If a waste disposal company requires customers to use its own dumpsters as part of the service, is providing the dumpster a taxable lease or part of a nontaxable service?

Plain-English summary

A family-owned waste disposal company charges customers a flat fee to haul away waste, requiring them to load the waste into the company's own roll-off dumpsters -- customers can't supply their own dumpster, and the company won't rent a dumpster without also providing the pickup/disposal service. The company asked the Department to confirm that providing the dumpster is merely incidental to its waste-removal SERVICE, not a separate taxable equipment lease, especially in light of a new Illinois rule taxing equipment leases that took effect January 1, 2025.

The Department agreed. Since 2025, Illinois generally taxes leases of tangible personal property the same way it taxes retail sales -- but its new regulation (86 Ill. Adm. Code 130.102) still requires figuring out the "true object" of a transaction FIRST: is the customer really paying for the use of the equipment, or for a service that happens to involve equipment along the way? If the true object is the SERVICE and equipment is transferred by lease merely incident to that service, the transaction is taxed under the Service Occupation Tax Act instead of as a standalone retail lease.

Here, the dumpster has little to no value to the customer independent of the disposal service -- nobody wants to just rent a dumpster and let waste pile up; the point is getting the waste HAULED AWAY. Because the company won't lease dumpsters standalone and always bundles them with pickup and disposal, the true object is the waste-removal service, and the dumpster is just the vessel used to deliver that service. The Department noted this same fact pattern and outcome had already been confirmed in an earlier private letter ruling (ST 25-0001-PLR, issued before the new leasing rule took effect) and confirmed the 2025 rule change doesn't alter that result -- the true object test used before is the same test the new regulation formally adopts.

What this means for you

Waste disposal, dumpster rental, and similar bundled-equipment service businesses

If you never rent your equipment (dumpsters, tanks, containers, etc.) standalone and always bundle it with a service the customer actually wants, you likely have a strong "true object is the service" argument -- keeping you under Service Occupation Tax treatment rather than the newer retail-lease tax. The less independent value the equipment has without your service, the stronger the argument.

Equipment lessors more broadly, post-2025

The 2025 rule change (86 Ill. Adm. Code 130.102) means MOST standalone equipment leases are now taxed like retail sales. This letter is a reminder that the "true object" test still comes first -- if your equipment is genuinely incidental to a service you provide (not separately rentable, of little value alone), you may still fall under Service Occupation Tax rather than the new lease-tax regime. But if customers CAN rent your equipment on its own, or the equipment has independent value to them, expect the new retail-lease tax to apply.

Accountants and tax professionals

Note how a serviceperson's Service Occupation Tax liability is calculated depending on registration status: an unregistered de minimis serviceperson pays Use Tax to ITS suppliers (no tax charged to its own customers); a registered de minimis serviceperson pays Service Occupation Tax on its cost price and collects Service Use Tax from customers; and a serviceperson above the de minimis cost-ratio threshold must tax either the separately-stated equipment price or 50% of the full bill, never less than its own cost.

Common questions

Q: Did the January 1, 2025 lease-tax change eliminate the "true object" test for bundled equipment-plus-service transactions?
A: No. The new regulation (86 Ill. Adm. Code 130.102) formally adopts the SAME true-object test that existed before -- first decide whether the transaction is really a service (with incidental equipment) or a standalone equipment lease, then apply the corresponding tax treatment.

Q: What makes equipment "incidental" to a service rather than a separate taxable lease?
A: Key factors here: the equipment has little to no independent value to the customer without the service, and the business won't provide the equipment without the service (no standalone rental option).

Q: Does a prior PLR on the same facts still apply after the new leasing rule took effect?
A: The Department confirmed here that an earlier PLR analyzing the identical waste-disposal/dumpster fact pattern reached the same result under the new rule -- the true object test didn't change, just the specific regulatory citation supporting it.

Q: How is Service Occupation Tax calculated for a bundled-equipment service provider?
A: One of four ways depending on registration and cost ratio: separately-stated equipment price, 50% of the entire bill, cost price if registered de minimis, or Use Tax on cost price if unregistered de minimis -- never less than the provider's own cost for the equipment.

Q: Can I rely on this letter for my own bundled-equipment service business?
A: No. This is a General Information Letter -- not binding on the Department, and the true-object conclusion is highly fact-specific. Get your own arrangement reviewed, especially if customers have any option to rent your equipment standalone.

