Does a waste-hauling broker owe Illinois sales/use tax on charges for roll-off dumpster and portable-toilet services when it subcontracts the actual dumpsters and toilets to third-party haulers?

Plain-English summary

A company that brokers waste-removal and portable-sanitation services (it does not own or lease any of the dumpsters, portable toilets, or handwashing stations itself, but instead contracts with local third-party haulers who do) asked the Illinois Department of Revenue to confirm that its charges to customers are not subject to Illinois sales tax at all. The company argued that the "true object" of each transaction is a nontaxable waste-removal or sanitation service -- the dumpster or toilet is just an incidental accessory to that service -- and that it therefore owes no Retailers' Occupation Tax (ROT) or Service Occupation Tax (SOT) on any part of the charge.

The Department agreed with the company's true-object analysis as far as it went (the customer isn't buying a dumpster or a toilet, they're buying disposal/sanitation service), but did not agree that this makes the transaction entirely tax-free. Effective January 1, 2025, under Article 75 of Public Act 103-592, a business that transfers tangible personal property "by lease" as an incident of a sale of service is subject to Service Occupation Tax on that leased property -- even though the underlying service itself isn't separately taxed. The Department found that delivering a dumpster or a portable toilet/handwashing station to a customer's site for a period of time, even with restrictions on how it can be used or moved, is a transfer of possession that counts as a "lease" under 35 ILCS 115/2. So the company is not selling a taxable service, but it is leasing taxable tangible personal property as part of that service, and SOT attaches to that leased property.

Because the company contracts out the actual dumpsters/toilets to third-party haulers, it is a "primary serviceman" in a multi-service transaction with those haulers as "secondary servicemen" (86 Ill. Adm. Code 140.145). Its SOT liability is measured either by a separately stated selling price for the leased property, or -- if none is stated, as here -- by 50% of the haulers' total invoiced amount, and in no case less than the company's own cost price. Because the company's invoices from haulers don't separately break out a rental/lease price, the Department had to assume the company's cost price is 50% of those invoices, which put the company above the 35% threshold for being a "de minimis" serviceman. As a result, the company must register for and remit Service Occupation Tax (at 6.25%, plus applicable local Service Occupation Tax) on its waste-removal and portable-sanitation charges, and collect the corresponding Service Use Tax from its own customers, unless it can later produce proof that its actual cost ratio is below the de minimis threshold.

Because this is a Private Letter Ruling, it binds the Department only as to the specific taxpayer that requested it (referred to here as "Company," with its name and other identifying details redacted) and only to the extent the facts described are correct and complete. It expires 10 years from this December 31, 2025 letter under 2 Ill. Adm. Code 1200.110(e), or sooner if the law or facts change. No other taxpayer can rely on it as precedent.

What this means for you

Waste-hauling and portable-sanitation brokers

If your business arranges for dumpsters, portable toilets, or handwashing stations to be delivered to customers as part of a waste-removal or sanitation service -- but you subcontract the actual equipment to independent haulers rather than owning it yourself -- this ruling says you are still on the hook for Service Occupation Tax on the leased equipment, even though the service itself (removal/disposal) isn't separately taxable. Marketing the arrangement as a "dumpster rental" doesn't change the analysis either way: what matters is that delivering the equipment to the customer for a period of time is treated as a taxable "lease" incident to your service.

Accountants and tax professionals advising multi-service arrangements

The ruling walks through the mechanics of Service Occupation Tax liability for a "primary serviceman" who subcontracts to "secondary servicemen" under 86 Ill. Adm. Code 140.145 and 140.141(f): if your client's supplier invoices don't separately state a lease/rental price for the property, the client's cost price is presumed to be 50% of the supplier's total invoice, which can easily push a broker above the 35% de minimis threshold in 86 Ill. Adm. Code 140.109. If a client wants to argue de minimis status, they will need actual proof of the suppliers' cost price for the equipment, not just an assumption.

Businesses relying on "true object test" arguments post-January 2025

Before the January 1, 2025 changes under Article 75 of Public Act 103-592, a service provider whose customers had no meaningful rights over an ancillary piece of equipment could sometimes argue the whole transaction was a nontaxable service. This ruling shows that argument no longer eliminates tax exposure by itself -- it only determines whether the transferred property is taxed as an incident of a sale of service (Service Occupation Tax) rather than as a standalone retail lease (Retailers' Occupation Tax). Either way, tax is now generally owed on tangible personal property transferred by lease on or after January 1, 2025.

Common questions

Q: Does the company have to charge sales tax directly to its customers on the dumpster or toilet rental?
A: Not exactly as a separate line-item sales tax. The Department ruled the company owes Service Occupation Tax (SOT) as a "serviceman," calculated on the property transferred by lease incident to its waste-removal/sanitation service, and must collect the corresponding Service Use Tax from its customers.

