Were ABC's separately stated dumpster delivery, daily rent, dumping, disposal, and fuel charges taxable in SC PLR 04-2?

Plain-English summary

The South Carolina Department of Revenue ruled that ABC, Inc.'s construction-debris operation was a nontaxable disposal service, not a taxable dumpster rental.

ABC delivered its own container to the construction site and later hauled the debris to a landfill. Every customer received ABC's container, and ABC would not dispose of debris placed in a customer-owned container. The Department therefore found that customers' true object was removal and disposal of waste.

That conclusion covered the separately stated delivery, daily “rent,” dump, disposal, and fuel-surcharge amounts. Because all were part of the same service transaction, itemizing them did not make the container component taxable.

The result would change if ABC supplied only the container while the customer or another company handled disposal. That would be a taxable rental of tangible personal property. ABC also owed tax on the containers, trucks, and other property it used to provide its service.

What this means for you

Dumpster and roll-off operators

The complete service package mattered more than the invoice label. Calling one line “rent” did not control when the operator actually provided the container, pickup, hauling, and disposal as one service.

Contractors and project managers

This PLR did not establish a general exemption for every dumpster charge. A container-only rental or a split arrangement involving another hauler can produce a different result.

Tax professionals

Apply the true-object test to the actual operating model, not merely the contract headings or separately stated charges.

Common questions

Q: Was ABC's daily container charge taxable?
A: No on these facts. It was part of the total charge for the waste-removal service.

Q: Were delivery and fuel surcharges taxable?
A: No. The ruling treated all listed charges as parts of the nontaxable service.

Q: What if the customer rented the container but hired another company to haul it?
A: The ruling said a container supplied without ABC's hauling and disposal would be a taxable rental.

Q: Did ABC pay tax on its equipment?
A: Yes. ABC was the user or consumer of its containers, trucks, and other property used in providing the service.

Citations and references

• S.C. Code Ann. § 12-36-910 — sales tax
• S.C. Code Ann. § 12-36-1310 — use tax
• S.C. Code Ann. § 12-36-60 — tangible personal property
• S.C. Code Ann. § 12-36-100 — sale, rental, lease, and license to use

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: PLR04-2.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 125, Columbia, South Carolina 29214
Website Address: http://www.sctax.org

SC PRIVATE LETTER RULING #04-2

SUBJECT:

Construction Debris Disposal Service
(Sales and Use Tax)

REFERENCES:

S. C. Code Ann. Section 12-36-910 (2000)
S. C. Code Ann. Section 12-36-1310 (2000)
S. C. Code Ann. Section 12-36-60 (2000)
S. C. Code Ann. Section 12-36-100 (2000)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000)
S. C. Code Ann. Section 1-23-10(4) (2000)
SC Revenue Procedure #03-1

SCOPE:

A Private Letter Ruling is a written statement issued to a specific
taxpayer by the Department to apply principles of law to a specific set of
facts or a particular tax situation. A Private Letter Ruling is an
advisory opinion; it does not have the force and effect of law, and is
not binding on the person who requested it or the public. It is,
however, the Department’s opinion limited to the specific facts set forth,
and is binding on agency personnel only with respect to the person to
whom it was issued and only until superseded or modified by a change in
statute, regulation, court decision, or advisory opinion, providing the
representations made in the request reflect an accurate statement of the
material facts and the transaction was carried out as proposed.

Question:
Are the charges by ABC, Inc. (as described in the facts) for delivering a garbage container to a
construction site and disposing of construction waste placed in the container subject to the sales
and use tax?
Conclusion:
No, charges by ABC, Inc. (as described in the facts) for delivering a garbage container to a
construction site and disposing of construction waste placed in the container are not subject to
the sales and use tax.
Facts:
From time to time, contractors will need construction debris hauled away to area landfills.

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ABC, Inc. delivers containers (dumpsters) at construction sites and, when filled, disposes the
waste. A container holds up to five tons of construction waste and is provided by ABC, Inc. to
every customer. ABC, Inc. does not dispose of construction debris for persons who own their
own container.
Each customer is charged the following
Delivery
Rent
Dump
Disposal
Fuel Surcharge

