The sale, furnishing, or service of solid waste collection and disposal are taxable to nonresidential commercial operations.
Waste may be solid, semi-solid, liquid, or contained gaseous form.
Taxable - Collection and Disposal from Nonresidential Commercial Operations:
- sludge from a water supply treatment plant or air contaminant treatment facility
- other discarded waste materials and sludges
Exempt - Collection and Disposal from Nonresidential Commercial Operations:
- any operation that is an industrial, commercial, agricultural, or mining operation, for profit or not
- all organizations involved in the buying and selling of goods and services in the marketplace
- fraternal organizations
Examples of Taxable Nonresidential Commercial Operations Include But Are Not Limited To:
Residential - Exempt
- apartment complexes
- mobile home parks
- single or multifamily dwellings
- counties and municipalities that provide the service of solid waste collection and disposal to nonresidential commercial operations
- anyone who contracts to provide solid waste collection and disposal service to a city or municipality must collect on service to nonresidential commercial operations located within the city or county
City D contracts with ABC Disposal Service for solid waste removal within the boundaries of City D. In return for this service, City D pays ABC Disposal Service $2 million per year.
ABC collects and disposes solid waste for retail sales businesses, a manufacturing plant, an apartment building, a quarry, a turkey-raising operation, and residents who own or rent their homes.
ABC must collect tax from City D on the portion of its business attributed to the nonresident commercial operations only. ABC may use a formula to determine the percentage that is taxable.
A service provider who is paid in one lump sum by a customer for both taxable and nontaxable solid waste collection and disposal service may, depending upon the circumstances, collect tax on all, none, or some of the proceeds collected from the customer.
A service provider must collect tax on the entire bill if the nontaxable service is an incidental part of the entire bill.
A service provider does not collect tax on any of the bill if the taxable service is an incidential part of the entire bill.
If a substantial portion is taxable and a substantial portion is nontaxable, the service provider must collect tax on only the taxable portion.
Using a Formula to Determine Amount of Taxable Gross Receipts
A service provider may request approval from the Department to use a formula to determine the amount of taxable and nontaxable services it performs for a customer. This formula is then used to calculate the taxable gross receipts.
Proposed formulas must reasonably reflect the amount of taxable and exempt service performed for any one customer and paid in one lump sum.
The formula request must contain an adequate description of the service provider’s operation, the formula which will be applied to it, and why the formula accurately reflects the taxable and nontaxable work.
Example - Formula by weight
ABC Disposal Service provides solid waste disposal service to Company D. Company D owns 100 residential apartment units and a building with 20 office suites. ABC bills Company D $750 per month. Part of this billing is for the nontaxable service of garbage collection from the residential apartment units and part for the taxable service of collecting garbage from the office building. In this instance, the ideal method of separating taxable gross receipts from nontaxable proceeds would be by a formula. A possible formula would be by weight.
A total of 1,500 pounds of garbage is collected each month. 1,000 pounds of garbage per month is collected from an apartment building and 500 pounds from an office building. In this case, taxable gross receipts would be computed as follows:
500 lbs. ÷ 1,500 lbs = 1/3 (the portion of the bill that is taxable)
$750 x 1/3 = $250 (the taxable amount)
Other possible formula options include:
- number of units of taxable and exempt operations or
- number of square feet of taxable and exempt operations
Nonresidential commercial operations that transport their own solid waste to a collection or disposal facility or have someone else transport it without compensation pay sales tax to the facility.
Tax applies on the disposal charge or tipping fee charged by the facility, except for the portion of the fee for recyclable materials, such as motor oil, paper, glass, metals, and batteries. These materials must be separated from other solid waste for recycling in order to be exempt.
John’s Quick Lube (JQL) hauls its own solid waste to the local landfill. Once a week, JQL pays $50 to dump all the solid waste it generates into the landfill, except for the used motor oil it collects from its customers. JQL pays the landfill operator an additional $50 per week to collect the used oil and send it to a different location for recycling into new products.
In this case, JQL must pay sales tax on the $50 disposal fee charged for the solid waste that stays at the landfill but not on the $50 to store and pass on the used motor oil.
Solid waste collection and disposal provided to a recycling facility is exempt from tax if the waste is collected and disposed of separately from other solid waste and, as a result of that separation or processing, reduces the volume of the waste collected by at least 85 percent.
An example of a qualifying recycling facility is one that produces insulation from used glass.
Taxable - Recycling Materials for Fuel
Facilities that separate or process recyclable materials for use as fuel are not eligible for this exemption.