Q: Why isn't this simply a nontaxable service, since the company doesn't even own the dumpsters?
A: The Department agreed the "true object" of the transaction is the service (waste removal or sanitation), not the equipment itself. But under the January 1, 2025 changes (Article 75 of P.A. 103-592), tangible personal property transferred "by lease" as an incident of a service is now taxed under the Service Occupation Tax Act, even when the service itself is not separately taxable. So the true-object conclusion doesn't produce a tax-free result anymore -- it just determines which tax regime (SOT vs. ROT) applies.

Q: How is the company's tax liability calculated if its haulers don't separately bill for the equipment?
A: Under 86 Ill. Adm. Code 140.141(f), if the secondary serviceman's (hauler's) invoice doesn't separately state a selling price for the leased property, the primary serviceman's (company's) cost price is presumed to be 50% of the hauler's total invoice, including labor and service charges, absent proof otherwise.

Q: Could the company have qualified as a "de minimis" serviceman and paid less tax?
A: Possibly, but only with proof. A serviceman is de minimis if the annual cost of tangible personal property transferred incident to services is under 35% of total service revenue (86 Ill. Adm. Code 140.106(a), 140.109). Because the company couldn't show its haulers' actual cost price, the Department had to apply the 50%-of-invoice presumption, which put it above the 35% threshold -- so it does not qualify as de minimis on the facts presented.

Q: Can another waste-hauling company rely on this ruling for its own tax treatment?
A: No. This is a Private Letter Ruling binding only on the Department and only as to the specific taxpayer and facts described here. Other companies -- even with similar business models -- would need their own ruling or should consult a tax professional, since small factual differences (e.g., whether equipment is separately billed, or whether the company itself owns any equipment) can change the outcome.

Citations and references

• 35 ILCS 115/3 (Service Occupation Tax Act -- tax on tangible personal property transferred by lease incident to a sale of service, effective Jan. 1, 2025)
• 35 ILCS 115/2 (Service Occupation Tax Act -- definition of "lease" and "transfer," as amended by Article 75 of P.A. 103-592)
• 35 ILCS 120/2 (Retailers' Occupation Tax Act -- tax on lessors' gross receipts from leases, as amended by Article 75 of P.A. 103-592)
• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax imposition)
• 86 Ill. Adm. Code 150.101 (Use Tax imposition)
• 86 Ill. Adm. Code 140.101 (Service Occupation Tax Act -- tax on servicemen)
• 86 Ill. Adm. Code 140.105(c) (cost ratio calculation for de minimis determination)
• 86 Ill. Adm. Code 140.106 (Service Occupation Tax base -- separately stated price or 50% of bill; local tax)
• 86 Ill. Adm. Code 140.108 (unregistered de minimis servicemen -- Use Tax on cost price)
• 86 Ill. Adm. Code 140.109 (registered de minimis servicemen -- 35%/75% thresholds)
• 86 Ill. Adm. Code 140.145 (multi-service transactions -- primary and secondary servicemen)
• 86 Ill. Adm. Code 140.141(f) (primary serviceman's cost price from secondary serviceman's invoice)
• 86 Ill. Adm. Code 150.110 (useful life used to compute cost price of leased property)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedures, including 10-year expiration)
• Spagat v. Mahin, 50 Ill. 2d 183 (1971) (true object test)
• Velten & Pulver, Inc. v. Department of Revenue, 29 Ill. 2d 524 (true object test)
• Dow Chemical Co. v. Department of Revenue, 26 Ill. 2d 283 (true object test)
• Kellogg Switchboard & Supply Corp. v. Department of Revenue, 14 Ill. 2d 434 (true object test)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2025.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2025/st25-0009-plr.pdf

Original ruling text

ST 25-0009-PLR

12/31/2025

LEASING

Effective January 1, 2025, in accordance with the provisions of Article 75 of Public
Act 103-592, persons engaged in the business of making sales of service are
subject to State and local service occupation tax on all tangible personal property
transferred by lease as an incident of a sale of service. See 35 ILCS 115/3. (This is a
PLR).
December 31, 2025
NAME
COMPANY1
ADDRESS
Dear NAME:
This letter is in response to your letter dated November 7, 2025, in which you
requested information. The Department issues two types of letter rulings. Private Letter
Rulings (“PLRs”) are issued by the Department in response to specific taxpayer inquiries
concerning the application of a tax statute or rule to a particular fact situation. A PLR is
binding on the Department, but only as to the taxpayer who is the subject of the request for
ruling and only to the extent the facts recited in the PLR are correct and complete. Persons
seeking PLRs must comply with the procedures for PLRs found in the Department’s
regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department
policy and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may
access our website at https://tax.illinois.gov/ to review regulations, letter rulings and other
types of information relevant to your inquiry.
Review of your request disclosed that all the information described in paragraphs 1
through 8 of Section 1200.110 appears to be contained in your request. This Private Letter
Ruling will bind the Department only with respect to COMPANY2, for the issue or issues
presented in this ruling, and is subject to the provisions of subsection (e) of Section
1200.110 governing expiration of Private Letter Rulings. Issuance of this ruling is
conditioned upon the understanding that neither COMPANY2, nor a related taxpayer is
currently under audit or involved in litigation concerning the issues that are the subject of
this ruling request. In your letter you have stated and made inquiry as follows:
I am writing on behalf of my client, COMPANY2 (“Company”). 1
Company is registered for Retail Occupation Tax in Illinois. Company is a
broker of waste removal services, portable sanitation services (portable
toilets & handwashing stations), temporary fencing and portable storage
containers. Company does not own or lease dumpsters, portable toilets,
1

COMPANY2 operates as “COMPANY3”, the customer-facing brand in the waste management industry.

