Does a radioactive-waste disposal company owe use tax on out-of-state-purchased containers it gives customers, and is its entire disposal charge taxable even though the waste and containers are ultimately buried or processed outside New York?

Plain-English summary

NDL Organization, Inc., based in Peekskill, New York, provides radioactive waste disposal and related radiological services to health care, research, and industrial customers. As part of its disposal service, NDL supplies customers with DOT-approved steel containers (purchased from out-of-state vendors), delivers them, later picks them up once full, and transports the waste to licensed disposal sites located in states like South Carolina, Washington, Utah, Tennessee, Florida, and Texas. Once radioactive waste goes into a container, the container is irrevocably contaminated and becomes part of the waste itself -- it's buried or incinerated along with the waste and can never be reused or returned. NDL asked two questions: does it owe New York use tax on the containers it buys out of state and brings into New York, and does taxing 100% of its disposal fee violate the Commerce Clause when part of the disposal process happens outside New York?

On the containers, the Department said no use tax applies. Because the containers are "actually transferred" to the customer as part of NDL's taxable waste-removal service (rather than being resold separately or kept by NDL), they don't count as a retail purchase by NDL for use-tax purposes -- the tax instead falls on NDL's service charge to the customer, which already accounts for the containers. (If NDL sells containers on their own, outside the disposal service, those standalone sales are separately taxable.)

On the Commerce Clause question, the Department found NDL's radioactive waste disposal service is an "integrated waste removal service" -- a taxable real-property maintenance service under Tax Law § 1105(c)(5) -- and that the full charge is generally taxable, including the pickup, transportation, and disposal, even though most of the mileage and the ultimate burial happens outside New York State. That's because the Commerce Clause concerns about taxing waste removal only kick in when actual processing (not simple burial) happens outside the state. Where a disposal site does something that changes the nature of the waste -- supercompaction, chemical digestion, incineration -- the portion of the charge attributable to that out-of-state processing is not subject to New York tax. But regulatory approvals, content verification, sorting, and overpacking aren't "processing," and transportation into another state for burial without treatment doesn't reduce the taxable New York charge at all.

What this means for you

Radioactive, hazardous, or industrial waste disposal companies

Containers or packaging you provide as part of a disposal service, which become contaminated and get disposed of along with the waste, aren't separately subject to use tax when brought into New York -- they're treated as transferred with the taxable service. But don't assume shipping waste out of state automatically shrinks your New York tax base: only genuine processing performed entirely outside New York (not mere transportation, burial, sorting, or regulatory paperwork) can be carved out of the taxable receipt.

Customers generating radioactive or hazardous waste for off-site disposal

Expect your full disposal service charge to be taxed in New York unless your vendor's invoice separately identifies a genuine out-of-state processing charge (such as incineration or chemical treatment performed at the destination facility).

Accountants and tax professionals

This ruling and its companion, TSB-A-98(15)S, both apply the framework from the Tax Appeals Tribunal's Olin Corporation decision: an integrated waste-removal service's entire receipt is taxable in New York unless a portion is reasonably attributable to genuine out-of-state processing, apportioned either by mileage or by isolating the transportation-versus-processing charge -- with the specific apportionment method left to case-by-case facts.

Common questions

Q: Does a waste-disposal company owe use tax on containers it buys out of state and brings into New York?
A: Not if the containers are actually transferred to the customer as part of a taxable disposal service -- they're treated as part of that service, not as a separate retail purchase by the disposal company.

Q: Is a waste-disposal company's full fee taxable even though the waste is buried or processed in another state?
A: Generally yes, unless a genuine "processing" activity (like incineration or chemical treatment, not simple burial, sorting, or regulatory approval) happens entirely outside New York and that portion is separately stated or reasonably allocated.

Q: What activities at an out-of-state disposal site don't count as "processing" for apportionment purposes?
A: Regulatory approvals, content verification, sorting by waste class, and overpacking are not processing -- they don't reduce the taxable New York portion of the charge.

