Can a trash-removal company buy the containers it rents to customers tax-free as a purchase for resale?

Plain-English summary

SSC Corp., a trash-removal business, asked whether it may buy the trash containers it supplies to customers for resale — i.e., tax-free — because it rents (or sells) those containers to the customers. Customers can either buy or rent a container; the rental fee doesn't depend on how often the trash is picked up, tipping fees, or other charges, and the container charge is separately stated on the customer's bill.

The Department's answer, under Tax Law § 1105(a) and the resale rules:

• The resale exclusion requires exclusive resale use. Section 1105(a) taxes retail sales of tangible personal property, but property bought exclusively for resale — including for rental — is excluded under § 1101(b)(4) and Regulations §§ 526.6(c)(1) and 526.7. "Sale" includes rentals and leases (§ 1101(b)(5)).
• A jointly used container isn't purchased for resale. Trash removal bundles property and service, so the transaction is viewed as a whole. The customer can't really get the container apart from the service, and both parties use the container — the hauler uses it to collect and remove the trash, and the customer uses it to store trash awaiting pickup. Because the container is not used exclusively by the customer, it fails the exclusivity test for the resale exclusion (citing American Locker v. Gallman, Albany Calcium Light v. State Tax Commission, U-Need-A-Roll-Off Corp. v. State Tax Commission, and Waste Management of New York).
• Result: SSC Corp. may not purchase its trash containers for resale — separately stating the container charge doesn't change that.

What this means for you

Waste haulers and dumpster-rental operators

If you supply containers as part of a trash-removal service and you also use those containers yourself to collect and haul the waste, you generally cannot buy them exempt as a purchase for resale. You owe sales or use tax on the containers when you buy them.

Separately stating a rental charge doesn't rescue the exclusion

Breaking out a container "rental" line on the invoice does not make the container a purchase for resale. The Department looks at who actually uses the property, not how the bill is itemized.

The dividing line is "exclusive" use

The resale exclusion turns on whether the property is bought exclusively to transfer to the customer. When both you and the customer use the same item, that exclusivity is missing and the exclusion is lost.

Accountants and tax professionals

The opinion applies the American Locker / U-Need-A-Roll-Off / Waste Management line: in a bundled property-and-service transaction with joint use of the container, there is no resale, so the hauler is the taxable end user of the containers.

Common questions

Q: Can a trash hauler buy dumpsters or containers tax-free for resale?
A: Not when the hauler also uses the containers to collect and remove the trash. The joint use defeats the exclusive-resale requirement, so the purchase is taxable.

Q: We separately state a container rental on our invoices — does that help?
A: No. Separately stating the charge doesn't convert a jointly used container into a purchase for resale.

Q: What's the underlying rule?
A: Property qualifies for the resale exclusion only if bought exclusively for resale (which includes renting it to customers). Shared use by the provider and the customer breaks that exclusivity.

Q: So who pays the tax on the containers?
A: The trash-removal company does, as the taxable purchaser/user of the containers.

Citations and references

Statutes and regulations:

• Tax Law § 1105(a) (tax on receipts from every retail sale of tangible personal property)
• Tax Law § 1101(b)(4)(i) (retail sale; excludes property purchased for resale as such)
• Tax Law § 1101(b)(5) (sale includes rentals, leases, and licenses to use)
• Sales and Use Tax Regulations §§ 526.6(c)(1), 526.7 (property purchased for resale)
• American Locker Co. v. Gallman, 32 N.Y.2d 175; Albany Calcium Light Co. v. State Tax Commission, 44 N.Y.2d 986; U-Need-A-Roll-Off Corp. v. State Tax Commission, 67 N.Y.2d 690; Waste Management of New York, Inc., Dec. Tax App. Trib., Mar. 21, 1991

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_36s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (36) S
Sales Tax
May 5, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920127B

On January 27, 1992, a Petition for Advisory Opinion was received from SSC Corp., 971
Waverly Avenue, Hallsville N.Y. 11742.
The issue raised by Petitioner, SSC Corp., is whether it may purchase for resale trash
containers which are used in its trash removal service.
Petitioner is in the business of providing trash removal service. Petitioner's customers have
the option to purchase or rent a trash container. The rental fee for the container is not dependent upon
the frequency of service, tipping fees, or any other charges made by Petitioner. Petitioner's charges
for the containers are separately stated on its billing to its customers.
Section l105(a) imposes a tax upon "[T]he receipts from every sale of tangible personal
property. . ."
Section 1101(b)(4)(i) defines, in part, a retail sale as "A sale of tangible personal property
to any person for any purpose, other than (A) for resale as such,.
Section 1101(b)(5) of the Tax Law defines a sale as: "[A]ny transfer of title or possession or
both, exchange or barter, rental, lease or license to use or consume, conditional or otherwise, in any
manner or by any means whatsoever for a consideration, or any agreement therefor, including the
rendering of any service, taxable under this article, for a consideration or any agreement therefor."
Section 526.7 of the Sales and Use Tax Regulations provides in part that:
(1) The words sale, selling or purchase mean any transaction in which there
is a transfer of title or possession, or both, of tangible personal property for a
consideration.
(2) Among the transactions included in the words, sale, selling or purchase
are exchanges, barters, rentals, leases or licenses to use or consume tangible personal
property. (Emphasis supplied)
Section 526.6(c)(1) of the Sales and Use Tax Regulations provides that:
Where a person, in the course of his business operations, purchases tangible personal
property or services which he intends to sell, either in the form in which purchased,
or as a component part of other property of services, the property or services which
he has purchased will be considered as purchased for resale, and therefore not subject
to tax until he has transferred the property to his customer.
TP-9 (9/88)

-2­
TSB-A-92 (36) S
Sales Tax
May 5, 1992

Section 1105(a) of the Tax Law imposes a sales tax on "receipts from every retail sale of
tangible personal property". However, where a purchaser acquires such property for the purposes of
resale, which includes rental of the property, the purchase is exempt from sales tax in accordance
with Section 1101(b)(4) of the Tax Law and Sections 526.6(c)(1) and 526.7(a)(1) of the Sales and
Use Tax Regulations.
In connection with trash removal where the sale of property and service is sold jointly, the
transaction must be viewed in its entirety. Thus in the instant case, for all practical purposes, the
purchaser of the trash removal service cannot purchase the container separately from the service even
though a separate price is shown on the invoice to its purchaser. Indeed it is Petitioner who is using
the container to facilitate the removal of trash from its customer's premises as well as the customer
who is using the container to store its trash while waiting for Petitioner to remove it. In situations
where there is joint use of tangible personal property by the provider of the property and the receiver
of the property, a resale of such property will not be found since it will not meet the exclusive test
required for purchases to meet the resale exclusion. (See: American Locker v. Gallman, 32 N.Y.2d
175; Albany Calcium Light v State Tax Commission, 44 N.Y.2d 986; U-Need-A-Roll-Off Corp. v.
State Tax Commission, 67 N.Y.2d 690.) Therefore Petitioner may not purchase its trash containers
for resale. Waste Management of New York, Inc., Dec Tax App Trib, March 21, 1991.

DATED: May 5, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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