COMPANY2
Page 2
December 31, 2025
handwashing stations, fencing or portable storage containers. Company
utilizes third-party contractors to perform these services. Company does not
have any physical locations, employees or property in Illinois.

1. Statement of Facts
   Company contracts with local businesses (hereinafter “third-party
   contractors/haulers”) who operate in Illinois and either own or lease
   dumpsters, portable toilets, handwashing stations, fencing and portable
   storage containers or have access to them. Company began charging tax and
   remitting on its ROT return in January 2025 for the rental of temporary fencing
   and portable storage bins. 2 The taxability of temporary fencing and portable
   storage bins are not addressed in this request as Company is properly taxing
   the rental of the tangible personal property effective with the January 2025 law
   change.
   This Private Letter Ruling is specifically requesting guidance for the
   proper tax treatment of waste removal services involving roll-off dumpsters
   and portable sanitation services.
   Basics of a Waste Removal Transaction
   A typical transaction begins when a customer contacts Company by
   phone or website with details about the waste they need removed. From this
   information, Company determines the appropriate size and type of container
   necessary for the removal and separately contracts with a local hauler who
   delivers the dumpster and when filled, ultimately performs the removal
   service by picking up the dumpster at the customer location and taking the
   material to a disposal station.
   It is important to note that Company’s use of local, independent
   contractors/haulers does not alter the nature of the transactions. Nor does
   the delegation of work to the third-party contractor affect the non-taxability
   status of the waste removal service. Accordingly, our references below to
   Company are interchangeable with contractors, and vice versa.
   Once an appropriate contractor and container are designated, the
   third-party contractor delivers the container to the customer’s location. The
   Effective January 1, 2025, persons engaged in the business of leasing tangible personal property at retail
   (“lessors”) in Illinois are subject to State & Local retailer’s occupation tax on the gross receipts from leases
   of tangible personal property made in the course of business. 35 ILCS 120/2 as amended by Article 75 of
   Public Act 103-592.

2

COMPANY2
Page 3
December 31, 2025
customer subsequently deposits their waste in the container. The contractor
then picks up the container at a pre-agreed upon time and date. Filled
containers are taken to processing locations at the sole discretion of the
contractors.
Company invoices customers after the service is complete and does
not charge or collect ROT or SOT from the customers. As shown in attachment
B, Company invoices its customers on a lumpsum basis (i.e., the provision of
a dumpster is never a separate charge from the removal service and the
delivery of a dumpster is never a separate charge from the removal service).
Marketing vs. Substance
We recognize Company advertises its service as a “dumpster rental,”
however, the true substance of the transaction is one for a service – i.e., waste
removal. From a marketing perspective, “dumpster rental” has become the
industry standard terminology for waste removal services, notwithstanding
this true nature of the transactions (i.e., waste removal services).
To illustrate the service nature of the transactions:
•

Company does not provide dumpsters independent of their
removal service;

•

Company does not provide their removal service independent
of their provision of dumpsters;

•

The provision of a dumpster is never a separate charge from the
removal service;

•

The delivery of a dumpster is never a separate charge from the
removal service;

•

Company selects the size and type of the dumpster provided
based on its review of the customer’s service request;

•

The use of the dumpsters is controlled by Company, not its
customers;
o A dumpster may only be used for the removal of waste;
o The customers are not permitted to move the dumpsters
once placed by Company;
o Company restricts the types of materials placed in the
dumpster; and

COMPANY2
Page 4
December 31, 2025
o Company restricts the amount of material placed in the
dumpster;
•

Company controls how and where the waste is disposed –
including paying any associated fees;

•

Pricing is based on the waste to be removed, not the age or
condition of the dumpster;

•

Title, possession, and direction or control over the dumpsters
remain with Company;

•

The purchase and maintenance of dumpsters are only a small
fraction of the cost associated with providing the waste removal
services; and

•

Sales and use taxes should be paid on the dumpsters by the
third-party contractor at the dumpsters’ initial purchase.
The COMPANY3 website is an informational website only, not
for transactional purposes, and uses common language used in
the industry. Individuals do not rent a dumpster because they
want a dumpster, they rent a dumpster to facilitate the removal
of waste/debris. While the COMPANY3 website may leverage
common language for customer engagement purposes, the
actual COMPANY3 commercial site includes the commercial
language noted below at the very bottom of every page of the
site that more clearly defines the commercial activity – i.e.,
“[REDACTED]”