Q: Does this ruling apply to my waste-disposal business?
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. Apportioning a charge between taxable transportation and nontaxable out-of-state processing depends on your own facts.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a98_16s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(16)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S960607C

On June 7, 1996, the Department of Taxation and Finance received a Petition
for Advisory Opinion from the NDL Organization, Inc., 1013 Brown Street,
Peekskill, New York 10566.
Petitioner, NDL Organization, Inc., provided
additional information pertaining to the Petition on March 24, 1997.
Petitioner raised the following issues:

1. Whether containers (e.g., drums) purchased by Petitioner
   outside New York State and used in the State constitute tangible
   personal property purchased at retail and, as such, are subject to
   the compensating use tax.
2. Whether the imposition of sales tax on 100 percent of the
   fees charged by Petitioner to its New York State customers for its
   radioactive waste disposal service violates the Commerce Clause of
   the United States Constitution when part of the service is conducted
   in New York State and part of the service is conducted outside of
   the State.
   Petitioner submitted the following facts as the basis for this Advisory
   Opinion.
   Petitioner has its offices in Peekskill, New York and services the
   radiological needs of customers in health care, research, industry and the
   environment. Some of the radiological services rendered by Petitioner include:
   radioactive waste disposal, radioactive decontamination, scintillation media
   disposal, calibration and repair of radiation survey instruments, environmental
   surveys and leak-testing of radioactive sealed sources. Potential radioactive
   waste categories are: dry solid waste, biological waste, solidified liquid waste,
   scintillation media, certain mixed wastes, sealed sources, source material and
   special nuclear material.
   Petitioner is licensed for its operations by the New York State Department
   of Labor (DOL) and the United States Nuclear Regulatory Commission (NRC).
   Petitioner is also permitted by the New York State Department of Environmental
   Conservation (DEC).
   In addition, Petitioner holds the necessary licenses,
   permits, registrations, etc. required by state and local authorities for disposal
   of waste at sites located outside of New York State. Petitioner indicates that
   due to the high degree of regulation, the complexities of the radioactive waste
   disposal process and the multitude of compliance issues, there are few
   organizations providing the services that Petitioner provides to its customers.

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Petitioner furnishes customers who request its radioactive waste disposal
service with the following:

• steel containers approved by the Department of Transportation (DOT),
including delivery of the containers;
• necessary packaging materials and the packaging and labeling criteria
relevant to the particular radioactive waste category;
• pick up of the containers when full, or at customers’ requests; and
• transportation of the containers and waste to approved, licensed disposal
sites.
Petitioner will not accept radioactive waste from customers unless
Petitioner is certain that it can dispose of the waste. Improper packaging,
certain isotopes with unacceptable concentrations, waste that does not meet
criteria, waste generators without site permits, waste requiring case-by-case
approval from a regulatory agency, etc. can cause problems for Petitioner.
Therefore, Petitioner reserves the right for prior approval of waste. For known
customers with consistent waste streams, knowledge of the packaging and labeling
criteria, and proven track records, Petitioner does not require prior approval.
However, for others, such as first-time customers or one-time customers, prior
approval is necessary because Petitioner may need additional information, waste
profiles, certifications of non-RCRA (i.e., not chemically hazardous), copies of
manifests, laboratory analyses and so forth.
Unless prior approval is necessary, at the time that the customer
identifies the nature and extent of the radioactive waste for disposal,
Petitioner provides the containers, packaging materials and packaging and
labeling criteria required by the DOL and/or the NRC for the particular waste
category. A customer may also order containers and packaging materials from
Petitioner, not yet knowing the waste stream for which they will be used. If a
customer decides to purchase the containers and not use them for disposal or
disposal by Petitioner, the customer is free to do so. Petitioner purchases
these containers and packaging material from vendors who are located outside New
York State. (Occasionally, Petitioner will dispose of waste that is packaged in
labeled containers that are not furnished by Petitioner. These containers must
meet all regulatory agency requirements and be approved by Petitioner or the
containers will not be accepted by Petitioner for disposal.)
The containers are filled with waste by the customer at the customer’s
location.
The length of time that the containers remain at the customer’s
location varies from several days to several years. This is a matter of the rate
at which the customer generates waste and health department ordinances with
respect to holding radioactive waste in the particular locality.
Once the
radioactive waste is placed in containers, the containers are irrevocably
contaminated and cannot be used for another purpose or returned to either
Petitioner or the customer. The containers along with the contents must be
incinerated or buried, as appropriate to the waste category, at the disposal
site. That is, each container is used once; it then becomes part of the waste
stream and is consumed in the waste disposal process.

