Is a solvent recycler's charge for removing recyclable materials from a New York site taxable, even though the materials are recycled and processed out of state?

Plain-English summary

Marisol, Inc. is a solvent recycler. It picks up recyclable material from customer sites in New York — using its own trucks or subcontracted haulers — and transports it to its processing facilities in New Jersey, where distillation, fractionation, blending, filtering, and drying recover a usable product that Marisol then sells. It charges its customers for the service of removing the solvents from their property and asked whether that charge is subject to New York sales tax.

The Department held the charge is taxable.

• Removing material from a customer's real property is a taxable service. Tax Law § 1105(c)(5) taxes "maintaining, servicing or repairing real property," and regulation 20 NYCRR § 527.7(b)(2) provides that trash, garbage, or debris removal is taxable whether from inside or outside a building, a construction site, or vacant land. Marisol's charge to remove material from the customer's property falls within that section.
• Recyclability doesn't matter. Because the tax is imposed on servicing real property, it is immaterial that the material being picked up is recyclable rather than "trash."
• Out-of-state delivery doesn't matter. It is likewise immaterial that the recovered material is delivered to New Jersey. When servicing real property, it is the location of the real property — here, New York — that controls the tax rate.

What this means for you

Labeling a pickup "recycling" doesn't make it tax-free

New York looks at what your charge is for. If you are paid to remove material from a customer's real property, that is a taxable service under § 1105(c)(5) — even if what you haul away is valuable feedstock you clean up and resell, not garbage.

Where the property is sets the tax, not where the material ends up

Because this is a service to real property, the tax rate is fixed by the location of the customer's property in New York. Trucking the material to a plant in another state for processing doesn't remove the transaction from New York sales tax. (Compare the companion opinion issued the same day, TSB-A-90(21)S, taxing a waste-water hauler on the same reasoning.)

The resale of the recovered product is a separate question

This opinion addresses only the removal service. What Marisol later does with the recovered solvent — selling a finished product — is a distinct transaction analyzed on its own facts.

Common questions

Q: We recycle what we pick up — is the pickup charge still taxable?
A: Yes. The taxable event is removing material from the customer's real property under § 1105(c)(5); the fact that the material is recyclable is irrelevant.

Q: We process everything out of state. Does New York still tax the pickup?
A: Yes. For a service to real property, the location of the property controls, so a New York pickup is taxed at the New York rate regardless of where processing happens.

Q: Which rate applies?
A: The state and local rate in effect where the customer's real property is located.

Citations and references

Statutes and regulations:

• Tax Law § 1105(c)(5) — tax on maintaining, servicing or repairing real property
• 20 NYCRR § 527.7(b)(2) — trash, garbage, or debris removal is taxable whether from inside or outside a building, construction site, or vacant land

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1990.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a90_20s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-90 (20) S
Sales Tax
April 16, 1990

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S891205D

On December 5, 1989, a Petition for Advisory Opinion was received from Marisol Inc., 125
Factory Lane, Middlesex, New Jersey 08846.
The issue raised by Petitioner, Marisol, Inc., is whether the service of removing certain
materials from New York to New Jersey and processing such materials is subject to sales tax.
Petitioner is a solvent recycler. It picks up, either in its own trucks or trucks subcontracted
to it, only recycleable materials from sites in New York State. It transports these materials to its
processing facilities in New Jersey. Petitioner uses methods such as distillation, fractionation,
blending, filtering and drying to recover from said materials a product which it then sells. Petitioner
charges its customers for the service of removing the solvents from their property.
Section 1105(c)(5) of the Tax Law imposes a tax upon the receipts from the services of
"maintaining, servicing or repairing real property...." Section 527.7(b)(2) of the Sales and Use Tax
Regulations states that: services of trash, garbage or debris removal are taxable, whether from inside
or outside of a building, a construction site or vacant land."
Petitioner's charge is for removing certain material from the real property of it's customers
and therefore such charge falls within the scope of Section 1105(c)(5) of the Tax Law. Since the tax
being imposed is upon servicing real property, it is immaterial that the material being picked up is
recyclable or that it is delivered outside of New York State. When servicing real property, it is the
location of the real property that controls the tax rate.

DATED: April 16, 1990

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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