The Company also provides portable sanitation services. 3 This
includes portable toilets and handwashing stations that are serviced either
weekly or biweekly. The servicing includes pumping, stocking, refilling and
sanitizing. During each service, the units are pumped out, biocides are added
to eliminate bacteria, toilet paper and hand sanitizer are restocked, and the
unit is completely sterilized to maintain Occupational Safety and Health
Administration (OSHA) standards of cleanliness. The customer is not
permitted to move or sanitize the units. After the sewage and wastewater
(“gray water”) is collected, the third-party contractor transports the sewage
and wastewater to a waste disposal site. Although the units are essential, the
primary activity of the business is the removal and disposal of the sewage and
3

Reference “COMPANY3” – For Companies; Jobsite Services

COMPANY2
Page 5
December 31, 2025
wastewater just like the dumpsters are to the waste disposal service. This
does not constitute the rental/lease of tangible personal property. Company
is providing a sanitation/waste removal service. As shown in attachments C &
D, Company invoices its customers on a lumpsum basis based on the number
of times the toilets/handwashing stations are pumped to remove the sewage
and gray water and to service the units as described above. There is no
separate charge for the toilet or handwashing station.

2. Relevant Service Agreement and Invoices
   •
   •

Third-party contractor Service Agreement – “Attachment A”
Sales Invoices “Attachments B, C &D”.

3. Tax Period at Issue and Pending audit or Litigation
   The tax period in question is January 1, 2025 through current. Company
   has no audit or litigation pending with the Department regarding this issue.
   Neither Company or any of its representatives have previously submitted the
   same or a similar issue to the Department. Company is not currently under
   audit with the Department nor is there pending litigation with the Department.
4. Prior Rulings
   The Department has issued PLR 25-0001 which discusses waste
   disposal services and roll-off dumpsters used as part of the service. However,
   there is a significant difference between the facts in PLR 25-0001 and the facts
   presented herein. In the instant matter, Company uses a third-party
   contractor to provide the dumpster to the customer and to perform the waste
   removal services. Hence, Company does not purchase the roll-off dumpsters
   or portable sanitation products. Further, PLR 25-0001 does not address
   portable toilets and handwashing stations. To the best of the knowledge of
   both the Company and Tax Representative, the Department has not
   previously ruled on the same or similar issue for the Company or a
   predecessor other than PLR 25-0001.
5. Statement of Authorities
   A “lease” is defined as a transfer of the possession or control of, the
   right to possess or control, or a license to use, but not title to, tangible
   personal property for a fixed or indeterminate term for consideration,
   regardless of the name by which the transaction is called. “Lease” does not
   include a lease entered into merely as a security agreement that does not

COMPANY2
Page 6
December 31, 2025
involve a transfer of possession or control from the lessor to the lessee. 4 On
and after January 1, 2025, for purposes of state and local retailers’ occupation
taxes, the term “sale” includes a lease.
True Object Test
The true object test is used to determine the real substance of a
transaction: is the customer primarily purchasing tangible personal property
(including by lease), or are they primarily purchasing a service, with any
transfer of property being merely incidental?
The Illinois Supreme Court and Department of Revenue have
articulated the test as follows:
•

If the article (tangible personal property) has no value to the
purchaser except as a result of services rendered by the vendor,
and the transfer of the article is an actual and necessary part of
the service, then the vendor is engaged in rendering a service,
not selling at retail.

•

If the article is the substance of the transaction and the service
is merely incidental to the transfer of the article, then the vendor
is engaged in the business of selling at retail. 5

If the operator is necessary for the equipment to perform as designed
and is responsible for more than maintaining, inspecting, or setting up the
tangible personal property, the arrangement is not a lease. When a purchaser
enters into such an agreement to use tangible personal property for a
predetermined period, but an owner operator retains possession and
control of the tangible personal property, such agreement does not
constitute a lease. The customer may gain access to the benefit of the
tangible personal property, but an owner operator remains in possession
and control of the property throughout its use under the agreement. In this
situation, the customer does not have the unfettered right to possess or
control the tangible personal property, and the transaction does not include
any taxable transfer of tangible personal property. 6

35 ILCS 120/2
Spagat v. Mahin, 50 Ill. 2d 183 (1971); Velten & Pulver, Inc. v. Department of Revenue, 29 Ill. 2d 524; Dow
Chemical Co. v. Department of Revenue, 26 Ill. 2d 283; Kellogg Switchboard & Supply Corp. v. Department of
Revenue, 14 Ill. 2d 434.
6
ST 25-0024-GIL
4
5