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Sales Tax

When the customer contacts Petitioner to arrange for the pick up of the
waste, the customer identifies the waste category and the quantity of waste to
be picked up. As indicated, when Petitioner returns to the customer’s location
to pick up the radioactive waste, the waste now includes the containers. Certain
customers generate a large quantity of containers so that a tractor-trailer is
needed to transport the waste. Other customers generate smaller quantities so
that a smaller vehicle, such as a van, may be used.
In the alternative, a
tractor-trailer may be used to pick up the containers of several customers
located in the same general geographic area. At any time, however, a customer
may request that only the customer’s container or containers be transported on
a vehicle. For this exclusive service, the customer is billed appropriately.
In order for a customer to transport containers itself, the customer would have
to be a registered and approved DOT transporter. Because Petitioner’s customers
are engaged in a variety of enterprises such as medical facilities, research
centers and manufacturing operations, it is not practical or cost effective for
each customer to be DOT registered and approved.
Depending on the quantity of containers, Petitioner may either return with
the containers to its Peekskill warehouse for consolidation with the containers
from other customers and then proceed on to the disposal site, or proceed
directly to the disposal site. The selection of the site is made by Petitioner.
Disposal sites are located in South Carolina, Washington, Utah, Tennessee,
Florida and Texas.
Waste is often buried without treatment. Sealed sources and Category R
biological material in double-walled containers must be disposed of without
treatment.
Containers of dry waste weighing 300 pounds or more and higher
activity containers are also not treated. However, all sites to which Petitioner
brings waste for disposal must employ appropriate waste handling technologies for
proper disposal to be in compliance with their licensing requirements and the
individual criteria for each disposal site. Unlike normal trash which can merely
be tipped by a transporter and disposed in a landfill, the waste Petitioner ships
has either a radioactive constituent or a RCRA-hazardous constituent, or both.
For example, at a shallow-land disposal site in Barnwell, South Carolina,
all radioactive waste is placed in engineered concrete trenches. Manifests of
all shipments must be submitted prior to shipment and must have prior approval
before they can be dispatched. Each container holding waste is manifested on the
shipping papers with detailed information required by the NRC to meet reporting
requirements of federal and state agencies for the safe transportation and
disposal of low-level radioactive waste. All of the information must be verified
while the shipment is at the site, before the shipment is officially accepted.
Containers are re-monitored. Containers may be opened to verify their contents
with the information on the shipping papers. Transport trucks are not released
and drivers are held until after a release survey of the vehicle is conducted and
documented by site personnel. Trucks and drivers can be held at the site for the
better part of a week. Once the site accepts the shipment, the containers are
then sorted as to "Waste Class." All Class A materials are disposed of together.
Classes B and C and greater than Class C waste are overpacked into concrete
overpacks and placed in the B/C trenches. Containers may also be removed from
2OWC transport containers, overpacked by site personnel and then buried. The
same thing applies to cask and liner shipments, which require special handling.
Some types of sealed sources require prior and direct approval from the South

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Sales Tax

Carolina Department of Health and Environmental Control. Approval letters must
accompany their respective waste containers. Copies of the shipping manifests,
upon return, must also be forwarded to the New York State Department of
Conservation.
For the waste going to the site in Richland, Washington, the above also
applies. However, on a case-by-case basis, Petitioner must also receive a prior
determination for each and every container from the Washington Department of
Ecology that the waste meets NARM/NORM criteria (NARM is accelerator produced
radioactive materials; NORM is naturally occurring radioactive materials). If
the waste is approved, Petitioner receives a variance from the State of
Washington authorizing shipment of only the approved containers.
Waste shipped to disposal sites in Tennessee is processed by
supercompaction, metal melt, steam reforming, incineration, sorting, decay and/or
burial. The Texas disposal site also treats various mixed waste streams by fuel
blending, retort processes, chemical digestion, separation and incineration.
When waste is shipped in vials to Florida, the vials are crushed and washed and
the fluid is blended and incinerated.
For those orders where a customer desires disposal of a known waste stream,
the charge for Petitioner’s service includes the containers, category
preparation, labeling, delivery, transportation and disposal. Two billings are
made in this case. The first billing is against the delivery of the prepared
containers. After the containers are filled and ready for disposal, the second
and final billing is against the removal of the waste. For those situations
where a customer orders containers without yet knowing the particular waste
stream for which they will be used, Petitioner charges only for the containers.
If and when the containers are removed as waste, the customer is charged the full
waste disposal price. If a customer decides to purchase the containers and not
use them for disposal, the price is relative to the value of the containers sold
and is lower than, and does not relate to, the first billing referred to above
for delivery of containers as part of the waste removal service. If the customer
orders packaging materials to accommodate the waste stream, these materials are
also billed as separate additional items. On those occasions when a customer
uses containers that are not furnished by Petitioner, the customer is charged the
full waste disposal price as if Petitioner had provided packaging for the waste.
In holding itself out as a licensed radioactive waste disposal service
provider, Petitioner represents to all its customers that it holds the necessary
licenses, permits, registrations, etc.; that it has the expertise and authority
necessary to provide this service; and that the containers, packaging materials
and packaging and labeling criteria are in complete compliance with all state and
federal regulations. Should the DOL or the NRC amend or change the packaging or
labeling materials or criteria, it is Petitioner’s responsibility to bring its
services in line with the changes or amendments. Petitioner also guides its
customers as to the customers’ obligations and responsibilities in keeping
abreast of changes or amendments to proper disposal procedures. The customers
do not interact with the DOL or the NRC on these matters. However, Petitioner’s
customers share in the responsibilities with Petitioner for ensuring that the
containers comply with NRC specifications and that the containers with the
radioactive contents are transported in accordance with NRC and DOT regulations.
If any containers do not comply with all regulatory requirements, both the
customers and Petitioner are subject to sanctions and fines.

