Are the transportation fees and landfill tipping fees an auto-shredding company pays to dispose of shredder waste subject to New York sales tax as a trash removal service?

Plain-English summary

Co-Steel Recycling shreds automobiles, producing "shredder fluff" -- the glass, plastic, and upholstery left over after the heavy metal is separated out. Petitioner pays an unrelated trucking company to haul the fluff to the county landfill, and pays the landfill a separate tipping fee to accept it. The wrinkle: the landfill actually USES the shredder fluff as required daily cover material (rather than buying or excavating soil for that purpose), which is why Petitioner's tipping fee for fluff ($6.50/ton) is far below the landfill's normal $30/ton rate. Petitioner was already paying sales tax on both fees and wanted to know if either was truly taxable.

The Department split the two charges. The tipping fee is a pure disposal payment -- prior case law (Cecos Intl. v State Tax Commn, Penfold v State Tax Commn) establishes that a service involving only the disposal of waste, without transport or treatment, isn't one of the enumerated taxable services -- so it's untaxed regardless of the reduced rate reflecting the fluff's reuse value. The transportation fee was a harder question. Under the Tax Appeals Tribunal's Seneca Foods decision, materials with genuine economic value (there, food by-products sold to farmers as feed and fertilizer, with the farmers effectively crediting the removal charge against that value) aren't "trash," so hauling them away isn't a taxable trash-removal service. But the Department distinguished Co-Steel's situation: unlike Seneca Foods, there was no payment flowing back from the landfill to Petitioner for the fluff's value -- Petitioner still paid a fee (albeit reduced) to get rid of it, and the fluff stays permanently in the landfill rather than being resold into commerce. Given that in a modern recycling economy "very little, if any, trash has no value" in some sense, the Department held that a below-market disposal fee alone doesn't convert waste hauling into something other than trash removal -- so the transportation fee remained taxable as maintaining, servicing, or repairing real property (real property here being Petitioner's own facility, kept clean by hauling away its waste) under § 1105(c)(5).

What this means for you

Manufacturers and recyclers paying separately for waste transport and disposal

Structure and bill your waste-hauling and disposal charges as SEPARATE, clearly itemized fees -- this ruling treats them independently. A pure disposal/tipping fee paid to a landfill or disposal facility is untaxed even if your waste happens to have some reuse value to the recipient, but a transportation/hauling fee to get waste off your property is generally taxable trash removal, UNLESS the recipient is actually paying (or crediting) you for the waste's value the way the farmers did in Seneca Foods.

Businesses whose waste byproducts are purchased or credited by the recipient

If the entity receiving your waste pays you (or credits your removal charge) because the material has real value to them -- as opposed to merely charging you a reduced disposal fee -- you may have a stronger argument under the Seneca Foods line that the transportation isn't taxable trash removal. The direction of payment matters: a reduced fee you still pay is different from a credit or payment flowing back to you.

Common questions

Q: Why was the tipping fee untaxed but the transportation fee taxed, when both relate to the same waste?
A: They're legally distinct services. A pure disposal fee (no transport or treatment) has never been an enumerated taxable service under New York case law. Hauling the waste away, however, is a maintaining/servicing/repairing-real-property service under § 1105(c)(5) -- and remains taxable even when the waste has some value to whoever takes it, so long as the generator is still the one paying to get rid of it.

Q: Does it matter that the landfill actually reuses the shredder fluff instead of just burying it as waste?
A: The Department considered this but found it insufficient to escape tax on the transportation charge, since there was no payment flowing back to Petitioner for the fluff's value -- distinguishing this from Seneca Foods, where farmers effectively paid for valuable by-products by crediting the removal charge.

Q: Can another recycler or manufacturer rely on this exact split for its own waste-hauling arrangement?
A: No. This advisory opinion binds the Department only as to Co-Steel Recycling and the specific facts described; a business with even a similar-looking fee structure (e.g., where the recipient pays for the waste) should seek its own opinion.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c)(5) (tax on maintaining, servicing, or repairing real property)
• 20 NYCRR § 527.7(a) (definitions of maintaining, servicing, and repairing)

Prior rulings and cases referenced:

• Cecos Intl. v State Tax Commn., 71 NY2d 934
• Penfold v State Tax Commn., 114 AD2d 696
• Counsel Opinion, May 7, 1992, TSB-M-92(3)S
• Matter of Seneca Foods Corp., Tax App Trib, July 6, 1995, TSB-D-95(30)S
• Matter of Marisol, Tax App Trib, January 4, 1996, TSB-D-96(2)S
• Matter of Auburn Steel Co., Tax App Trib, September 13, 1990, TSB-D-90(49)S
• Tonawanda Tank Transport Service v Tax Appeals Tribunal, 168 AD2d 748
• Rochester Gas and Electric v State Tax Commn., 71 NY2d 931

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a96_64s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (64) S
Sales Tax
October 1, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S960229A

