Is hauling waste water and sludge from a customer's site to a disposal plant a taxable real-property service, or a nontaxable transportation service?

Plain-English summary

Ecologics Management, Inc. hauls liquid waste — waste water and sludge (a mix of 96%–98% water and 2%–4% solids) for the businesses that generate it. Its customers include municipalities, food-processing plants, and landfills producing leachate. Ecologics is hired (usually on an annual contract) to pick the waste up at the generator's site and truck it to a disposal site chosen by the generator, generally a municipal sewage treatment plant. Ecologics never takes title to the waste, doesn't treat or alter it, pays no tipping fees (the generator does), and uses ordinary tractor-trailers that could just as easily haul milk or fuel. It asked whether this hauling is a taxable service under Tax Law § 1105(c)(5).

The Department held the service is taxable.

• Removing waste from a customer's property is a taxable real-property service. Section 1105(c)(5) taxes "maintaining, servicing or repairing real property" and specifically includes trash removal. Hauling the waste off the generator's site fits that description.
• It doesn't matter that this is "transportation." The courts have held that the transportation cost of moving industrial waste is not a nontaxable transportation service — it is taxable trash removal. In Rochester Gas & Electric Corp. v. State Tax Commn. (fly ash from power generation) and Cecos International, Inc. v. State Tax Commn. (chemical-waste landfill), independent haulers moved waste from where it was generated to a disposal site, and the receipts were taxed under § 1105(c)(5). It makes no difference that the waste was an industrial by-product.
• Sales to government are exempt. Where Ecologics performs the service for governmental agencies, those sales are exempt under Tax Law § 1116(a)(1), (2) and (3).

What this means for you

"We just transport it" is not a tax shield

If your charge is for taking waste off a customer's real property, New York treats it as taxable trash removal even when the physical act is driving a truck. Not taking title, not paying the dump, and using general-purpose trucks don't change the result — the taxable event is servicing the customer's real property.

Recyclable waste and out-of-state disposal don't help

The same rule reaches material headed for recycling or a plant in another state (see the companion opinion issued the same day to a solvent recycler, TSB-A-90(20)S). What controls is that you removed material from real property located in New York.

Government customers are the real exception

Sales of the hauling service to governmental agencies — the United States, New York State, and their agencies and political subdivisions — are exempt under § 1116(a). Keep documentation showing the customer's exempt status.

Common questions

Q: We never own the waste and pay no dump fees — is our charge still taxable?
A: Yes. The taxable event is removing waste from the customer's real property under § 1105(c)(5); title and tipping fees are irrelevant.

Q: Does it matter that our trucks are ordinary tankers, not special waste equipment?
A: No. The Department looked at what the service accomplishes — removing waste from real property — not the type of equipment.

Q: Are any of these charges exempt?
A: Yes — charges to governmental agencies are exempt under § 1116(a)(1), (2) and (3).

Citations and references

Statutes and regulations:

• Tax Law § 1105(c)(5) — tax on maintaining, servicing or repairing real property, including trash removal
• Tax Law § 1116(a)(1), (2), (3) — exemption for sales to the United States, New York State, and their agencies/subdivisions

Cited authority:

• Rochester Gas & Electric Corp. v. State Tax Commn., 126 AD2d 238, aff'd 71 NY2d 931 — transportation of fly ash taxable as trash removal
• Cecos International, Inc. v. State Tax Commn., 126 AD2d 884, aff'd 71 NY2d 934 — transportation of chemical waste taxable as trash removal

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_21s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-90(21)S
Sales Tax
April 16, 1990

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S900110A

On January 10, 1990 a Petition for Advisory Opinion was received from Ecologics
Management Inc., 55 Mushroom Blvd., Rochester, New York 14623.
The issue raised is whether Petitioner, Ecologics Management, Inc.'s, service of hauling
waste water and sludge for its customers is subject to sales tax under Section 1105(c)(5) of the Tax
Law.
Petitioner is contracted, usually on an annual basis, by the generators of liquid waste to haul
the product from the generator site to the disposal site, generally a municipal sewage treatment plant.
The liquid waste consists of water and sludge which is a mixture of 96% to 98% water and 2% to
4% solids.
Petitioner's customers include municipalities, food processing plants, landfills which produce
leachate water, and any others who produce biological waste water. At no time does title to the
product pass from the generator to Petitioner, nor does the Petitioner pay the disposal site any fees.
The Petitioner is directed in all cases as to which site for disposal has been chosen by the generator.
The equipment used by the Petitioner is tractors and trailers. The equipment is not special
and can be utilized to haul a variety of products such as drinking water, milk, fuel or any type of
liquid.
Petitioner has no financial arrangements with any disposal site and does not pay tipping fees,
which in all cases is the responsibility of the generator. Petitioner in no way, treats or alters the
product which is being transported. Tests and suitability of the material is performed by the
generators to the satisfaction of the New York State Department of Environmental Conservation and
the disposal facility.
Section 1105(c)(5) of the Tax Law imposes a sales tax upon the receipts from "Maintaining,
servicing or repairing real property, property or land... whether such services are performed in or
outside of a building...." Such section specifically includes "trash removal from buildings" as a
service subject to tax.
The Courts have held that all aspects of trash removal are subject to tax and that it does not
matter whether or not the trash was generated as a result of an industrial process. (See: Rochester
Gas and Electric Corporation v. State Tax Commn., 126 AD 2d 238, affd 71 NY 2d 931 and Cecos
International, Inc. v. State Tax Commn., 126 AD 2d 884, affd 71 NY 2d 934)
Both Rochester and Cecos involved the taxability of the transportation costs arising from the
transportation of industrial waste products. In Rochester, the taxpayer was an energy producer which
generated fly ash as a waste product of its energy production. In Cecos the company operated a
landfill and waste treatment facility for the disposal of chemical waste. Both companies used
TP-9 (9/88)

-2­
TSB-A-90(21)S
Sales Tax
April 16, 1990

independent haulers to transport the waste from the waste generation location to the waste disposal
location.
In these cases, the courts held that the transportation costs were not a nontaxable
transportation service but were taxable pursuant to Tax Law Section 1105(c)(5) as "trash removal
from buildings."
Accordingly, Petitioner's service of hauling waste water and sludge to treatment plants is
subject to tax. However, Petitioner's sales of such services to governmental agencies are exempt
pursuant to Sections 1116(a)(1), (2) and (3) of the Tax Law.

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.