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Sales Tax

After the containers are delivered to customers and remain at the
customers’ premises, no matter the length of time, the customers are totally
responsible for the radioactive waste and the proper handling, storage and
maintenance of the waste and containers at the customers’ premises. Other than
responsibilities stemming from providing defective containers, Petitioner has no
responsibility for the waste while it remains on the customers’ premises and is
not required to be cognizant of local health requirements or other requirements
relative to the retention of the radioactive waste.
Applicable Law and Regulations
Section 1101(b) of the Tax Law provides in part:
When used in this article for the purposes of the taxes
imposed by subdivisions (a), (b), (c) and (d) of section eleven
hundred five and by section eleven hundred ten, the following terms
shall mean:
(1) Purchase at retail.
A purchase by any person for any
purpose other than those set forth in clauses (A) and (B) of
subparagraph (i) of paragraph (4) of this subdivision.
*

*

*

(3) Receipt. The amount of the sale price of any property and
the charge for any service taxable under this article, valued in
money, whether received in money or otherwise, including any amount
for which credit is allowed by the vendor to the purchaser, without
any deduction for expenses or early payment discounts and also
including any charges by the vendor to the purchaser for shipping or
delivery regardless of whether such charges are separately stated in
the written contract, if any, or on the bill rendered to such
purchaser and regardless of whether such shipping or delivery is
provided by such vendor or a third party, but excluding any credit
for tangible personal property accepted in part payment and intended
for resale ....
(4) Retail sale. (i) 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 ....
*

*

*

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Sales Tax

(6) Tangible personal property.
of any nature ....

Corporeal personal property

Section 1105(a) of the Tax Law imposes sales tax upon "receipts from every
retail sale of tangible personal property, except as otherwise provided in this
article."
Section 1105(c) of the Tax Law imposes tax upon receipts from every sale,
except for resale, of the following services:
*

*

*

(2) 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 services are performed.
*

*

*

(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 1110(a) of the Tax Law imposes compensating use tax, in part, as
follows:
Except to the extent that property or services have already
been or will be subject to the sales tax under this article, there
is hereby imposed on every person a use tax for the use within this
state ... except as otherwise exempted under this article, (A) of
any tangible personal property purchased at retail ....
Section 527.7(a) of the Sales and Use Tax Regulations provides, in part:
(1) Maintaining, servicing and repairing are
Definitions.
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.
Section 527.7(b) of the regulations provides, in part:
Imposition. (1) The tax is imposed on receipts from every
sale of the services of maintaining, servicing or repairing real
property, whether inside or outside of a building.
*

