Are portable-toilet rental and servicing charges subject to South Carolina sales and use tax?

Plain-English summary

The South Carolina Department of Revenue ruled that temporarily providing a portable toilet for a fee was a rental of tangible personal property, not a nontaxable waste-removal or sanitation service. The customer's true object was use of the toilet; routine waste removal, chemicals, and toilet-paper replacement were incidental.

Both mandatory and optional servicing charges made with the rental entered taxable gross proceeds or sales price. The Department reasoned that the provider would not receive those servicing fees but for the toilet rental.

A specific statute then exempted 70% of the total portable-toilet rental charge. Under the 2009 ruling, the provider reported all rental and servicing charges but deducted 70%, leaving 30% subject to sales and use tax.

What this means for you

Portable-toilet rental companies

Do not split routine service from the equipment rental merely because it is separately stated or optional. The ruling included both in the same total before applying the partial exemption.

Contractors and event operators

The transaction was treated as renting equipment even though regular cleaning and waste disposal were essential parts of the arrangement.

Accountants and tax professionals

The ruling's return-line instructions and 70/30 calculation reflect the statute and forms in effect when issued. Confirm that the exemption and reporting method remain current.

Common questions

Q: Was the transaction a service or a rental?
A: A rental. The customer received temporary possession and use of tangible personal property for consideration.

Q: Were routine servicing fees taxable?
A: Yes. Waste removal, chemical replacement, and toilet-paper replacement were incidental to and part of the rental charge.

Q: What about optional extra servicing?
A: It was also included in gross proceeds when charged in conjunction with the rental.

Q: Was the entire charge taxed?
A: No. The ruling applied a statutory 70% exemption, leaving 30% of the combined rental and service charges taxable.

Citations and references

• S.C. Code §§ 12-36-910 and 12-36-1310 (sales and use tax)
• S.C. Code §§ 12-36-60 and 12-36-100 (tangible personal property and rentals as sales)
• S.C. Code §§ 12-36-90 and 12-36-130 (gross proceeds and sales price include service costs)
• S.C. Code § 12-36-2120(62) (70% exemption described in the ruling)
• Meyers Arnold, Inc. v. South Carolina Tax Commission, 285 S.C. 303, 328 S.E.2d 920 (1985) (related service fees included in gross proceeds)
• SC Revenue Advisory Bulletin 01-5 (superseded by this ruling)

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR09-5.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 125, Columbia, South Carolina 29214

SC REVENUE RULING #09-5

SUBJECT:

Rental of Portable Toilets
(Sales and Use Tax)

EFFECTIVE DATE:

Applies to all open periods under the statute.

SUPERSEDES:

SC Revenue Advisory Bulletin #01-5 and all previous advisory
opinions and any oral directives in conflict herewith.

REFERENCES:

S. C. Code Ann. Section 12-36-910 (2000, Supp. 2008)
S. C. Code Ann. Section 12-36-1310 (2000; Supp 2008)
S. C. Code Ann. Section 12-36-60 (2000)
S. C. Code Ann. Section 12-36-100 (2000)
S. C. Code Ann. Section 12-36-90 (2000; Supp 2008)
S. C. Code Ann. Section 12-36-130 (2000; Supp 2008)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000)
S. C. Code Ann. Section 1-23-10(4) (Supp. 2008)
SC Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the
public and to Department personnel. It is an advisory opinion
issued to apply principles of tax law to a set of facts or general
category of taxpayers. It is the Department’s position until
superseded or modified by a change in statute, regulation, court
decision, or another Departmental advisory opinion.

Question:
Is a charge by a business for temporarily providing portable toilets to another person a
rental of tangible personal property subject to the sales and use tax or is it a service not
subject to the sales and use tax?
Conclusion:
A charge by a business for temporarily providing portable toilets to another person
constitutes a rental of tangible personal property subject to the sales and use tax since
such is the transfer of tangible personal property for a consideration.