COMPANY2
Page 7
December 31, 2025
In the instant matter, the customer does not acquire title, possession
or a leasehold interest in the dumpsters or portable toilets/handwashing
stations. The use of the dumpsters and portable toilets/handwashing stations
are controlled by Company, not its customers, and the customers are not
permitted to move the dumpsters or the portable toilets/handwashing
stations once placed by Company. Moreover, Company does not
independently lease or rent to customers the aforementioned tangible
personal property which is only used as an accessory to the provision of waste
removal and sanitation services.
Because Company is not selling, renting, or leasing tangible personal
property to the customer, but merely arranges for a nontaxable waste removal
service to be performed by a third-party contractor, Company does not owe
sales or use tax (including SOT) for the service transaction. Though Company
is not requesting tax guidance relative to the third-party contractor, it would
seem the contractor, as the service provider and owner of the dumpsters and
portable toilets/handwashing stations is, in like manner, not responsible for
remitting SOT or ROT on the service provided, unless it separately rents or
leases the dumpsters to the customer, which is not the case here.

6. Contrary Authorities
   Although Private Letter ST 25-0001-PLR has similar facts to
   Company’s, there is a significant difference. ST 25-0001-PLR did not address
   the “True Object Test” (discussed above) relative to the SOT obligations of a
   waste removal service provider such as Company. Further, the third-party
   contractor purchases the roll-off dumpsters or portable sanitation products
   which are then used to provide waste removal services to the Company’s
   customers. The third-party contractors are likely paying sales/use tax on the
   dumpsters and toilets/washing stations at the time of purchase.
   This Private Letter Ruling is specifically requesting guidance for the
   proper tax treatment of Company’s waste removal services involving roll-off
   dumpsters and portable sanitations services relative to the “true object” test
   referenced discussed above.
   We respectfully request that the Department provide us with a private
   letter ruling confirming that:
7. Company’s charges to customers for waste removal and portable
   sanitation services, which include the use of roll-off dumpsters and
   portable toilets/handwashing stations, are not subject to IL sales

COMPANY2
Page 8
December 31, 2025
tax (i.e., Company is not required to collect sales tax from the
customer on any portion of the transaction).

2. Company has no SOT liability because (i) the true object of the
   transaction is a “waste removal service” (ii) there is no separate
   charge for the use, rental or lease of these items and, (iii) the
   customer does not acquire any rights in the dumpsters/portable
   toilets/handwashing stations beyond what is necessary for the
   service.
3. Should the Department conclude that Company does incur a SOT
   obligation, please provide guidance on how Company should
   calculate same given that Company is not the purchaser/owner of
   the dumpsters or portable toilets/handwashing stations. As
   referenced above, third-party contractors purchase the dumpsters
   and portable toilets/handwashing stations for use in the waste
   removal service. Company does not know what the third-party
   contractors
   pay
   for
   their
   dumpsters
   or
   portable
   toilets/handwashing stations.
4. Trade Secret Information
   We request that Attachments “A”, “B”, C” & “D” be deleted from the
   publicly disseminated version of the Private Letter Ruling.
   DEPARTMENT’S RESPONSE:
   The Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this State
   in the business of selling tangible personal property at retail to purchasers for use or
   consumption. See 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is imposed on the privilege
   of using, in this State, any kind of tangible personal property that is purchased anywhere at
   retail from a retailer. See 86 Ill. Adm. Code 150.101. These taxes comprise what is
   commonly known as “sales” tax in Illinois. The provision of a service in Illinois that is not
   accompanied by the transfer of tangible personal property is generally not subject to
   Retailers’ Occupation Tax or Service Occupation Tax liability. The sale of service that is
   accompanied by a transfer of tangible personal property would be subject to liability under
   the Service Occupation Tax Act.
   Effective January 1, 2025, in accordance with the provisions of Article 75 of Public Act
   103-592, persons engaged in the business of making sales of service are subject to State
   and local service occupation tax on all tangible personal property transferred by lease as an
   incident of a sale of service. See 35 ILCS 115/3. A “lease” is defined as a transfer of the

COMPANY2
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December 31, 2025
possession or control of, the right to possess or control, or a license to use, but not title to,
tangible personal property for a fixed or indeterminate term for consideration, regardless of
the name by which the transaction is called, but does not include a lease entered into merely
as a security agreement that does not involve a transfer of possession or control from the
lessor to the lessee. On and after January 1, 2025, for purposes of State and local service
occupation taxes, the term “transfer” includes a lease. See 35 ILCS 115/2. The tax applies
to tangible personal property transferred by lease by persons engaged in the business of
making sales of service in which leases are in effect, entered into, or renewed on or after
January 1, 2025. The serviceman who is a lessor must remit for each tax return period only
the tax applicable to that part of the selling price actually received during such tax return
period. See 35 ILCS 115/3.
Transfer of Possession
When the provision of tangible personal property includes an operator for the
tangible personal property for a fixed or indeterminate period, the arrangement may
constitute a lease taxable under the Retailers’ Occupation Tax Act. If the operator is
necessary for the equipment to perform as designed and is responsible for more than
maintaining, inspecting, or setting up the tangible personal property, the arrangement is not
a lease. When a purchaser enters into such an agreement to use tangible personal property
for a predetermined period, but an owner operator retains possession and control of the
tangible personal property, such agreement does not constitute a lease. The customer may
gain access to the benefit of the tangible personal property, but an owner operator remains
in possession and control of the property throughout its use under the agreement. In this
situation, the customer does not have the unfettered right to possess or control the tangible
personal property, and the transaction does not include any taxable transfer of tangible
personal property. However, if the provision of tangible personal property includes an agent
of the lessor to simply maintain, inspect, set up, or disassemble the tangible personal
property, such arrangement is subject to the provisions of Article 75 of Public Act 103-592.
True Object Test
If it is determined that a transaction includes a taxable transfer of tangible personal
property, it must be determined whether the transaction is a retail lease transaction or a
transfer by lease of tangible personal property incident to a sale of service. To determine
whether a transaction is a retail lease transaction or a transfer by lease of tangible personal
property incident to a sale of service, the lessor must determine the true object or substance
of the transaction. “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 service 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

