Are a bottle-bill container handler's charges for collecting, transporting, processing, and accounting for empty deposit containers, and its sale of the processed materials, subject to sales tax?

Plain-English summary

Western New York Beverage Industry Collection and Sorting handles empty non-refillable deposit beverage containers under the New York State Returnable Container Act (the "Bottle Bill"). It picks up bags and boxes of containers from dealers, transports them to its plant, sorts, counts, and processes them into re-usable materials, keeps the records distributors need to reimburse dealers, and sells the processed aluminum, glass, and plastic (and steel for scrap) on behalf of distributors. It asked whether its various charges — and its sale of the processed materials — are taxable.

The Department held that none of it is taxable.

• The deposit and handling amounts aren't taxable. The 5¢ refund value and the additional 1.5¢ reimbursement per container are not receipts from a sale of tangible personal property or a taxable service, so they are not subject to sales tax.
• Transportation and recordkeeping fees aren't taxable. Section 1105(c) taxes only enumerated services. Record keeping/bookkeeping and transportation are not enumerated, so the fees charged to dealers (per container picked up) and to distributors (for accounting and transportation) are not taxable.
• Processing charges aren't taxable — the containers are resold. Section 1105(c)(2) taxes processing tangible personal property for the person who furnishes it, but not when the property is intended to be resold (20 NYCRR 527.4(f)(1)). The charges to distributors for pickup/transport and the weight-based processing charge are all processing charges on property that will be resold, so they are not taxable.
• The sale of processed materials isn't a retail sale. Because the buyers will resell the aluminum, glass, plastic, and steel, the sales are not retail sales and are exempt if the buyers give a properly completed Resale Certificate (Form ST-120) (§ 1101(b)(4); 20 NYCRR 526.6(c)(2)).

What this means for you

Deposit refunds and handling fees under the Bottle Bill aren't taxable receipts. The 5¢ deposit and the statutory handling reimbursement move money through the system but aren't payments for goods or a taxable service.

Transportation and bookkeeping are outside New York's taxable-services list. New York taxes only specifically enumerated services. Hauling containers and keeping the reconciliation records aren't on the list, so those charges are nontaxable — a useful reminder that a service is taxable only if the statute names it.

Processing goods headed for resale is exempt — document it with resale certificates. When you process material that will be resold (here, recyclable containers), the processing charge isn't taxable, and your sale of the recovered material is exempt as a sale for resale. Collect a Form ST-120 from each buyer to support it.

Common questions

Q: We haul and process deposit containers and resell the recovered metal and glass. Do we charge sales tax on our fees?
A: No. Transportation and recordkeeping aren't taxable services, and processing property that will be resold isn't taxable. Your sale of the recovered materials is also exempt if buyers give you a resale certificate.

Q: Are the 5¢ deposit and 1.5¢ handling amounts taxable?
A: No. They aren't receipts from a sale of property or a taxable service.

Q: What do we need to keep the material sales exempt?
A: A properly completed Resale Certificate (Form ST-120) from each buyer who will resell the materials.

Citations and references

Statutes:

• Tax Law § 1105(c) — taxes only specifically enumerated services (transportation and recordkeeping are not enumerated)
• Tax Law § 1105(c)(2) — tax on processing tangible personal property; not taxable when the property is to be resold
• Tax Law § 1101(b)(4) — retail sale; excludes sales for resale

Regulations:

• 20 NYCRR 527.4(f)(1) — processing is not taxable when the property is intended to be resold
• 20 NYCRR 526.6(c)(2) — Resale Certificate (Form ST-120)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a85_3s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85 (3)S
Sales Tax
April 15, 1985

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S831003A

On October 3, 1983, a Petition for Advisory Opinion was received from Western New York
Beverage Industry Collection and Sorting, 2440 Harlem Road, Cheektowaga, New York 14225.
The issues raised are whether Petitioner's services of (1) transporting non-refillable beverage
containers from various dealers' places of business to Petitioner's plant, (2) processing such
containers into re-usable materials for resale, and (3) providing accounting information regarding
such activities are subject to State and local sales tax where such services are performed in relation
to the New York State Returnable Container Act. At issue also, is whether the subsequent sale of the
processed materials (containers) is subject to State or local sales tax.
Petitioner is in the business of collecting, transporting and processing empty non-refillable
beverage containers.
Petitioner has entered or will enter into agreements with distributors and dealers for the
transportation and processing of containers.
Under such agreements with distributors, Petitioner will pick up bags and boxes of containers
on a periodic basis from dealers designated by the distributors; transport the containers to Petitioner's
processing facility for sorting and counting; maintain records of all containers collected, sorted and
processed; and process the containers.
Petitioner, through its accounting procedure, will determine the volume of containers for each
distributor and the amount such distributor must reimburse each dealer for the refund value plus 1.5¢
per container as provided for by the "Bottle Law".
Petitioner will sell the processed containers to primary users of aluminum, glass and plastic,
while the steel will be sold for scrap value. The sales of the processed containers will be made on
behalf of each appropriate distributor.
Petitioner will receive payment from each distributor for each container picked up on behalf
of such distributor. Petitioner will also receive payment from each distributor based on the weight
of the total containers processed on behalf of such distributor. Petitioner's charge to each distributor
for these services will be deducted from the sums received for the processed materials sold on behalf
of such distributor.

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-85 (3)S
Sales Tax
April 15, 1985

Under agreements with dealers, Petitioner will pick up bags and boxes of containers on a
periodic basis from each dealer's facilities; transport the containers to Petitioner's processing facility
for sorting and counting; maintain records of all containers collected, sorted and processed; and
invoice the appropriate distributor(s) on behalf of each dealer for containers picked up at such
dealers' facilities.
Petitioner will charge the dealer a fee based on each container which it picks up.
The New York State Returnable Container Act requires that a distributor pay to a dealer or
a redemption center the refund value of 5¢ for each beverage container accepted by the distributor
from such dealer as well as an additional reimbursement of 1.5¢ for each beverage container
accepted by the distributor from such dealer. As the refund of 5¢ and the reimbursement of 1.5¢ are
not receipts from the sale of tangible personal property nor receipts from the sale of a taxable service,
they are not subject to New York State or local sales tax.
The fee charged by petitioner to dealers, irrespective of how calculated, is considered a fee
for transporting the containers to the distributor and for performing the record keeping function for
dealers with respect to the deposit reimbursement and handling fee provisions of the New York State
Returnable Container Act.
Section 1105(c) of the New York State Sales and Use Tax Law imposes a tax on specifically
enumerated services. Record keeping or bookkeeping services and transportation services are not
specifically taxed under section 1105(c) of the New York State Sales and Use Tax Law and,
therefore, Petitioner's fees to dealers are not subject to a sales or use tax.
Section 1105(c)(2) of the Tax Law imposes a tax on the receipts from services of processing
tangible personal property, performed for a person who directly or indirectly furnishes the property.
However, the service of processing tangible personal property is not taxable when the tangible
personal property is intended to be resold. 20 NYCRR 527.4(f)(1). Accordingly, Petitioner's charges
to the distributors for picking up the beverage containers and transporting them to Petitioner's
processing location and the additional charge based on the weight of the containers processed are
all considered to be processing charges which are not subject to tax as provided under section
1105(c)(2) of the Tax Law.
Under agreements with distributors, Petitioner will maintain records of all containers
collected, sorted and processed. Petitioner will determine the volume of containers for each
distributor and the amount such distributor must reimburse each dealer for the refund value (5¢) plus
1.5¢ per container as provided by the New York State Returnable Container Act. Petitioner will
invoice the appropriate distributor(s) on behalf of each dealer for containers picked up at such
dealer's facilities. As accounting services and transportation services are not among the services
taxed under section 1105(c) of the Tax Law, Petitioner's charges to the distributors for such services
are not subject to State or local sales tax.

-3­
TSB-A-85 (3)S
Sales Tax
April 15, 1985

Section 1101(b)(4) of the Tax Law defines a retail sale as a sale of tangible personal property
to any person, other than for resale as such or as a physical component part of tangible personal
property. As Petitioner sells the processed containers to customers who will resell the materials, such
sales are not considered to be retail sales and will be exempt from State and local sales tax provided
the customers provide Petitioner a properly completed Resale Certificate (Form ST-120). 20
NYCRR 526.6(c)(2).

DATED: April 15, 1985

FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinion expressed in Advisory Opinions
are limited to the facts set forth therein.