On February 29, 1996, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Co-Steel Recycling, Advance Division, P.O. Box 1131, 776 Ohio Street,
Buffalo, New York 14240.
The issues raised by Petitioner, Co-Steel Recycling, are whether the payments made by
Petitioner for transportation fees and tipping fees are subject to sales tax under Section 1105(c)(5)
of the Tax Law as payments for a trash or garbage removal service.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is engaged in the business of shredding automobiles. One component of the
materials resulting from the shredding of automobiles is referred to as "shredder fluff." The fluff
results from shredding the glass, plastic and upholstery of automobiles. The heavy metal and other
materials resulting from the shredding of automobiles are not included in the fluff.
Petitioner pays an unrelated trucking company to transport the shredder fluff to the County's
sanitary landfill. Petitioner also pays the landfill a tipping fee with respect to the shredder fluff.
Petitioner currently pays sales tax on both the payments for transportation and the tipping fees.
The landfill uses the shredder fluff it obtains from Petitioner as a daily cover. The landfill is
required to put a cover material on the landfill at the end of each day. The cover material is not
removed. Instead, items disposed of in the landfill the next day are placed on top of the previous
day's cover material. When and if the landfill does not use the shredder fluff as its daily cover
material, it is required to use other material such as soil it purchases or excavates.
The tipping fee that Petitioner pays to the landfill per ton of shredder fluff is less than the
tipping fee that would apply if the shredder fluff could not be used by the landfill as a daily cover
material. The normal tipping fee is $30.00 per ton. The tipping fee for shredder fluff usable as daily
cover material is $6.50 per ton.
The New York State Department of Environmental Conservation ("DEC") has informed the
landfill that shredder fluff may be used as daily cover. DEC requires that the shredder fluff be tested
on a quarterly basis for TCLP (toxic control leachate process) and PCBs (polychlorinated biphenyl).
The landfill requires Petitioner to have the shredder fluff tested on a quarterly basis.

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October 1, 1996

Applicable Law and Regulations
Section 1105(c)(5) of the Tax Law imposes tax upon receipts from every sale, except for
resale, of:
(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 ....
Section 527.7(a) of the Sales and Use Tax Regulations provides, in part:
(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.
Opinion
Section 1105(c) of the Tax Law imposes tax on receipts from the sale of certain enumerated
services. Where Petitioner contracts directly with unrelated vendors to transport shredder fluff and
to dispose of shredder fluff, two distinct and separate services occur and the taxability of each service
must be determined independently. A service involving only the disposal of waste without transport
or treatment of the waste is not an enumerated service under Section 1105(c) of the Tax Law. (See,
Cecos Intl. v State Tax Commn., 71 NY2d 934; Penfold v State Tax Commn., 114 AD2d 696;
Counsel Opn, May 7, 1992, TSB-M-92(3)S.) Therefore, the $6.50 per ton tipping fees paid by
Petitioner to the landfill for the disposal of shredder fluff are not subject to sales tax.
Regarding the transportation of shredder fluff, in Seneca Foods Corp. (Tax App Trib, July
6, 1995, TSB-D-95(30)S), the Tribunal recently addressed whether the transportation of certain food
by-products and sludge constituted the servicing of real property, that is as a trash and garbage
removal service, within the context of Section 1105(c)(5) of the Tax Law and Section 527.7(a) of
the regulations. The Tribunal opined that the "crux of the matter" was whether the food by-products
and sludge were "trash" within the meaning of Section 1105(c)(5) of the Tax Law or whether they
had "value." Having determined that the food by-products and sludge had economic value as feed
and fertilizer, the Tribunal concluded that the payments made to farmers for their removal did not
constitute payments for a trash or garbage removal service taxable under Section 1105(c)(5). (See,
also, Marisol, Tax App Trib, January 4, 1996, TSB-D-96(2)S; Auburn Steel Co., Tax App Trib,
September 13, 1990, TSB-D-90(49)S; Tonawanda Tank Transport Service v Tax Appeals Tribunal,
168 AD2d 748; Rochester Gas and Electric v State Tax Commn., 71 NY2d 931; Cecos Intl., supra.)
The decision in Seneca Foods and the case law upon which it was based suggest that trash
and items of value are mutually exclusive. However, given today's recycling and resource

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recovery efforts very little, if any, trash has no value. This calls into question the use of the term
"trash" in relation to Petitioner and Section 1105(c)(5) of the Tax Law. Unlike Seneca Foods,,
Petitioner's shredder fluff is disposed of in a landfill and it remains in the landfill. Also, in Seneca
Foods, the Tribunal found that "[t]he dollar value of the food by-products and sludge is reflected in
the statements from both farmers to the effect that their charges represented the difference between
their expense in picking up and transporting the food by-products and sludge and the value of the
food by-products and sludge". That is, the Tribunal in effect found a payment flowing from the
farmers to the petitioner for the purchase of the byproducts and sludge in the form of a credit against
the removal and transportation charge. That is not the case here. There is no payment by the landfill
to Petitioner for the shredder fluff; Petitioner pays the landfill a fee, albeit at a reduced rate, to dump
the shredder fluff.
"The obvious legislative intent was to tax trash removal" (Rochester Gas and Electric, supra).
A "landfill," as defined in Section 52-0101(11) of the Environmental Conservation Law, disposes
of all matters of solid waste.
"Solid Waste" means all putrescible and non-putrescible materials or substances
discarded or rejected as being spent, useless, worthless or in excess to the owners at
the time of such discard or rejection, ... including but not limited to garbage, refuse,
industrial and commercial waste, sludges from air or water control facilities, rubbish,
ashes, contained gaseous material, incinerator residue, demolition and construction
debris, discarded automobiles and offal but not including sewage and other highly
diluted water carried materials or substances and those in gaseous form. (ECL, §27­
0701(1), emphasis added)
Semantics aside, trash and garbage removal services are only one example of the services of
maintaining, servicing or repairing real property, property or land as set forth in Section 527.7 of the
regulations. Regardless of the value of shredder fluff as daily cover material at the landfill, the
removal and transportation of this fluff constitutes the removal and transportation of solid waste, as
defined in the Environmental Conservation Law, from Petitioner's place of business to a landfill and
these activities are related to keeping Petitioner's real property in a condition of fitness, efficiency,
readiness and safety or restoring it to these conditions. Accordingly, payments made by Petitioner
for the transportation of shredder fluff are subject to sales tax pursuant to Section 1105(c)(5) of the
Tax Law.

DATED: October 1, 1996

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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