COMPANY2
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December 31, 2025
inseparable part of the transfer to the purchaser of the article sold, then the vendor is
engaged in the business of selling at retail.” Spagat v. Mahin, 50 Ill. 2d 183 (1971); Velten &
Pulver, Inc. v. Department of Revenue, 29 Ill. 2d 524, 529; Dow Chemical Co. v. Department
of Revenue, 26 Ill. 2d 283, 285; Kellogg Switchboard & Supply Corp. v. Department of
Revenue, 14 Ill. 2d 434, 437. If the tangible personal property rented would have value even
without the services a company provides, the substance of the transaction is the tangible
personal property.
Service Occupation Tax
Under the Service Occupation Tax Act, businesses providing services (i.e.
servicemen) are taxed on tangible personal property transferred as an incident to sales of
service. See 86 Ill. Adm. Code 140.101. Tangible personal property that is transferred to the
service customer may result in either Service Occupation Tax liability or Use Tax liability for
the serviceman depending upon the serviceman’s activities. The serviceman’s liability may
be calculated in one of four ways:
(1)

Service Occupation Tax on the separately stated selling price of tangible
personal property transferred incident to service;

(2)

Service Occupation Tax on 50% of the servicemen’s entire bill;

(3)

Service Occupation Tax on the servicemen’s cost price if the servicemen are
registered de minimis servicemen; or

(4)

Use Tax on the servicemen’s cost price if the servicemen are de minimis and
are not otherwise required to be registered under Section 2a of the Retailers’
Occupation Tax Act.

Using the first method, servicemen may separately state the selling price of each
item transferred as a result of the sale of service. The tax is then calculated on the separately
stated selling price of the tangible personal property transferred. If the servicemen do not
separately state the selling price of the tangible personal property transferred, they must
use 50% of the entire bill to the service customer as the tax base (the second method
described above). Both of the above methods provide that in no event may the tax base be
less than the servicemen’s cost price of the tangible personal property transferred. See 86
Ill. Adm. Code 140.106.
The third way servicemen may account for their tax liability only applies to de minimis
servicemen who have either chosen to be registered or are required to be registered because
they incur Retailers’ Occupation Tax liability with respect to a portion of their business. See
86 Ill. Adm. Code 140.109. Servicemen may qualify as de minimis if they determine that the

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annual aggregate cost price of tangible personal property transferred as an incident of the
sale of service is less than 35% of the total annual gross receipts from service transactions
(75% in the case of pharmacists and persons engaged in graphics arts production).
Registered de minimis servicemen are authorized to pay Service Occupation Tax (which
includes local taxes) based upon their cost price of tangible personal property transferred
as an incident of the sale of service. Such servicemen should give suppliers resale
certificates and remit Service Occupation Tax using the Service Occupation Tax rates for
their locations. Such servicemen also collect a corresponding amount of Service Use Tax
from their customers, absent an exemption.
The final method of determining tax liability may be used by de minimis servicemen
that are not otherwise required to be registered under Section 2a of the Retailers’
Occupation Tax Act (referred to as “unregistered de minimis servicemen”). Such de minimis
servicemen handle their tax liability by paying Use Tax to their suppliers. If their suppliers
are not registered to collect and remit tax, the servicemen must register, self-assess and
remit Use Tax to the Department. The servicemen are considered to be the end-users of the
tangible personal property transferred incident to service. Consequently, they are not
authorized to collect a “tax” from the service customers. See 86 Ill. Adm. Code 140.108.
The cost ratio is a measure of the amount of tangible personal property transferred
with a service. It is calculated by comparing the serviceman’s product cost to his total
income from services. The cost of materials that are not transferred to customers incident
to a service, such as those sold at retail, removed from inventory for use, or incorporated
into repairs of real estate, must be excluded when determining the cost ratio. See 86 Ill.
Adm. Code 140.105(c). Except as otherwise provided with respect to multi-service
situations, to calculate the cost price of the tangible personal property transferred by lease,
a serviceman must first determine the useful life of the tangible personal property. The
useful life is the useful life or recovery period allowed under federal law for like kind of
property. See 86 Ill. Adm. Code 150.110. The serviceman must then divide the price initially
paid to its supplier for the item by its useful life. Finally, convert the cost price into whatever
time period is used for the lease (e.g. years or months). The result is the cost price for each
rental payment. The serviceman must multiply the cost price for each rental payment by the
duration of the lease during the year to determine the annual product cost used to determine
cost ratio. This method to determine cost price for each rental payment must also be used
in calculating Service Occupation Tax liability using the first three methods described above.
This cost price is used as long as the serviceman transfers such tangible personal property
by lease as an incident of a sale of service and is not limited to the useful life of the item.
Multi-Service Transaction
Multi-service situations exist where a primary serviceman subcontracts work to a
secondary serviceman. See 86 Ill. Adm. Code 140.145. A primary serviceman engages the