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Any additional charges for servicing the toilets (whether optional or mandatory) that are
made in conjunction with, or as part of the rental of, portable toilets are includable in
"gross proceeds of sales" or "sales price", and, therefore, subject to the tax.
However, since seventy percent of the total charges (rental fees and servicing charges and
fees) for the rental or lease of portable toilets are exempt from the sales and use tax under
Code Section 12-36-2120(62), only thirty percent of the total charges (rental fees and
servicing charges and fees) for the rental or lease of portable toilets are subject to the
sales and use tax.
Note: Retailers renting or leasing portable toilets should report all charges (rental fees
and servicing charges and fees) for the rental or lease of portable toilets on Line 1 of the
“Sales and Use Tax Worksheet” on the sales and use tax return and report a deduction of
seventy percent of all charges (rental fees and servicing charges and fees) for the rental or
lease of portable toilets on Line 4 of the “Sales and Use Tax Worksheet.” Reporting in
this manner will result in the retailer only remitting sales tax with respect to thirty percent
of all charges (rental fees and servicing charges and fees) for the rental or lease of
portable toilets.
Facts:
From time to time, contractors, businesses and events need additional restroom facilities.
As such, other businesses provide, under oral or written contracts, portable toilets to such
contractors, businesses and events. The necessary servicing of the toilet will also be
provided as part of the contract and this typically consists of regular and routine removal
and disposal of the waste and the replacement of chemicals and toilet paper. At the
customer’s request, additional servicing of the toilet will also be provided for an
additional fee.
Discussion:
The first issue concerns whether or not persons providing portable toilets for a limited
period of time for a fee are renting of tangible personal property.
Code Section 12-36-910 imposes "a sales tax, equal to [six] 1 percent of gross proceeds of
sales, upon every person engaged ... within this State in the business of selling tangible
personal property at retail."
1

Code Section 12-36-1110, which increased the state sales and use tax rate from 5% to 6% on June 1,
2007, states:
Beginning June 1, 2007, an additional sales, use, and casual excise tax equal to one
percent is imposed on amounts taxable pursuant to this chapter, except that this additional
one percent tax does not apply to amounts taxed pursuant to Section 12-36-920(A), the
tax on accommodations for transients, nor does this additional tax apply to items subject
to a maximum sales and use tax pursuant to Section 12-36-2110 nor to the sale of
unprepared food which may be lawfully purchased with United States Department of
Agriculture food coupons. (Emphasis added.)

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Code Section 12-36-1310 imposes a “use tax … on the storage, use, or other consumption
in this State of tangible personal property purchased at retail for storage, use, or other
consumption in this State, at the rate of [six] 2 percent of the sales price of the property,
regardless of whether the retailer is or is not engaged in business in this State.”
The term “tangible personal property” is defined in Code Section 12-36-60, in part, to
mean:
personal property which may be seen, weighed, measured, felt, touched, or
which is in any other manner perceptible to the senses.”
The term “sale” is defined in Code Section 12-36-100 to mean:
any transfer, exchange, or barter, conditional or otherwise, of tangible
personal property for a consideration including:
(1) a transaction in which possession of tangible personal property
is transferred but the seller retains title as security for payment,
including installment and credit sales;
(2) a rental, lease, or other form of agreement;
(3) a license to use or consume; and
(4) a transfer of title or possession, or both. (Emphasis added.)
From time to time it is necessary to determine if the transaction is a sale or rental of
tangible personal property or the furnishing of a service. The so-called "true object" test
is generally used to delineate sales of services from sales of tangible personal property.
The "true object" test is best described in 9 Vanderbilt Law Review 231 (1956), wherein it
is stated:
The true test then is one of basic purpose of the buyer. When the product
of the service is not of value to anyone other than the purchaser, either
because of the confidential character of the product, or because it is
prepared to fit the purchaser's special need - a contract or will prepared by
a lawyer, or the accident investigation report prepared for an insurance
company - this fact is evidence tending to show that the service is the real
purpose of the contract. When the purpose of a contract is to produce an
article which is the true object of the agreement, the final transfer of the
product should be a sale, regardless of the fact that special skills and
knowledge go into its production. Under this analysis, printing work, done
on special order, and of significant value only to the particular customer, is
still a sale. The purchaser is interested in the product of the services of the
2

See footnote #1.