Citations and references

Regulations:

• 86 Ill. Adm. Code 130.102 (tax on leases of tangible personal property on and after January 1, 2025; true object test)
• 86 Ill. Adm. Code 140.101 (Service Occupation Tax Act imposition)

Session laws:

• P.A. 103-592, Article 75 (2025 imposition of Retailers' Occupation Tax on leasing of tangible personal property)

Source

• Landing page: Illinois 2026 Sales Tax Letter Rulings
• Original PDF: ST26-0017-GIL.pdf

Original ruling text

ST 26-0017-GIL 05/06/2026 LEASING
If the true object of the transaction is the service and tangible personal property is
transferred by lease incident to the sale of service, the transfer of tangible personal
property by lease is subject to the Service Occupation Tax Act. See 86 Ill. Adm.
Code 130.102. (This is a GIL).
May 6, 2026
NAME
COMPANY
ADDRESS
EMAIL
Dear NAME:
This letter is in response to your letter dated March 5, 2026, 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.
The nature of your inquiry and the information you have provided require that we
respond with a GIL.
INQUIRY:
This private letter ruling request is submitted pursuant to 2 Ill. Adm. Code
1200.110 on behalf of our client, COMPANY1 (“taxpayer”). I have attached
Power of Attorney Forms IL-2848. IL-2848-A and IL 2848-B granting a power of
attorney to the undersigned and NAME. This private letter ruling request is
made with respect to an issue involving the Retailers' Occupation Tax, the
Service Occupation Tax and related taxes.
Pursuant to Section 1200.l10(a)(3)(C), the issue for which this ruling is being
requested is not being examined as part of a Department audit, nor is there

COMPANY1/NAME
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May 6, 2026
pending litigation involving the taxpayer or a related taxpayer in which the
Department is named as a plaintiff or defendant.
Pursuant to Section 1200.110(a)(3)(D) of the Department's rules, there is no
case law or regulations dispositive of the subject of the request.
This ruling request is on behalf of taxpayer who operates a waste disposal
service. Taxpayer requires customers of the waste disposal service to load the
waste into dumpsters provided by taxpayer. Taxpayer does not pick up and
dispose of waste from customers that do load the waste into taxpayerprovided dumpsters and customers may not supply their own dumpsters.
We seek a private letter ruling from the Department ruling that under the facts
and applicable Illinois law and regulations, the true object of taxpayer's
business is a waste disposal service, and the dumpsters supplied to
customers for loading the waste prior to pick up and disposal by taxpayer are
incidental to the provision of the service. As a result, taxpayer is de minimis
serviceman under the Illinois Service Occupation Tax Act and is not a lessor
of dumpsters under the Retailers' Occupation Tax.
I.

Statement of Facts and Relevant Information

Taxpayer is a locally family-owned waste disposal service. Taxpayer provides
waste material disposal for residential and commercial projects. “Waste
material” consists of all non­hazardous solid waste, organic waste and if
applicable, recyclables generated by customers. Taxpayer provides roll-off
dumpsters to contain the waste for pickup from customers as a part of their
service. The cost of the service and the size of the dumpster depends upon
the amount of waste material to be disposed of by the customer.
Customers sign a service agreement with taxpayer for disposal of waste
material for a flat fee. The dumpsters are the vessels used for the collection of
waste material. Taxpayer will not enter into a service agreement for pick up
and disposal of waste without the use of its dumpsters for waste collection.
Taxpayer does not enter into agreements for the rental of dumpsters
separately from Taxpayer's waste disposal service.
Taxpayer does not make sales of tangible personal property and is not
registered under the Retailers' Occupation Tax Act. When taxpayer purchases
dumpsters from retail suppliers of dumpsters taxpayer pays applicable state
and local sales and use taxes to the sellers of the dumpsters.

COMPANY1/NAME
Page 3
May 6, 2026
II.

Contracts and Agreements

The service agreement between customers and the taxpayer establishes a flat
rate charge based upon the volume and weight of the waste material to be
disposed of by the customer. The size of the dumpster provided to the
customer depends on the volume of waste material to be disposed of by the
customer. Additional charges are imposed if the materials exceed the
contracted for weight or if cleaning is needed due to loading of restricted or
hazardous material into the dumpsters. A copy of a typical service agreement
is attached to this request.
III.

Tax Periods at Issue

The tax periods at issue are all periods beginning with January 1, 2025.
IV.

Prior Rulings

To the best of the knowledge of the taxpayer and taxpayer's representative the
Department has not previously ruled on the same or a similar issue for the
taxpayer or a predecessor. Neither taxpayer nor any representatives has
previously submitted the same or a similar issue to the Department but
withdrew it before a letter ruling was issued.
V.

Supporting Authorities

Article 75 of P.A. 103-592 imposed the Retailers' Occupation Tax on persons
engaged in the business of leasing at retail tangible personal property
effective January 1, 2025.
The Department adopted rules implementing and explaining the scope of the
changes made by Article 75 of P.A. 103-592. This rulemaking added 86 Ill.
Adm. Code Section 130.102, “Tax Imposed on Leases of Tangible Personal
Property on and after January 1, 2025.” The rule was adopted effective January
8, 2026.
Section 130.102(a) provides in relevant part that two decision points in
determining the taxability of a transaction are “... whether or not the
transaction is a service transaction, and, if not whether service charges
included with the lease are subject to retailers' occupation tax.” In making
such determinations, the Department's rules adopt a “true object test” in
subsection 130.102(a)(l).