*

*

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Sales Tax

(2) All services of trash or garbage removal are taxable,
whether from inside or outside of a building or vacant land.
Opinion
Issue 1
In those instances where containers (and packaging materials) are furnished
to customers in conjunction with the performance of Petitioner’s radioactive
waste disposal service and are irrevocably contaminated so as to be of no further
use, the containers are considered to be “actually transferred” to customers in
conjunction with a service that is subject to tax under Section 1105(c) of the
Therefore, the containers are not purchased at retail by
Tax Law (infra).
Petitioner within the meaning and intent of paragraphs (1) and (4) of Section
1101(b) of the Tax Law and the use of the containers within New York State by
Petitioner is not subject to the compensating use tax imposed under Section
1110(a)(A) of the Tax Law. (See, Waste Management of New York, Inc., Tax App
Trib, March 21, 1991, TSB-D-91(19)S; Chem-Nuclear Systems, Inc., Tax App Trib,
January 12, 1989, TSB-D-89(2)S; Johns’ Insulation, Inc., Modified Adv Op Comm
T&F, January 8, 1993, TSB-A-92(65.1)S.)
It is noted that Petitioner’s receipts from the sales of containers and
other items of tangible personal property to customers who purchase these items
other than as part of the charge for Petitioner’s radioactive waste disposal
service are subject to sales tax under Section 1105(a) of the Tax Law when these
items are delivered to the customers in New York State.
Issue 2
Petitioner’s radioactive waste disposal service constitutes an integrated
waste removal service under Section 1105(c)(5) of the Tax Law. Receipts from the
sales of this service are subject to sales tax as the maintenance of real
property, property or land. (See, Matter of Tonawanda Tank Transport Service v
Tax Appeals Tribunal, 168 AD2d 748; Matter of Cecos Intl. v State Tax Comm, 126
AD2d 884, affd 71 NY2d 934; Matter of Rochester Gas and Electric v State Tax
Comm, 128 AD2d 238 affd 71 NY2d 931.)
The Commerce Clause concerns raised in the matters of General Electric
Company, Dec Tax App Trib, March 5, 1992, TSB-D-92(22)S, and subsequent Tax
Appeals Tribunal decisions regarding the removal of waste from New York State are
not at issue where Petitioner performs its radioactive waste disposal service and
the waste is buried at disposal sites located outside this State without further
processing of the waste. (See, Michael Gross, Adv Op Comm T&F, September 23,
1996, TSB-A-96(57)S.) Thus, Petitioner’s entire receipt (100%) from the sale of
such a service is subject to New York State sales tax. This is so, regardless
of the waste approval and handling procedures employed by the disposal site.

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Obtaining regulatory and other approvals, content verification and handling are
not processing services. Nor is the overpacking or sorting of waste, provided
such
overpacking
or
sorting
does
not
involve
any
“solidification,”
“demineralization” or “dewatering” as described in Chem-Nuclear Systems, supra,
or other processing activities which change the nature or form of the waste.
Petitioner also performs its radioactive waste disposal service with
respect to waste that is processed at disposal sites located outside of New York
State (e.g., by supercompaction, chemical digestion, incineration). In such an
instance, because the processing occurs wholly in another state, the portion of
the receipt attributable to processing the waste is not subject to New York State
sales tax.
Accordingly, only that portion of the receipt from the sale of
Petitioner’s radioactive waste disposal service that is reasonably attributable
to providing containers and other items of tangible personal property, picking
up and removing the radioactive waste from the customer’s New York State location
and transporting the waste to the disposal site is subject to tax. The total
charge to transport the waste is subject to New York’s sales tax as part of the
integrated waste removal service and is not subject to apportionment
notwithstanding the mileage traveled within and outside of New York State. (The
matter of how the receipt is to be apportioned in order to distinguish processing
from these other activities is a question of fact which must be resolved based
upon the circumstances in each case and is beyond the scope of this Advisory
Opinion.)
It is noted that the conclusions stated in this Advisory Opinion are not
inconsistent with the Tax Appeals Tribunal decision in Olin Corporation, Dec Tax
App Trib, September 11, 1997, TSB-D-97(34)S. In Olin, the Tribunal held that the
imposition of New York State sales tax on the entire receipt from the sale of
an integrated waste removal service where the waste processing occurs outside New
York violates the Commerce Clause. In affirming the Administrative Law Judge’s
method of apportioning receipts based on mileage in the circumstances of the
case, the Tribunal referred to two possible methods of apportionment:
apportionment based on miles traveled within this State and apportionment based
on the charge for the transportation portion of the entire receipt. The Tribunal
noted, “we do not hold that in every case such as this an apportionment based on
miles traveled within New York State is necessary in order to find a
constitutional application of Tax Law §1105(c)(5).”

DATED: March 4, 1998

NOTE:

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

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