangible personal property, not purchased by him for
resale, upon which such services are performed.
*

(5)

*

The receipts from every sale, except for resale, of the following
services:
*

(2)

*

*

*

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, 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 chapter, by excluding services rendered by an individual who
is not in a regular trade or business offering his services to the public.

Section 532.5(a) of the Sales and Use Regulations provides that:
A direct payment permit is a notice to a vendor that the holder thereof is authorized
to pay directly to the Commissioner of Taxation and Finance any tax due on
purchases made. The vendor's responsibility for the collection of tax from the permit

-3­
TSB-A-94 (2)S
Sales Tax
February 18, 1994
holder is waived upon receipt of such permit.
The service of cleaning up waste and processing it is subject to the sales tax imposed under
Sections 1105(c)(2) and (c)(5) of the Tax Law. (See: Cecos International, Inc. v. State Tax
Commission, 126 A.D. 2d 884, affd 71 N.Y.934)
There are no exemptions in the sales tax law for the purchase or lease of equipment used to
clean up toxic wastes. Therefore, if Petitioner uses equipment such as booms, vacuum cleaners, and
earth moving equipment in providing its services, it would be required to pay sales tax on the
purchase or rental of such equipment. Morton L. Coren, P.C., Adv Op Comm T&F, October 5,
1993, TSB-A-93(54)S.
Petitioner is not considered to be reselling drums, absorbents or packaging material to its
customers, but is considered to be the ultimate consumer of such items and thus the purchase of such
items are subject to sales tax. (See: Marine Pollution Control, Adv Op Comm T&F, June 13, 1991,
TSB-A-91(45)S). However, in those instances where Petitioner's customers retain ownership and
legal responsibility for the toxic waste, the drums, absorbents, and packaging would be considered
to be actually transferred to such customer and as such may be purchased for resale by Petitioner in
accordance with Section 1101(b)(4)(i) of the Tax Law. (See: Chem-Nuclear Systems, Inc., TSB-D­
89(2)S). The items used by Petitioner such as protection gear and disposable uniforms are not
transferred along with the service and are thus subject to sales tax whether or not Petitioner's
customers retain ownership of the waste product. Morton L. Coren, P.C., supra.
Pursuant to Section 532.5(a) of the Sales and Use Tax Regulations, Petitioner will not be
responsible for collecting sales tax where its customer gives Petitioner a copy of the customer's direct
payment permit.

DATED: February 18, 1994

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

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