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printer, not in the services per se. Similarly, it would seem that contracts
for custom-produced articles, be they intrinsically valuable or not, should
be classified as sales when the product of the contract is transferred.
The Vanderbilt Law Review article, in quoting Snite v Department of Revenue, 398 Ill.
41, 74 N.E.2d. 877 (1947), also establishes the following general rule:
If the article sold has no value to the purchaser except as a result of
services rendered by the vendor, and the transfer of the article to the
purchaser is an actual and necessary part of the services rendered, then the
vendor is engaged in the business of rendering service, and not in the
business of selling at retail. If the article sold is the substance of the
transaction and the service rendered is merely incidental to and an
inseparable part of the transfer to the purchaser of the article sold, then the
vendor is engaged in the business of selling at retail, and the tax which he
pays ... [is measured by the total cost of article and services]. If the
service rendered in connection with an article does not enhance its value
and there is a fixed or ascertainable relation between the value of the
article and the value of the service rendered in connection therewith, then
the vendor is engaged in the business of selling at retail, and also engaged
in the business of furnishing service, and is subject to tax as to the one
business and tax exempt as to the other.
While the above quotes do not establish rigid rules, they do provide general guidance in
determining the purpose of a transaction, and are particularly helpful in addressing the
issues at hand.
Based on the above, businesses temporarily providing portable toilets to others for a fee
are renting tangible personal property since such constitutes the transfer of tangible
personal property for a consideration. See Code Section 12-36-60. In addition, the “true
object” of the transaction is the portable toilet and not the servicing of the toilet (regular
and routine removal and disposal of the waste and the replacement of chemicals and toilet
paper). Such servicing is incidental to the rental of the portable toilets.
Other states have reviewed this issue. North Carolina (Sales and Use Tax Bulletin 34-17)
and Virginia (Ruling of the Tax Commissioner 91-275) both consider the business of
providing portable toilets for a limited period of time for a fee a rental of tangible
personal property subject to the sales and use tax.
The next issue concerns the application of the tax to any charges for servicing the toilets.
The sales tax is imposed upon a retailer's "gross proceeds of sales" which is defined at
Code Section 12-36-90, in part, as:
... the value proceeding or accruing from the sale, lease, or rental of
tangible personal property... without any deduction for... the cost of
materials, labor, or service... [or] any other expenses....
4

The use tax is based upon the "sales price" of tangible personal property. The term "sales
price" is defined at Code Section 12-36-130, in part, as:
... the total amount for which tangible personal property is sold, without
any deduction for the cost of the property sold, the cost of the materials
used, labor or service cost, interest paid, losses, or any other expenses.
(1) The term includes:
(a) any services or transportation costs that are a part of the
sale, whether paid in money or otherwise;.…
In Meyers Arnold, Inc. v. South Carolina Tax Commission, 285 S.C. 303, 328 S.E.2d 920,
923 (1985), the Court of Appeals of South Carolina held the element of service involved
in a lay away sale was subject to tax as being part of the sale of tangible personal
property. The test used by the court was as follows:
... But for the lay away sales, Meyers Arnold would not receive the lay
away fees. The fees are obviously charged for the service rendered in
making lay away sales. For these reasons, this court holds the lay away
fees are part of the gross proceeds and subject to the sales tax.
Accordingly, the total amount charged in conjunction with the sale or purchase of
tangible personal property is subject to the tax.
With respect to the issue at hand, but for the rentals of the portable toilets, the person
providing the portable toilets would not receive fees for servicing the toilets.
In Commission Decision #90-38, the Commission held that charges for engraving
services, even though optional, were a part of the sale of plaques and trophies by the
retailer and includible in gross proceeds of sales. The decision states, in part:
...We find and conclude that here the "engraving charges" are part of the
sale of tangible personal property since the customer is not seeking a
professional service but is seeking an engraved trophy or plaque....

...The Courts have held that although the amount of materials used may be
inconsequential with respect to the labor involved where the customer
seeks to purchase custom made or designed tangible personal property, the
artistic skill of the craftsman is a part of the sales price of the product and
is inextricably linked ....
In summary, charges for servicing the toilets (whether optional or mandatory) that are
made in conjunction with, or as part of the rental of, portable toilets are includable in
"gross proceeds of sales" or "sales price", and, therefore, subject to the tax.
5

The final issue concerns an exemption. Code Section 12-36-2120(62) exempts from the
sales and use tax:
seventy percent of the gross proceeds of the rental or lease of portable
toilets.
Therefore, seventy percent of the total charges (rental fees and servicing charges and
fees) for the rental or lease of portable toilets are exempt from the sales and use tax.

SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Ray N. Stevens
Ray N. Stevens, Director
May 19
, 2009
Columbia, South Carolina

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