Can a trash-hauling company buy its trash containers tax-exempt as purchases for resale when it separately bills customers for container rental and trash removal?

Plain-English summary

Accurate Disposal is a commercial and residential garbage removal company that supplies trash containers to many customers along with its removal service. Invoices show a separate, specified equipment rental charge and a separate, specified trash removal charge — but a customer can use Accurate Disposal's containers without using its removal service, or vice versa, and the rental charge doesn't change based on whether the customer also buys removal service.

The Department applied a well-established test for this exact fact pattern: does the trash hauler PERMANENTLY transfer the container to the customer, or is it just used to facilitate an integrated removal service? Since Accurate Disposal doesn't permanently transfer its containers, its purchases can only be tax-exempt "for resale" if the container rental is genuinely a SEPARATE AND DISTINCT transaction from the removal service — not merely separately priced on the invoice. To prove that, the taxpayer bears the burden of showing: (1) two truly separate transactions exist (a customer can rent a container without buying removal service, and can buy removal service without renting a container); (2) the rental price is reasonable (comparable to what similar containers rent for on a stand-alone basis); and (3) the containers aren't used interchangeably for rental and non-rental purposes. A separately stated invoice line alone is NOT enough — the Department was explicit that this is insufficient proof by itself. If Accurate Disposal can establish all of this, its container purchases qualify as exempt purchases for resale (rental); if it can't, the containers are being used to perform an integrated, taxable trash removal service, and its purchases are fully taxable retail purchases.

What this means for you

Trash and waste-hauling companies bundling equipment with service

Separately stating an equipment rental charge on your invoice is necessary but NOT sufficient to buy that equipment tax-free as a resale item. You need to actually be able to prove customers can choose one without the other, that your rental pricing is comparable to a genuine stand-alone rental market rate, and that you keep records distinguishing rental-only containers from those used as part of your integrated service.

Any equipment-plus-service business trying to unbundle for tax purposes

This is a reusable template well beyond trash removal: any business providing equipment "in conjunction with" a service (photo booths, tools, staging, etc.) needs the same three-part showing — real optionality, reasonable comparable pricing, and dedicated non-interchangeable use — to treat the equipment as a genuinely separate, tax-exempt-on-purchase rental rather than an input into an integrated taxable service.

Accountants and tax professionals

Watch for clients who assume a separately stated invoice line automatically supports a resale exemption — this ruling (and its cited precedents, especially Morton L. Coren and Matter of C.I.D. Refuse Service) makes clear the taxpayer needs contemporaneous proof of genuine transactional separateness, not just billing format.

Common questions

Q: Is separately stating a rental charge on my invoice enough to buy equipment tax-exempt for resale?
A: No — you must also prove customers can choose the rental separately from the service, the price is reasonable, and the equipment isn't used interchangeably for other purposes.

Q: What if I permanently transfer the container to the customer?
A: Then the purchase can qualify as an exempt purchase for resale on that separate basis, since actual (permanent) transfer to the customer is its own path to the resale exemption.

Q: Who has to prove the exemption applies?
A: The taxpayer (vendor) bears the burden of proving its purchase qualifies for resale treatment.

Q: Can another trash hauler rely on this Advisory Opinion?
A: No. It binds the Department only for the petitioner and facts described; another hauler needs its own facts and records to support the same conclusion.

Citations and references

Statutes and regulations:

• Tax Law §§ 1101(b)(4), (5) (retail sale; resale exclusions; sale)
• Tax Law § 1105(a) (retail sale of tangible personal property)
• Tax Law § 1132(c)(1) (burden of proof)
• 20 NYCRR 526.6(c)(1) (resale exclusion)

Cases and prior rulings referenced:

• Morton L. Coren, P.C., TSB-A-90(33)S
• Penfold v State Tax Commission, 114 AD2d 696
• Waste Management of New York, Inc., DTA No. 805791, aff'd 185 AD2d 479
• Matter of C.I.D. Refuse Service, DTA No. 809934
• Matter of Albany Calcium Light Co. v State Tax Commn., 44 NY2d 986
• Matter of U-Need-A-Roll Off Corp. v New York State Tax Commn., 67 NY2d 690

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2006.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a06_28s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-06(28)S
Sales Tax
November 30, 2006

Office of Tax Policy Analysis
Technical Services Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S060208A

On February 8, 2006, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Accurate Disposal, Inc., P. O. Box 6155, Schenectady, New York,
12306-0155.
The issue raised by Petitioner, Accurate Disposal, Inc., is whether sales tax is due on
Petitioner’s purchases of trash containers used by residential customers or whether such
purchases are exempt from tax as purchases for resale.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a commercial and residential garbage removal company. Petitioner provides
trash containers to many of its commercial and residential customers in conjunction with its trash
removal services. Customer invoices show a separate and specified equipment rental charge in
addition to a separate and specified trash removal charge. However, customers may or may not
use Petitioner's trash removal service in conjunction with Petitioner's containers. The equipment
rental charge is unaffected by whether or not the customers also use Petitioner’s trash removal
service.
The size, type and dollar value of the trash containers provided to customers are based
solely on the need and preference of the customer made known by the customer’s request.
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:
*

*

*

(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

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purchaser of the service in conjunction with the performance of the service
subject to tax. . . .
*