$ 50.00
$ 2.50 per day
$100.00
$ 28.00
$ 4.88 per dump

Discussion:
Code Section 12-36-910 imposes "a sales tax, equal to five percent of gross proceeds of sales,
upon every person engaged ... within this State in the business of selling tangible personal
property at retail."
Code Section 12-36-1310 imposes a "use tax ... on the storage, use, or other consumption in this
State of tangible personal property purchased at retail for storage, use, or other consumption in
this State, at the rate of five percent of the sales price of the property, regardless of whether the
retailer is or is not engaged in business in this State."
The term "tangible personal property" is defined in Code Section 12-36-60, in part, to mean:
personal property which may be seen, weighed, measured, felt, touched, or which is in any
other manner perceptible to the senses."
The term "sale" is defined in Code Section 12-36-100 to mean:
any transfer, exchange, or barter, conditional or otherwise, of tangible personal property for
a consideration including:
(1) a transaction in which possession of tangible personal property is transferred but
the seller retains title as security for payment, including installment and credit sales;
(2) a rental, lease, or other form of agreement;
(3) a license to use or consume; and
(4) a transfer of title or possession, or both.
From time to time it is necessary to determine if the transaction is a sale or rental of tangible
personal property or the furnishing of a service. The so-called "true object" test is generally used
to delineate sales of services from sales of tangible personal property.

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The "true object" test is best described in 9 Vanderbilt Law Review 231 (1956), wherein it is
stated:
The true test then is one of basic purpose of the buyer. When the product of the service is
not of value to anyone other than the purchaser, either because of the confidential
character of the product, or because it is prepared to fit the purchaser's special need - a
contract or will prepared by a lawyer, or the accident investigation report prepared for an
insurance company - this fact is evidence tending to show that the service is the real
purpose of the contract. When the purpose of a contract is to produce an article which is
the true object of the agreement, the final transfer of the product should be a sale,
regardless of the fact that special skills and knowledge go into its production. Under this
analysis, printing work, done on special order, and of significant value only to the
particular customer, is still a sale. The purchaser is interested in the product of the
services of the printer, not in the services per se. Similarly, it would seem that contracts
for custom-produced articles, be they intrinsically valuable or not, should be classified as
sales when the product of the contract is transferred.
The Vanderbilt Law Review article, in quoting Snite v Department of Revenue, 398 Ill. 41, 74
N.E.2d. 877 (1947), also establishes the following general rule:
If the article sold has no value to the purchaser except as a result of services rendered by
the vendor, and the transfer of the article to the purchaser is an actual and necessary part
of the services rendered, then the vendor is engaged in the business of rendering service,
and not in the business of selling at retail. If the article sold is the substance of the
transaction and the service rendered is merely incidental to and an inseparable part of the
transfer to the purchaser of the article sold, then the vendor is engaged in the business of
selling at retail, and the tax which he pays ... [is measured by the total cost of article and
services]. If the service rendered in connection with an article does not enhance its value
and there is a fixed or ascertainable relation between the value of the article and the value
of the service rendered in connection therewith, then the vendor is engaged in the
business of selling at retail, and also engaged in the business of furnishing service, and is
subject to tax as to the one business and tax exempt as to the other.
While the above quotes do not establish rigid rules, they do provide general guidance in
determining the purpose of a transaction, and are particularly helpful in addressing the issues at
hand.
A similar issue was addressed by the State of Virginia in Ruling of the Tax Commissioner #91275. In that ruling the Tax Commissioner addressed the treatment of portable toilets and whether
they should be treated in the same manner as the taxpayer's refuse disposal operation. The Tax
Commissioner of Virginia held:
It has been the longstanding policy of the department to treat the lease or rental of
portable toilets as a taxable transaction. The "true object" of the refuse service provided
by the Taxpayer is the actual pickup and removal of refuse. The "true object" of the
portable toilet operation is the provision of tangible personal property. The waste removal
in the portable toilet operation is incidental to the provisions of the toilets. ...
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Based on the above and the facts provided by the taxpayer, the true object of the taxpayer's
business is the providing of a service. Customers are hiring the taxpayer to haul away and
dispose of construction waste. Customers are not renting containers from the taxpayer. Such
containers are being used and consumed by the taxpayer in providing a service.
However, it is important to note that if the taxpayer was only providing the container and was
not providing the service of hauling away and disposing of the waste (e.g. the customer
disposed of the waste or hired a third party to dispose of the waste), then the charge for the
container would be subject to the tax as a rental of tangible personal property.
In addition, since the taxpayer provides every customer a container and the true object of the
transaction and the taxpayer's method of operating is the providing of a service, the itemized
charges are a part of the total charge for the service provided and are not subject to the tax.
Therefore, charges by the taxpayer (as described in the facts) for delivering a garbage container
to a construction site and disposing of construction waste placed in the container are not subject
to the sales and use tax. However, sales to, or purchases by, the taxpayer of tangible personal
property for use in providing its service (e.g., containers, trucks, etc.) are subject to the sales and
use tax.
Note: Sales and use taxes are transaction taxes. Therefore, if the taxpayer changes its method of
operating, the application of the sales and use tax to the taxpayer's business may also change.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Burnet R. Maybank
Burnet R. Maybank, Director
, 2004
January 12
Columbia, South Carolina

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