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services of a secondary serviceman in order to obtain part or all of the products and services
desired by the service customer. Depending upon whether the primary and secondary
servicemen are registered or de minimis will determine at what point Service Occupation
Tax or Use Tax will be incurred. In multiservice situations, a primary serviceman’s cost price
is determined either by the separately stated selling price of the tangible personal property
transferred from a secondary serviceman, or if the secondary serviceman does not
separately state the cost of goods, it is presumed that the primary serviceman’s cost price
is 50% of the secondary serviceman’s total charge. See 86 Ill. Adm. Code 140.301(a).
When both primary servicemen and secondary servicemen are registered, primary
servicemen provide secondary servicemen with a Certificate of Resale. A primary
serviceman would then incur Service Occupation Tax based upon the separately stated
selling price of the property or 50% of the bill to the service customers. If the primary
serviceman is registered and de minimis (that is, under the 35% threshold, or the 75% for
pharmacists and printers), he may choose to remit Service Occupation Tax to the
Department based upon his cost price of tangible personal property purchased from the
secondary serviceman. If the cost price of the tangible personal property is not separately
stated by the secondary serviceman, the cost price will be deemed to be 50% of the total bill
from the secondary serviceman. Upon selling their product, servicemen are required to
collect the corresponding Service Use Tax from their customers.
If an unregistered de minimis serviceman subcontracts service work to another
unregistered de minimis secondary serviceman, the primary serviceman does not incur a
Use Tax liability if the secondary serviceman (i) has paid or will pay Use Tax on his or her cost
price of any tangible personal property transferred to the primary serviceman and (ii)
certifies that fact in writing to the primary serviceman. This certification option is only
available in multi-service situations when both the primary and secondary servicemen are
unregistered and de minimis.
Transactions involving multiple servicemen work best if both the primary and
secondary servicemen are registered. This will enable both parties to utilize Certificates of
Resale. If the primary serviceman is registered and the secondary serviceman is not
registered, it is possible that tax will be incurred at more than one point during the course of
sale of a particular item. This will occur if the unregistered secondary serviceman has paid
Use Tax with respect to an item of tangible personal property, then transfers that property to
a primary serviceman who will, in turn, incur a Service Occupation Tax liability when
transferring the item to the service customer.
Ruling
With respect to waste removal services involving roll-off dumpsters and portable
sanitation services (portable toilets & handwashing stations) described in this letter,

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COMPANY2 is engaged in making sales of service in which tangible personal property is
transferred by lease or rental incident to the sale of service.
The delivery of dumpsters, portable toilets, and portable handwashing stations to
customers is a transfer of possession of those items. While there may be some restrictions
on use or movement of the items, this is true with a multitude of leased and rented items.
Nonetheless, delivery of these items to customers for consideration is a transfer of
possession of these items to the customer and constitutes a lease.
The true object of the transactions you describe in your letter constitute (i) the sale of
waste removal services in which a dumpster is transferred by lease as an incident of the
waste removal service and (ii) the sale of portable sanitation services in which portable
toilets and handwashing stations are transferred by lease as an incident of the portable
sanitation services. This is so because (i) without the waste removal service, the dumpster
is of little to no value to the customer and (ii) without the portable sanitation service, the
portable toilets and handwashing stations are of little to no value to the customer. As such,
the provisions of the Service Occupation Tax Act apply to these transactions. Further, when
COMPANY2 contracts with local businesses who operate in Illinois to obtain the products
and services desired by the service customer, COMPANY2 is engaged in a multi-service
situation.
COMPANY2 is registered under the Retailers’ Occupation Tax Act with respect to
other aspects of its business not subject to the ruling here. If the secondary serviceman
COMPANY2 contracts with is registered, COMPANY2 should provide the secondary
serviceman with a Certificate of Resale. If the secondary serviceman is not registered, it is
possible that tax will be incurred at more than one point during the course of sale of a
particular item. This will occur if the unregistered secondary serviceman has paid Use Tax
with respect to an item of tangible personal property, then transfers that property to
COMPANY2 who will, in turn, incur a Service Occupation Tax liability when transferring the
item to the service customer. See 86 Ill. Adm. Code 140.145.
In order to calculate its tax liability, COMPANY2 must determine whether it is de
minimis. If the ratio between the serviceman’s annual aggregate cost of tangible personal
property transferred incident to sales of service and the serviceman’s total annual gross
receipts from all sales of service is 35% or greater (75% or greater in the case of servicemen
transferring prescription drugs or engaged in graphic arts production), the serviceman is not
de minimis and must register and remit Service Occupation Tax. See 86 Ill. Adm. Code
140.106(a). When a primary serviceman purchases (including leases or rents) tangible
personal property from a secondary serviceman, the primary serviceman shall determine
his cost price either by using the separately stated selling price of tangible personal property
set forth on the invoice from the secondary serviceman or, if no selling price is separately
stated, 50% of the total invoice including labor and service charges, in the absence of proof

