Can a trash-removal company buy portable compactors tax-free for resale when it supplies them to customers as part of its trash-removal service?

Plain-English summary

Long Island Rubbish Removal West Nassau Corp. buys portable compactors and places them at its supermarket customers, charging each customer a flat $200/month "rental," separately stated on the invoice and unchanged regardless of pickup frequency. It asked whether it may buy the compactors tax-free for resale (treating the monthly charge as a taxable rental) rather than paying sales tax when it buys them.

The Department said no — the compactors are not purchased for resale, so Long Island Rubbish must pay sales tax when it buys them. Although renting property to customers can normally qualify as a resale, in a bundled trash-removal transaction the deal must be viewed in its entirety. The customer cannot buy the compactors separately from the service even though a separate price is shown. And there is joint use: the hauler uses the compactors to facilitate removing the trash, while the customer uses them to compact and store the trash until pickup. Where the provider and the customer both use the property, there is no resale, because the arrangement fails the exclusive-use test required for the resale exclusion (citing American Locker, Albany Calcium Light, U-Need-A-Roll-Off, Waste Management of New York, and SSC Corp., TSB-A-92(36)S). So the resale exclusion doesn't apply, and the hauler owes tax on its purchase of the compactors.

What this means for you

Trash haulers and equipment-based service providers

If you supply equipment to customers as part of a bundled service you perform, you probably can't buy that equipment tax-free for resale — even if you separately state a "rental" charge. The resale exclusion for rentals requires that the customer have exclusive use; when you and the customer both use the item to accomplish your service, it's not a resale, and you pay tax when you buy the equipment.

Separately stating a "rental" doesn't change the substance

Long Island Rubbish itemized a $200/month rental, but the Department looked at the whole transaction: the customer couldn't get the compactor apart from the trash service, and both parties used it. Invoicing form doesn't create a resale where the exclusive-use test isn't met.

Accountants and tax professionals

The controlling concept is the exclusive-use requirement for the resale exclusion under § 1101(b)(4)(i) and Regs. §§ 526.7 and 526.6(c)(1). Joint use by provider and customer defeats resale — a well-established line running through 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), Waste Management of New York (585 N.Y.S.2d 883), and SSC Corp., TSB-A-92(36)S.

Common questions

Q: Can I buy equipment tax-free for resale if I "rent" it to customers?
A: Only if the customer has exclusive use of it. If you also use the equipment to perform your service, it's joint use, the resale exclusion doesn't apply, and you owe tax when you buy the equipment.

Q: Does separately stating a rental charge on the invoice make it a resale?
A: No. The Department viewed the bundled trash-removal transaction as a whole. The customer couldn't buy the compactor apart from the service, and both parties used it, so it wasn't a resale despite the separate line item.

Q: Why does "joint use" matter?
A: The resale exclusion requires the customer to have exclusive use of the property. When both the provider and the customer use it, that exclusive-use test fails, so there is no resale.

Q: Can another taxpayer rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described; another taxpayer with different facts cannot rely on it.

Citations and references

Statutes and authorities:

• Tax Law § 1105(a) (tax on receipts from retail sales of tangible personal property)
• Tax Law § 1101(b)(4)(i) (definition of retail sale; resale exclusion)
• Tax Law § 1101(b)(5) (definition of "sale," including rental and lease)
• Sales and Use Tax Regulations § 526.7 (meaning of sale, selling, purchase)
• Sales and Use Tax Regulations § 526.6(c)(1) (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., 585 N.Y.S.2d 883; SSC Corp., Adv Op Comm T&F, May 5, 1992, TSB-A-92(36)S

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_73s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (73) S
Sales Tax
October 26, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920630A

On June 30, 1992 a Petition for Advisory Opinion was received from Long Island Rubbish
Removal West Nassau Corp., 177 Buffalo Avenue, Freeport, New York 11520.
The issue raised by Petitioner, Long Island Rubbish Removal West Nassau Corp., is whether
portable compactors purchased by it and supplied to its customers in conjunction with a trash
removal service are purchased for resale.
Petitioner purchased portable compactors for placement at its supermarket customers.
Petitioner passed the cost of such compactors on to its customers through a monthly rental charge
of $200.00 per customer per location. Petitioner separately states the rental charges on an invoice
to a customer. The rental charge does not vary from month to month or from customer to customer
regardless of the frequency of pickups or the identity of the customer.
Section 1105(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:
When 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
TP-9 (9/88)

-2­
TSB-A-92 (73) S
Sales Tax
October 26, 1992

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.
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 portable compactors separately from the
service even though a separate price if shown on the invoice to its purchaser. Indeed it is Petitioner
who is using the portable compactors to facilitate the removal of trash from its customer's premises
as well as the customer who is using the portable compactors to compact 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 portable compactors for resale. Waste Management of New York.
Inc. 585 NYS2d 883, SSC Corp., Adv Op Comm T & F, May 5, 1992, TSB-A-92(36)S.

DATED: October 26, 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.