Must a trash-removal company charge sales tax on the landfill 'dumping fee' it pays and passes through to its customer as a separate line item?

Plain-English summary

Livingston Moving & Storage, Inc. provides a trash-removal service and, in doing so, must pay a dumping fee to use a municipal landfill. It passes that fee on to its customers as a separate charge. It asked whether sales tax is due on the portion of its bill representing reimbursement of the dumping fee.

The Department held the entire charge is taxable, including the dumping-fee portion.

• Trash removal is a taxable service. Receipts from trash removal are subject to sales tax under § 1105(c)(5).
• "Receipt" allows no deduction for expenses. Section § 1101(b)(3) defines "receipt" as "the charge for any service taxable under this article . . . without any deduction for expenses."
• Expenses of making the sale are not deductible. Under 20 NYCRR 526.5(e), "all expenses incurred by a vendor in making a sale, regardless of their taxable status and regardless of whether they are billed to a customer, are not deductible from the receipts." The landfill dumping fee is exactly such an expense.
• Result. Livingston must collect sales tax on its entire charge to the customer — both the portion labeled "Rubbish Removal" and the portion labeled "Dumping Fee."

What this means for you

Passing a cost through on a separate line doesn't make it tax-free. If you incur an expense to perform a taxable service, reimbursing yourself for it is still part of your taxable receipt — even if you itemize it separately on the invoice.

"Without any deduction for expenses" is a hard rule. New York taxes the full charge for a taxable service; you can't back out your own costs (permit fees, landfill fees, tipping fees, and the like) from the taxable base.

Labeling a line "fee" or "reimbursement" changes nothing. What matters is that it's an expense you incur in making the sale, not the name you give it.

Common questions

Q: I list the landfill dumping fee separately. Can I leave it out of the taxable amount?
A: No. It's an expense of making the sale, and expenses aren't deductible from receipts whether or not they're separately billed (20 NYCRR 526.5(e)).

Q: What if the fee is a straight pass-through with no markup?
A: It's still taxable. The tax is on the full charge for the taxable service; a dollar-for-dollar reimbursement is still part of the receipt.

Q: Are there any charges I can exclude?
A: Some genuinely separate items (for example, certain separately stated transportation charges under other rules) may be treated differently, but a vendor's own cost of performing the service is not deductible. Check the specific rule for the charge at issue.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c)(5) — tax on trash removal / servicing real property
• Tax Law § 1101(b)(3) — "receipt" is the charge for a taxable service without any deduction for expenses
• 20 NYCRR 526.5(e) — expenses of making a sale are not deductible, whether or not billed to the customer

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a82_8s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-82(8)S
Sales Tax
February 10, 1982

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S811014A

On October 14, 1981, a Petition for Advisory Opinion was received from Livingston Moving
& Storage, Inc., 533 LeRay Street, Watertown, New York 13601.
Petitioner provides a trash removal service in the course of which it is required to pay, and
passes on to its customers, a dumping fee for use of a municipal landfill. The issue raised here is
whether sales tax is due on that portion of Petitioner's charge to its customer representing
reimbursement for such dumping fee.
Receipts from the service of trash removal are subject to a sales tax imposed under section
1105(c)(5) of the Tax Law. The term "receipts" is defined in section 1101(b)(3) of the Tax Law as
". . . the charge for any service taxable under this article . . . without any deduction for expenses . .
. . " (emphasis added). The Sales and Use Tax Regulations provide in pertinent part, as follows:
"(e) Expenses. All expenses incurred by a vendor in making a sale, regardless of their taxable
status and regardless of whether they are billed to a customer are not deductible from the receipts."
20 NYCRR 526.5.
The dumping fee paid by Petitioner constitutes an expense "incurred by a vendor in making
a sale," within the meaning and intent of the above-quoted regulation. Accordingly, Petitioner is
required to collect sales tax on its entire charge to its customer, including both that portion labeled
"Rubbish Removal" and that portion labeled "Dumping Fee."

DATED: January 25, 1982

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR