Is a fee for baling garbage and arranging to ship it out of state for disposal subject to sales tax?

Plain-English summary

The CPA firm Michael J. Berger and Co. asked about a client planning a new business: it would receive garbage from local carting companies, bale the garbage, and ship it out of state for disposal using contract truckers, charging the carting companies a per-ton fee. None of the garbage would be recycled.

The Department held the fee is taxable:

• Baling waste is taxable "processing." Baling the waste to make it suitable for transportation and disposal is the processing of tangible personal property performed for its owner under Tax Law § 1105(c)(2). The Department relied on Cecos International, Inc. v. State Tax Commission (71 NY2d 934), which held that treating waste is taxable processing — and that "processing for the owner" applies whether or not the property is returned to the owner.
• So collect tax on the per-ton fee. When the client bales and transports the trash, it must charge and collect sales tax on its per-ton fee.
• A limit worth noting. Merely arranging for the transportation and disposal of trash without treatment, after a trash hauler has already removed it from real property, is not itself maintaining, servicing, or repairing real property under § 1105(c)(5). (Trash and garbage removal from a customer's premises is a taxable real-property service under § 1105(c)(5) and 20 NYCRR § 527.7(a) — see Cecos — but that's not what makes this client's fee taxable.) Here it is the baling that is taxable processing under § 1105(c)(2).

What this means for you

If your business treats, compacts, bales, or otherwise processes waste: Don't assume that because you're not "removing" trash from someone's property you're outside the tax. Physically treating or processing the waste — including baling it for shipment — is a taxable service under § 1105(c)(2), and you must collect tax on the charge.

Two different taxing provisions can apply to the waste business. Removing trash from a customer's real property is taxable under § 1105(c)(5); processing the waste (treating, baling) is taxable under § 1105(c)(2). But just arranging transport and disposal, with no treatment, after someone else has hauled the trash away, is not a § 1105(c)(5) real-property service.

"We don't give it back" is not a defense. Under Cecos, processing is taxable even though the waste is never returned to the owner — the customer paid to have its property treated.

Common questions

Q: We only bale and ship garbage — we don't pick it up from anyone's property. Is our fee taxable?
A: Yes. Baling the waste is taxable processing of tangible personal property under § 1105(c)(2), so you must collect tax on your per-ton fee.

Q: We never return the garbage to the customer — how can it be "processing for the owner"?
A: Under Cecos International, treating waste is taxable processing whether or not the property is returned to its owner.

Q: What if we only arranged trucking and disposal, with no baling or treatment?
A: Merely arranging transport and disposal — without treatment, after the trash has been removed from real property — is not itself a taxable § 1105(c)(5) real-property service. It is the treatment/processing that triggers tax.

Citations and references

Statute and regulation:

• Tax Law § 1105(c)(2) — tax on producing, fabricating, processing, printing, or imprinting tangible personal property for a person who furnishes the property
• Tax Law § 1105(c)(5) — tax on maintaining, servicing, or repairing real property, property, or land
• 20 NYCRR § 527.7(a) — trash and garbage removal is within "maintaining, servicing or repairing real property"

Case cited:

• Cecos International, Inc. v. State Tax Commission, 71 NY2d 934 (1988) (treating waste is taxable processing under § 1105(c)(2))

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1989.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a89_18s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-89 (18)S
Sales Tax
July 17, 1989

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S881209A

On December 9, 1988, a Petition for Advisory Opinion was received from Michael J. Berger
and Co., CPA's, 1401 Church Street, Bohemia, New York 11716.
The issue raised is the taxability, under Articles 28 and 29 of the Tax Law, of the services
of baling garbage and arranging for its shipment out of state by contract truckers.
A client of Petitioner is contemplating going into business whereby it will receive garbage
from local carting companies, bale the garbage and then ship it out of state by means of contract
truckers. The client will charge a fee to the local carting companies on a per ton basis. The client will
then pay the contract truckers on a per ton basis to transport and dispose of the garbage out of state.
Petitioner has not indicated that any of the garbage consists of materials which will be recycled.
Section 1105(c)(5) of the Tax Law imposes a tax upon the services of maintaining, servicing
or repairing real property. Regulation section 527.7(a) provides that the services of trash and garbage
removal are included within the phrase "maintaining, servicing or repairing real property" and are
subject to tax under section 1105(c)(5). Should Petitioner's client arrange with a property owner or
occupant for the hauling of garbage from such person's premises, the charges for such services would
be subject to tax. Cecos International, Inc. v State Tax Commission, 71 NY2d 934 (1988). However,
the services of arranging for the transportation and disposal without further treatment of trash and
garbage, after its removal from real property by a trash hauler, would not itself constitute maintaining
servicing or repairing real property and would not be subject to tax under section 1105(c)(5).
Section 1105(c)(2) of the Tax Law imposes a tax upon the services of [p]roducing,
fabricating, processing, printing or imprinting tangible personal property performed for a person who
directly or indirectly furnishes the tangible personal property, not purchased by him for resale, upon
which such services are performed.
"When treatment [of waste] is required, a sales tax can be imposed pursuant to Tax Law §
1105(c)(2), which allows a tax upon the receipts from the sale of the service of "processing * * *
tangible personal property, performed for a person who directly or indirectly furnishes the tangible
personal property * * * upon which services are performed" (Tax Law § 1105[c][2])". Cecos, 71
NY2d at 937.
There is no requirement in section 1105(c)(2) that the property be returned to its owner after
processing. "Neither the text of the statute nor the language of the regulation, however, so limits the
definition of "processing." Inasmuch as petitioner treated the waste and the cost of treating it was
TP-9 (9/88)

-2­
TSB-A-89 (18)S
Sales Tax
July 17, 1989

passed on to the customer, "processing for the owner" resulted and the transaction was subject to
taxation whether the property was returned to the customer or not." Cecos, 71 NY2d at 937.
Thus, the service of baling waste to make it suitable for transportation and disposal qualifies
as the processing of such waste within the meaning of section 1105(c)(2) of the Tax Law. When
Petitioner's client performs such services, the client is performing a service taxable under section
1105(c)(2) of the Tax Law. Therefore, Petitioner's client is required to charge and collect sales tax
on its per ton fee for bailing and transporting trash and garbage to the out of state disposal dump.

DATED: July 17, 1989

s/FRANK J. PUCCIA
Director
Technical Services Bureau

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