Can a waste-transfer-station operator buy a competitor's trash-hauling service tax-free for resale when that competitor also uses the same transfer station for its own customers' trash?

Plain-English summary

Paper Fibres Corporation runs its own trash removal service, collecting waste from its customers and consolidating roughly 1,250 tons a month at its own New York transfer station, charging (and collecting sales tax from) its customers along the way. Browning Ferris Industries ("B.F.I.") runs a similar service for its own customers, but instead of operating its own transfer station, it brings about 700 tons a month of its customers' waste to Paper Fibres' transfer station, paying Paper Fibres a fee for that (without sales tax being collected on that particular fee). Once all the waste -- Paper Fibres' and B.F.I.'s combined -- sits consolidated at the station with no material change made to it, B.F.I. hauls everything onward in its own trucks to a landfill in Pennsylvania, charging (and collecting sales tax from) Paper Fibres for that transport leg. Paper Fibres asked whether it could treat its payment to B.F.I. for that final landfill-transport leg as a tax-exempt purchase for resale, since the waste eventually gets delivered to Paper Fibres' own customers' final disposal destination as part of the overall service Paper Fibres itself sells.

The Department said no. Under New York law, trash and garbage removal is a taxable service because it counts as "maintaining, servicing, or repairing" the customer's real property. Both Paper Fibres and B.F.I. are separately providing that same kind of taxable service -- but to different real property. Paper Fibres provides trash removal to its own customers' properties. B.F.I., by hauling waste away from Paper Fibres' transfer station (including the very waste B.F.I. itself brought there), is providing trash removal service to Paper Fibres' property -- the transfer station. Because B.F.I.'s service to Paper Fibres is servicing a distinct piece of real property (Paper Fibres' own station) rather than functioning as an integrated link in the chain of service Paper Fibres sells to its original customers, the resale exclusion doesn't apply: Paper Fibres can't buy B.F.I.'s landfill-hauling service tax-free, and it's simply a business expense Paper Fibres incurs (with tax already properly charged by B.F.I.) in the course of running its own separately taxable trash removal business.

What this means for you

Waste haulers and transfer station operators who subcontract the final landfill leg

Paying a third party to haul consolidated waste off your own transfer station to its final disposal site is a taxable service performed on your real property (the station), not an ingredient you can buy tax-free for resale -- even though your own upstream service to your customers is itself taxable trash removal.

Businesses relying on the resale exclusion for services

The resale exclusion for services generally requires that the purchased service actually become, unmodified, part of what you resell to your own customer -- here, B.F.I.'s service was aimed at Paper Fibres' own property (the transfer station), which the Department treated as separate and distinct from the trash-removal service Paper Fibres sells to its customers, even though both use the same physical waste.

Companies with reciprocal trash-hauling arrangements between competitors

Sharing a transfer station with a competitor, where each collects sales tax from its own customers, doesn't turn the fees the two companies charge each other into resale transactions -- each leg gets analyzed on its own, based on whose real property is actually being serviced.

Common questions

Q: Is trash removal always a taxable service in New York?
A: Yes -- Tax Law § 1105(c)(5) and 20 NYCRR § 527.7(a) specifically list trash and garbage removal as a taxable real-property maintenance service.

Q: Can I ever buy a trash-hauling service tax-free for resale?
A: Only if the purchased service becomes an unmodified, integrated part of the taxable service you resell to your own customer without servicing a separate piece of your own real property along the way -- a fact-specific test this ruling found wasn't met here.

Q: Does using a shared transfer station change the tax analysis?
A: Not by itself -- each company's charges are analyzed based on whose real property is being serviced at each step, regardless of physical co-mingling of the waste at a shared facility.

Q: Does this ruling apply to my waste-hauling arrangement?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else.

Citations and references

• Tax Law § 1105(c)(5) (maintaining, servicing, or repairing real property, including trash removal)
• 20 NYCRR § 527.7(a) (definitions of maintaining, servicing, repairing real property)
• 20 NYCRR § 526.6(c)(1) (resale exclusion)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_32s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(32)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S970303B

On March 3, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Paper Fibres Corporation, 280 Madison Avenue,
New York, NY 10016.
The issue raised by Petitioner, Paper Fibres Corporation, is whether
Petitioner may purchase the trash removal service provided by Browning Ferris
Industries (hereinafter "B.F.I."), whereby B.F.I. collects waste from
Petitioner's transfer station for shipment to a landfill in Pennsylvania, exempt
from sales tax because the service is purchased for resale.
Petitioner submits the following facts as the basis for this Advisory
Opinion.
Petitioner operates a trash removal service whereby it collects trash from
various customers and brings it to its transfer station in New York State.
Petitioner brings an average of 1,250 tons of waste per month to the transfer
station. Petitioner collects sales tax from its customers on the charges for
this service.
B.F.I. also operates a trash removal service whereby it collects trash from
its own customers and brings it to the transfer station owned and operated by
Petitioner. B.F.I. brings an average of 700 tons of waste per month to the
transfer station.
B.F.I. collects sales tax from its customers on the charge
for this service. Petitioner bills B.F.I. for the use of its transfer station,
but does not collect sales tax on such fees.
Once at the transfer station, Petitioner consolidates the small loads of
trash. There is no material change made to the waste. The transfer station is
only a consolidation point where the waste is transloaded from one truck to
another. B.F.I. ships all the waste in its trucks from the transfer station to
a landfill in Pennsylvania. B.F.I. collects sales tax from Petitioner on the
charges for this service.
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

-2­
TSB-A-97(32)S
Sales Tax

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. (emphasis added)
Section 526.6(c)(1) of the Sales and Use Tax Regulations provides:
Where a person, in the course of 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.
Opinion
In this case, Petitioner collects trash from various customers and brings
it to its transfer station. B.F.I. collects trash from its own customers and
brings it to the transfer station owned and operated by Petitioner. Petitioner
charges B.F.I. for bringing the trash to its transfer station.
Once at the
transfer station, Petitioner consolidates the small loads of trash. There is no
material change made to the waste. B.F.I. has contracted with Petitioner to
collect all the waste consolidated at the transfer station and transport such
waste in its trucks to a landfill in Pennsylvania.
Pursuant to Section 1105(c)(5) of the Tax Law and Section 527.7 of the
Sales and Use Tax Regulations, the service provided by Petitioner and B.F.I. to
their customers constitutes a taxable trash and garbage removal service in that
they are both maintaining and servicing the real property of their customers.
In addition, B.F.I. by contracting with Petitioner to remove waste from
Petitioner's transfer station, including waste brought to the transfer station
by B.F.I., is providing a separate taxable trash and garbage removal service
since B.F.I. is maintaining and servicing the real property of Petitioner. The
trash removal service provided by B.F.I. to Petitioner is not part of the
integrated trash removal service provided by Petitioner to its customers. In
removing waste as described above, Petitioner and B.F.I. are each maintaining and
servicing separate and distinct real property. Therefore, the service provided
by B.F.I. to Petitioner is not purchased for resale, but rather is an expense
incurred by Petitioner in providing trash removal service to its customers.

DATED:

May 28, 1997

NOTE:

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

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