COMPANY1/NAME
Page 4
May 6, 2026
Section 130.102(a)(l) provides in relevant part that “[i]f it is determined that a
transaction includes a taxable lease 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 make
this determination, the lessor must determine the true object or substance of
the transaction.”
Section 130.102(b) provides that “[i]f it is determined that the true object of
the transaction is the service and that the tangible personal property is
transferred by lease incident to a sale of service, tax on the transfer of the
tangible personal property by lease is calculated under the Service
Occupation Tax Act.”
The Service Occupation Tax is a tax on tangible personal property transferred
incident to a sale of service. See 86 Ill. Adm. Code 140.101. Tangible personal
property transferred to a service customer may result in Service Occupation
Tax or Use Tax liability for the serviceman. There are 4 ways in which the
liability may be calculated.
Prior to the adoption of regulations implementing P.A. 103-592, the
Department issued private letter ruling ST 25-0001-PLR. Although private
letter rulings are only binding for the party to whom the ruling is issued, and
this ruling was adopted prior to the Department's regulations, we believe it is
instructive. The Department ruled that under the facts presented in the ruling
request, the transactions constituted waste removal services in which a
dumpster is leased as an incident of the sale of waste removal service. The
Department concluded that without the waste removal service, the dumpster
is of little to no value to the customer. As such the provisions of the Service
Occupation Tax would apply to the transactions.
VI.

Contrary Authorities

Taxpayer is unaware of any contrary authorities.
VII.

Ruling Requested

We respectfully request a ruling that the transactions engaged in by taxpayer
are waste removal services in which a dumpster is leased as an incident of the
sale of the waste removal service. The “true object” of such transactions is
the waste removal service. Dumpsters are the vessels for the transfer of waste
from the customer to taxpayer.

COMPANY1/NAME
Page 5
May 6, 2026
The provisions of the Service Occupation Tax apply to taxpayer's transactions.
As an unregistered deminimis serviceman, Taxpayer pays tax to suppliers
when purchasing dumpsters and no tax is charged customers of its waste
removal service.
If you have any questions or need any additional information, please contact
NAME at PHONE or EMAIL.
DEPARTMENT’S RESPONSE:
As you note, ST 25-0001-PLR was issued prior to the effective date of the rules
implementing changes to the taxation of leases of tangible personal property on and after
January 1, 2025, at 86 Ill. Adm. Code 130.102. Under the new rule, the analysis is the same.
It must be determined whether the transaction is a service transaction that includes the
transfer of tangible personal property by lease, or, if a retail transaction, whether service
charges included with the lease are subject to retailers’ occupation tax. See 86 Ill. Adm.
Code 130.102(a). The new rule also uses the true object test that was used in ST 25-0001PLR to make that determination. See 86 Ill. Adm. Code 130.102(a)(1).
Therefore, the adoption of the new rule would not have changed the result in ST 250001-PLR, which was based on the transactions constituting waste removal services in
which dumpsters were leased as an incident of the sale of waste removal service, because
without the waste removal service, the dumpster was of little to no value to the customer.
This resulted in the provisions of the Service Occupation Tax Act applying to the
transactions, which would be the same under the new rule. The facts presented in your letter
are similar enough to those in ST 25-0001-PLR that the same rule and the same analysis
apply (with the addition of new authority to cite to in the new rule).
Rather than restate ST 25-0001-PLR in its entirety, we refer you to that letter for
detailed guidance and summarize here. A serviceman who is not required to or who does
not voluntarily register with the Department must calculate the cost ratio of tangible
personal property transferred over total income from services to determine whether the
serviceman is de minimis. An unregistered de minimis serviceman owes Use Tax to its
suppliers when it purchases tangible personal property that will be transferred incident to
its sales of service. If the suppliers do not collect that tax, the serviceman must self-assess
and remit it to the Department. No tax is charged to the serviceman’s customer. A registered
de minimis serviceman is subject to Service Occupation Tax on the serviceman’s cost price
of tangible personal property transferred incident to its sales of service. Such servicemen
should give suppliers resale certificates and remit Service Occupation Tax, and must also
collect a corresponding amount of Service Use Tax from their customers, absent an
exemption.

COMPANY1/NAME
Page 6
May 6, 2026
If the serviceman’s cost ratio is above the de minimis threshold, the serviceman is
subject to Service Occupation Tax and must assess it on customer transactions in one of
two ways. If the lease price of the tangible personal property is separately stated from the
service price, then Service Occupation Tax must be assessed on the separately stated lease
price. If the lease price of the tangible personal property is not separately stated from the
service price, then Service Occupation Tax on 50% of the customers’ entire bills must be
assessed. In neither case may the tax base be less than the serviceman’s cost price of the
tangible personal property transferred.
I hope this information is helpful. If you require additional information, please visit
our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information
Division at 800-732-8866.
Very truly yours,
Edward Mroczkowski
Associate Counsel
(217) 782-7055
EM:slc

Printed by the authority of the State of Illinois
Electronic Only - One Copy
Issued 05/06/2026, Redacted 5/26/2026