Does a building-cleaning company have to pay sales tax on the paper towels, garbage bags, rock salt, and cleaning agents it buys to perform its cleaning services, even though it separately bills customers for supplies?

Plain-English summary

Paris Maintenance Co. provides building cleaning services under "cost plus" labor contracts -- it bills customers an hourly labor rate, and customers separately buy their own cleaning supplies, either from a third party or from Paris Maintenance at a discount. Paris Maintenance ships the ordered supplies (toilet paper, garbage bags, paper towels, rock salt, and cleaning agents) directly to customers' buildings and bills them separately, charging sales tax on that supply charge. It asked the Department whether its own purchases of these supplies are subject to sales and use tax.

Cleaning services are a taxable real-property maintenance service. Under New York's resale rules, a company performing a taxable service can buy supplies tax-free for resale only if those supplies either become a physical part of the customer's property or are actually transferred to the customer as part of the service -- not if they're merely consumed by the service provider along the way. The Department drew a sharp line between two categories of supplies here: garbage bags, rock salt, and ordinary cleaning agents are used up performing the cleaning itself and never become the customer's property (any that happen to remain, like leftover rock salt, are incidental and useless to the customer) -- so Paris Maintenance owes tax on those, regardless of how it bills or what it charges the customer. But toilet paper, paper towels, and hand soap actually placed in restrooms for building occupants, and wax actually applied to floors and furniture, are genuinely transferred to (and left for the use of) the customer -- so those can be purchased tax-free for resale, as long as Paris Maintenance gives its supplier a timely Resale Certificate (Form ST-120) within 90 days of the purchase.

Separately billing for supplies and charging the customer tax on that bill doesn't change the analysis of what Paris Maintenance itself owes on its own purchases -- when a service and supplies are provided together as part of one cleaning arrangement, the transaction isn't split into two independent sales for tax purposes.

What this means for you

Cleaning, janitorial, and building-maintenance companies

The tax treatment of your supply purchases turns on what actually happens to each item, not on how you bill for it. Supplies consumed in the process of cleaning (bags, salt, general cleaning agents) are taxable purchases for you. Supplies genuinely left behind for the building/occupants' own use (restroom paper products, soap, floor wax) can be bought tax-free for resale with a timely resale certificate to your supplier.

Building owners and property managers who buy supplies through their cleaning vendor

Whether you're charged sales tax on the supply portion of your bill depends on the vendor's own analysis of which supplies were consumed versus transferred -- ask your vendor how it's splitting the bill if the distinction matters to you.

Accountants and tax professionals

The key regulatory hook is 20 NYCRR § 526.6(c)(6) and its "drop cloths and sandpaper" example -- items used by a service provider in performing a taxable service, even if left behind with no further use to the customer, are not "actually transferred" for resale purposes. Compare that to genuinely consumable products (paper goods, soap, wax) that retain independent value to the customer after the service is performed.

Common questions

Q: If I separately bill and charge tax on cleaning supplies, do I still owe tax on my own purchase of them?
A: Yes, for supplies you consume performing the service (garbage bags, rock salt, general cleaning agents) -- billing and taxing the customer separately doesn't exempt your own purchase.

Q: Which supplies can I buy tax-free for resale?
A: Only those actually transferred to and left for the customer's use, like restroom paper products, hand soap, and floor/furniture wax -- and only if you give your supplier a properly completed resale certificate within 90 days of your purchase.

Q: Can another cleaning business rely on this ruling?
A: No. It binds the Department only as to this petitioner's facts. Other businesses should analyze which of their own supplies are consumed versus genuinely transferred before assuming the same treatment.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(4)(i) (definition of "retail sale"; resale exclusion)
• Tax Law § 1105(c)(5) (tax on maintaining, servicing, or repairing real property)
• Tax Law § 1110(a) (compensating use tax)
• 20 NYCRR § 526.6(c) (resale exclusion for property transferred or consumed in performing a taxable service)
• 20 NYCRR § 527.7(b) (imposition of tax on real property maintenance services)

Prior rulings and cases referenced:

• Jeffrey J. Coren, CPA, Adv Op Comm T&F, June 24, 1999, TSB-A-99(34)S
• Ruston Paving Co., Dec State Tax Commn., Sept. 15, 1986, TSB-H-87(222)S
• Matter of Custom Management Corporation v. Tax Commn., 148 AD2d 919

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2000.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a00_14s.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Tax Policy Analysis
Technical Services Division

TSB-A-00(14)S
Sales Tax
March 29, 2000

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S990504A

On May 4, 1999, the Department of Taxation and Finance received a Petition for Advisory
Opinion from Paris Maintenance Co, Inc., 588 Meacham Avenue, Elmont, New York, 11003.
The issue raised by Petitioner, Paris Maintenance Co., Inc., is whether certain supplies
purchased by Petitioner for use in providing building cleaning services are subject to sales and
compensating use tax.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner provides building cleaning services to various businesses and building
management companies. Petitioner’s contracts are “cost plus” labor contracts, meaning that
Petitioner bills its customers an hourly rate for labor only and the customers are required to buy their
own supplies. These supplies include toilet paper, garbage bags, paper towels, rock salt and cleaning
supplies.
Petitioner’s customers can purchase their supplies from a third party or buy them from
Petitioner, using the substantial discounts Petitioner gives them. The supplies that are ordered
through Petitioner are shipped from the supply companies directly to the buildings. Petitioner bills
its customers separately for the supplies and charges them sales tax.
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:
*

*

*

(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. . . .