*

*

(5) Sale, selling or purchase. Any transfer of title or possession or both,
exchange or barter, rental, lease or license to use or consume . . . conditional or
otherwise, in any manner or by any means whatsoever for a consideration, or any
agreement therefor, including the rendering of any service, taxable under this
article, for a consideration or any agreement therefor.
Section 1105(a) of the Tax Law provides for the imposition of sales tax upon:
The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
Section 526.6(c)(1) of the Sales and Use Tax Regulations provides that:
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.
Opinion
Petitioner is a commercial and residential garbage removal company. Customer invoices
show a separate and specified equipment rental charge in addition to a separate and specified
trash removal charge. Customers may or may not use Petitioner’s trash removal service in
conjunction with Petitioner's trash containers. The equipment rental charge is unaffected by
whether or not the customers also use Petitioner’s trash removal service.
In Morton L. Coren, P.C., Adv Op Comm T&F, June 29, 1990, TSB-A-90(33)S, it was
concluded that even though the components of a particular sale could be separately stated,
calculated or estimated, if such components could not be separately purchased, the combination
of items must be considered as one and, thus, subject to sales tax as a single purchase. See also
Penfold v State Tax Commission, 114 AD 2d 696 [1985].
In the case of a trash removal service, where property (containers) and service (trash
removal) are sold jointly, the transaction is viewed in its entirety. If the purchaser of a trash
removal service cannot purchase (or lease) the container separately from the service even though
a separate price is shown on the invoice to the purchaser, the sale is one of an integrated trash
removal service. In such circumstances, the trash removal company is using the container to

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facilitate the removal of trash from its customer's premises. In addition, the customer is using
the container to store trash while waiting for the company to remove it. In such case, the vendor
of the trash removal service cannot purchase the containers exempt from tax as purchases for
resale. An exception to this rule exists, however, where a trash container used by the service
provider as part of a trash removal service subject to sales tax under section 1105(c)(5) of the
Tax Law is “actually transferred,” i.e., permanently transferred, to the purchaser of the service.
In such circumstances, the vendor of a trash removal service may purchase the containers exempt
from sales tax as a purchase for resale pursuant to section 1101(b)(4)(i)(B) of the Tax Law. See
Waste Management of New York, Inc., Dec Tax App Trib, March 21, 1991, DTA No. 805791,
aff’d 185 AD2d 479 (3d Dept 1992).
Alternatively a vendor of a trash removal service may purchase containers exempt from
sales tax as purchases for resale as such pursuant to section 1101(b)(4)(i)(A) of the Tax Law, if
it can prove that there was a specified charge to its customers for the rental of the containers, the
charge was reasonable, the containers were not used interchangeably for rental and non-rental
purposes, and the containers were purchased exclusively for resale (or rental). See Matter of
C.I.D. Refuse Service, Dec Tax App Trib, August 31, 1995, DTA No. 809934.
Since the containers in this case are not permanently transferred by Petitioner to its
customers, Petitioner's purchases of trash containers that are provided to customers in
conjunction with Petitioner's trash removal services may only qualify as purchases for resale if
Petitioner's rental of containers is separate and distinct from its sales of its trash removal service
and the rental charge is reasonable. In order for Petitioner's sale of its trash removal service to be
separate and distinct from its rental of containers, there must be two separate transactions
between Petitioner and its customers. If such containers are not rented to Petitioner's customers
in a separate and distinct transaction from the sale of Petitioner's trash removal service, then
Petitioner's purchases of such containers are retail purchases subject to sales tax under section
1105(a) of the Tax Law.
Petitioner has the burden of proof to establish it purchased the containers for resale. See
section 1132(c)(1) of the Tax Law; Matter of C.I.D. Refuse Service, supra; Matter of Albany
Calcium Light Co. v State Tax Commn., 44NY2d 986; Matter of U-Need-A-Roll Off Corp. v
New York State Tax Commn., 67 NY2d 690. Petitioner must maintain records for its containers
showing that the containers were rented to its customers and not provided as part of an integrated
trash removal service. Merely showing a separate price on its invoice for “trash removal” and
“container rental” is insufficient to show that it is renting containers as a separate transaction. In
addition to separate pricing, Petitioner needs to prove that customers may rent a container
without purchasing Petitioner's trash removal service and that customers may purchase the trash
removal service without renting a container from Petitioner. See Morton L. Coren, P.C., supra;
Penfold v State Tax Commission, supra. Petitioner also needs to show that the separate price on
its invoice for "trash removal" and "container rental" is reasonable (for example, the prices for
these items are comparable to their prices when sold separately). If these conditions are met,

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then Petitioner is renting containers to its customers separate from the sale of trash removal
services and Petitioner's purchases of such containers are nontaxable purchases for resale.
If trash containers are provided to customers who do not purchase Petitioner's trash
removal service, there is a specified charge to its customers for the rental of the container and
such charge is reasonable, the containers are not used interchangeably for rental and non-rental
purposes, and the containers are purchased exclusively for rental purposes, Petitioner may
purchase such containers for resale without payment of sales tax. See Matter of C.I.D. Refuse
Service, supra.

DATED: November 30, 2006

NOTE:

/s/
Jonathan Pessen
Tax Regulation Specialist IV

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