Is a toxic-waste cleanup company's service taxable, and are the equipment and supplies it uses during a cleanup subject to sales tax?

Subject

Whether Petitioner's client's services cleaning up toxic waste spills and sites are subject to sales tax, and whether purchases used in providing such services are subject to sales tax.

What this means for you

A New York environmental cleanup company responds to toxic waste spills -- from vehicle accidents, loading/unloading mishaps, or industrial plant releases -- billed on a time-and-materials basis. Under state Department of Environmental Conservation rules, the spilled waste legally remains the property of whoever generated it. The company brings its own booms, vacuum cleaners, and earth-moving equipment to the site, spreads and collects absorbents, and packages everything into drums; sometimes it delivers the containerized waste to a location the customer specifies or straight to a disposal site, and sometimes the customer takes possession and handles disposal itself. The absorbents, containers, and the company's own disposable protective uniforms can't be reused and are thrown away after each job.

New York taxes both "processing" services performed on someone else's property and services that maintain or repair real property -- and toxic waste cleanup and processing falls squarely within both categories, so the company must collect sales tax on its cleanup charges. There's no special exemption in the sales tax law for equipment used specifically to clean up toxic waste, so the company's own booms, vacuum cleaners, and earth-moving equipment are fully taxable purchases or rentals, the same as any other business equipment. The drums, absorbents, and packaging materials are trickier: normally the company is treated as the final consumer of those supplies (since it isn't reselling them to the customer), making its own purchase of them taxable -- UNLESS the customer keeps legal ownership and responsibility for the containerized waste, in which case those same containers, absorbents, and packaging are considered actually transferred to the customer, and the company can buy them tax-free for resale. Either way, the company's own protective gear and disposable uniforms are never treated as transferred to the customer along with the service, so those stay taxable no matter who ends up owning the waste.

Q&A

Q: We run a toxic-waste or hazardous-spill cleanup business -- is our cleanup service itself subject to sales tax?
A: Yes, per this opinion -- cleaning up and processing toxic waste is taxable under Tax Law §§ 1105(c)(2) and (c)(5).

Q: Do we owe sales tax on the equipment (booms, vacuums, earth-moving machinery) we buy or rent to perform cleanups?
A: Yes, per this opinion -- there's no exemption in the sales tax law specifically for toxic-waste cleanup equipment, so those purchases/rentals are fully taxable.

Q: What about the drums, absorbents, and packaging materials we use to contain the waste?
A: It depends, per this opinion -- if your customer retains legal ownership and responsibility for the waste, those items are considered transferred to the customer and you can buy them tax-free for resale. If you (the cleanup company) instead take title to the containerized waste, you're the ultimate consumer of those supplies, and your own purchase of them is taxable.

Q: Are our disposable protective uniforms and protective gear ever exempt as resold supplies?
A: No, per this opinion -- protective gear and disposable uniforms are never treated as transferred along with the cleanup service, so they remain taxable regardless of who ends up owning the waste.

Q: Can another environmental cleanup company rely on this opinion?
A: No. This advisory opinion binds the Department only as to the petitioner and the facts described here; another taxpayer cannot rely on it, though it was later cited as precedent in a subsequent Department opinion addressing a similarly structured environmental-cleanup business.

Citations

• Tax Law § 1101(b)(4)(i) -- excludes from "retail sale" (i.e., permits resale purchase) property later transferred to the purchaser of a taxable service in conjunction with performing that service.
• Tax Law § 1105(c)(2) -- imposes tax on processing, fabricating, or producing tangible personal property furnished by the customer.
• Tax Law § 1105(c)(5) -- imposes tax on maintaining, servicing, or repairing real property, other than a genuine capital improvement.
• Cecos International, Inc. v. State Tax Commission, 126 A.D.2d 884, aff'd 71 N.Y.2d 934 -- held that toxic-waste cleanup and processing services are subject to New York sales tax.
• Marine Pollution Control, Adv. Op. Comm. T&F, TSB-A-91(45)S -- held that a cleanup company is the ultimate consumer (not reseller) of containment supplies it uses and disposes of.
• Chem-Nuclear Systems, Inc., TSB-D-89(2)S -- held that containment supplies transferred to a customer who retains ownership and legal responsibility for waste may be purchased for resale.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a93_54s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (54)S
Sales Tax
October 5, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S930614A

On June 14, 1993 a Petition for Advisory Opinion was received from Morton L. Coren, P.C.,
638 Meadow Court, Westbury, New York 11590.
The issue raised by Petitioner, Morton L. Coren, is whether Petitioner's client's services
cleaning up toxic waste spills and sites are subject to sales tax and whether purchases used in
providing such services are subject to sales tax.
Petitioner's client operates a business that cleans up toxic waste spills and sites. All work is
performed within New York State. The toxic waste spills are generated by various events. The
following are examples of such events:
1)

A vehicle that is carrying toxic materials is involved in an accident that
causes the release of toxic materials.