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(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. . . . (Emphasis added)
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax. – . . . there is hereby imposed and there shall be paid
a tax . . . upon:
(a) The receipts from every retail sale of tangible personal property, except
as otherwise provided in this article.
*

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*

(c) The receipts from every sale, except for resale, of the following services:
*

*

*

(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 provides, in part:
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 on and after June first, nineteen hundred seventy­
one except as otherwise exempted under this article, (A) of any tangible personal
property purchased at retail. . . . (Emphasis added)

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Section 526.6 of the Sales and Use Tax Regulations provides, in part:
(a) The term retail sale or sale at retail means the sale of tangible personal
property to any person for any purpose, except as specifically excluded.
*

*

*

(c) Resale exclusion. (1) Where a person, in the course of his business
operations, purchases tangible personal property or services which he intends to sell,
either in the form in which purchased, or as a component part of other property or
services, the property or services which he has purchased will be considered as
purchased for resale and therefore not subject to tax until he has transferred the
property to his customer.
*

*

*

(6) Tangible personal property purchased for use in performing services
which are taxable under sections 1105(c)(1), (2), (3) and (5) of the Tax Law is
purchased for resale and not subject to tax at the time of purchase, where the property
so sold (i) becomes a physical component part of the property upon which the
services are performed, or (ii) is later actually transferred to the purchaser of the
service in conjunction with the performance of the service subject to tax.
*
Example 9:

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A painter purchases plastic drop cloths and sandpaper and after
painting a customer’s premises, leaves the used drop cloths and
sandpaper at the premises. The drop cloths and sandpaper, even
though of limited or no use after the painting, have not been
purchased for resale as they are items used by the painter in
performing a taxable service. The drop cloths and sandpaper are not
actually transferred to the purchaser of the service in conjunction with
the performance of the service.

Section 527.7(b) of the Sales and Use Tax Regulations provides, in part:
(b) 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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(3) When the service of maintaining, servicing or repairing real property is
performed in conjunction with the transfer of title to tangible personal property, the
price of the tangible personal property is also subject to tax.
Opinion
Petitioner is in the business of providing building cleaning services which are subject to sales
tax under Section 1105(c)(5) of the Tax Law as the maintenance and servicing of real property. In
accordance with Section 1101(b)(4)(i) of the Tax Law and Section 526.6(c) of the Sales and Use Tax
Regulations, tangible personal property purchased for use in performing the services subject to tax
under Section 1105(c)(5) of the Tax Law may be purchased for resale, where the property so sold
becomes a physical component part of the property upon which the services are performed or where
the property is to be actually transferred to the purchaser of the service in conjunction with the
performance of the taxable service.
Since Petitioner is selling a service subject to tax under Section 1105(c)(5) of the Tax Law,
it may purchase for resale those items which will become a physical component part of the building
serviced or will actually be transferred to its customers. However, if such items of tangible personal
property are actually consumed by Petitioner in the performance of its cleaning services, they cannot
be purchased for resale and are subject to sales and compensating use tax.
In this case, the paper towels used by Petitioner to perform cleaning services, the garbage
bags used to collect and remove garbage from customers’ premises, the rock salt and the ordinary
cleaning agents/supplies do not become physical component parts of Petitioner’s customers’
property, nor are they actually transferred to Petitioner’s customers in conjunction with the
performance of Petitioner’s cleaning activities (see Jeffrey J. Coren, CPA, Adv Op Comm T&F, June
24, 1999, TSB-A-99(34)S; Ruston Paving Co., Dec State Tax Commn., September 15, 1986, TSBH-87(222)S). These items are used by Petitioner as part of its service to its customers. Any rock
salt or cleaning agents which remain on a customer’s property are merely incidental to Petitioner’s
cleaning service and are of no use to the customer. Accordingly, purchases of such supplies by
Petitioner are retail sales pursuant to Section 1101(b)(4)(i) of the Tax Law and are subject to the
sales and compensating use tax imposed by Article 28 of the Tax Law.
Sales and compensating use tax is due on purchases of these supplies irrespective of the fact
that Petitioner separately bills its customers for the supplies. When Petitioner furnishes both its
service and the supplies to its customers, the provision of the supplies is connected to the provision
of the service and cannot be considered a separate transaction for sales tax purposes (see Matter of
Custom Management Corporation v. Tax Commn.,148 AD2d 919).
With regard to the other items listed in this Petition, Petitioner is not required to pay tax on
purchases of property that becomes a physical component of its customers’ property or is actually
transferred to its customers in the performance of its services. This exemption applies to toilet paper,

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paper towels and hand soap placed in rest rooms and to waxes placed on floors and furniture, and
may be claimed by Petitioner issuing a Resale Certificate (Form ST-120) to the vendor of the exempt
supplies no later than 90 days after the purchase.

DATED: March 29, 2000

NOTE:

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

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