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(e.g., the secondary serviceman’s purchase invoices showing his cost price) of the
consideration paid by the secondary serviceman for the purchase of such property. See 86
Ill. Adm. Code 140.141(f).
For purposes of this ruling the Department assumes that COMPANY2’s sales of
service in Illinois consist solely of services involving roll-off dumpsters and portable
sanitation services (portable toilets & handwashing stations) described in this letter. Based
on the information provided in this letter, and absent proof to the contrary, COMPANY2 is
not a de minimis serviceman. The information provided indicates that invoices received by
COMPANY2 from secondary servicemen do not separately state the selling price (lease or
rental price) of the tangible personal property transferred. Absent proof of the consideration
paid by the secondary servicemen for the purchase of the tangible personal property
transferred, the Department must assume that COMPANY2’s cost price for the lease or
rental of such property is 50% of the secondary serviceman’s total invoice including labor
and service charges. Based on this statutory assumption, COMPANY2’s cost price is above
the 35% threshold and, therefore, COMPANY2 is not a de minimis serviceman.
COMPANY2 must register and remit Service Occupation Tax with respect to its waste
removal services involving roll-off dumpsters and portable sanitation services (portable
toilets & handwashing stations) described in this letter. The Service Occupation Tax
incurred is based upon 6.25% of the selling price of the tangible personal property
transferred incident to sales of service. COMPANY2 may determine “selling price” in the
following ways:
1)

Separately stated selling price. If the serviceman separately states the selling
price of the tangible personal property transferred incident to service on
billings to service customers, then his Service Occupation Tax liability is based
on that separately stated selling price. However, in no event can the Service
Occupation Tax liability be based on an amount less than the serviceman’s
cost price of the tangible personal property being transferred.

2)

Fifty percent base. If the serviceman’s bill to the service customer does not
separately state the selling price of the tangible personal property transferred,
the serviceman’s Service Occupation Tax liability is based on 50% of the entire
customer bill. However, in no event can the Service Occupation Tax be based
on an amount less than the serviceman’s cost price of the tangible personal
property being transferred.

A serviceman who incurs Service Occupation Tax on his selling price is liable for local
Service Occupation Taxes, which are based upon his location. Service Use Tax must be
collected from service customers by a serviceman who incurs Service Occupation Tax on
his selling price and must be based upon either the separately stated selling price of the

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tangible personal property transferred or 50% of the entire customer bill, depending upon
how it is billed to the customer. See 86 Ill. Adm. Code 140.106.
Note, however, that if COMPANY2 is able to obtain proof of its de minimis status, the
following provision applies. If a serviceman is below the 35% threshold (or under the 75%
threshold for servicemen transferring prescription drugs or engaged in graphic arts
production) but is otherwise required to be registered as a retailer under Section 2a of the
Retailers’ Occupation Tax Act because he incurs Retailers’ Occupation Tax liability with
respect to a portion of his sales, he does not incur a Use Tax liability based on his cost price
of items transferred incident to service. Rather, except for a serviceman who opts to pay
Service Occupation Tax on the selling price, he incurs and must remit Service Occupation
Tax (including local taxes) on his cost price of the tangible personal property transferred
incident to sales of service. See 86 Ill. Adm. Code 140.109(a) and 86 Ill. Adm. Code
140.145(f).
The factual representations upon which this ruling is based are subject to review by
the Department during the course of any audit, investigation, or hearing and this ruling shall
bind the Department only if the factual representations recited in this ruling are correct and
complete. This Private Letter Ruling is revoked and will cease to bind the Department 10
years after the date of this letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or
earlier if there is a pertinent change in statutory law, case law, rules or in the factual
representations recited in this ruling.
If you have further questions concerning this Private Letter Ruling, you may contact
me at (217) 782-7055. If you have further questions related to the Illinois sales tax laws,
please visit our website at https://tax.illinois.gov/or contact the Department’s Taxpayer
Information Division at (800) 732-8866.
Very truly yours,

Samuel J. Moore
Chairman, Private Letter Ruling Committee
SJM:sce