2)

A vessel or motor vehicle releases toxic chemicals into the environment
during the process of loading or unloading.

3)

An industrial plant releases toxic chemicals into the environment during
operation of the facility. The release may be the result of normal operations
or caused by an accident.

Petitioner's client contracts to perform the clean up of such spills or sites. The work is
performed on a time and material basis.
When a spill occurs, Petitioner's client is contacted and makes a preliminary evaluation of
the situation and sends out its own equipment, personnel and supplies to the site. The personnel use
the supplies and equipment to cure the problem. Usually absorbents are spread and collected and
placed in containers. The New York State Department of Environmental Conservation determines
the procedures to be followed. Petitioner's client never assumes title to the containerized waste. The
law requires that the wastes remain the property of the generator of the waste. These containers are
either delivered to a location specified by the customer or directly delivered to a disposal site. Many
customers take possession of the containerized waste and make their own disposal arrangements.
The absorbents and containers cannot be reused by Petitioner's client. In addition, the disposable
uniforms used by the client's employees become contaminated and must be disposed of.
Petitioner's client provides equipment and supplies to be used during the clean up of toxic
wastes. The equipment consists of booms that are used to contain oil spills, vacuum cleaners used
to remove oil from water, and earth moving equipment to remove contaminated soil. The supplies

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TSB-A-93 (54)S
Sales Tax
October 5, 1993
include disposable uniforms and other protective items, absorbent materials, and packaging materials
such as drums which are used to contain the absorbents and waste.
Section 1101(b)(4)(i) of the Tax Law provides, in part, that:
A sale of tangible personal property to any person for any purpose, other than (A) or
resale as such or as a physical component part of tangible personal property, or (B)
for use by that person in performing the services subject to tax under paragraphs (1),
(2), (3), (5), (7) and (8) of subdivision (c) of section eleven hundred five where the
property so sold becomes a physical component part of the property upon which the
services are performed or where the property so sold is later actually transferred to
the purchaser of the service in conjunction with the performance of the service
subject to tax (Emphasis Supplied)
Section 1105 of the Tax Law imposes sales tax upon:
(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
*

*

*

(c) The receipts from every sale, except for resale, of the following services:
*
*
*
(2) Producing, 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.
(5) Maintaining, servicing or repairing real property, property or land, as such terms
are defined in the real property tax law, whether the services are performed in or
outside of a building, as distinguished from adding to or improving such real
property, property or land, by a capital improvement as such term capital
improvement is defined in paragraph nine of subdivision (b) of section eleven
hundred one of this chapter, but excluding services rendered by an individual who
is not in a regular trade or business offering his services to the public.
The service of cleaning up toxic waste and processing it is subject to the sales tax imposed
under Sections 1105(c)(2) and (c)(5) of the Tax Law. (See: Cecos International, Inc. v. State Tax
Commission,126 A.D. 2d 884, affd 71 N.Y.934) Therefore, Petitioner's client must collect sales tax
on such services.

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TSB-A-93 (54)S
Sales Tax
October 5, 1993
There are no exemptions in the Sales Tax Law for the purchasing or leasing of equipment
used to clean up toxic wastes. Therefore, if Petitioner's client uses equipment such as booms,
vacuum cleaners, and earth moving equipment in providing its services, it would be required to pay
sales tax on the purchase or rental of such equipment.
Petitioner's client is not considered to be reselling drums, absorbents or packaging material
to its customers, but is considered to be the ultimate consumer of such items and thus the purchase
of such items are subject to sales tax. (See: Marine Pollution Control TSB-A-91(45)S.) However,
in those instances where petitioner's client's customers retain ownership and legal responsibility for
the toxic waste, the drums, absorbents, and packaging would be considered to be actually transferred
to such customer and as such may be purchased for resale by Petitioner's client. (See: Chem-Nuclear
Systems, Inc. TSB-D-89(2)S.) The items used by Petitioners client such as protective gear and
disposable uniforms are not transferred along with the service and are thus subject to sales tax
whether or not Petitioner's client's customers retain ownership of the waste product.

DATED: October 5, 1993

/s/
PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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