Taxability of recycling services, waste removal and dumpster rentals

April 10, 2025

[Redacted Text]

Re: [Redacted Text] Technical Advice Letter

Dear [Redacted Text]:

Thank you for your letter, dated October 15, 2024, requesting guidance on the taxability of recycling services, waste removal, and dumpster rentals. Revenue Administrative Bulletin (RAB) 2016-20 describes procedures for issuing various types of guidance to taxpayers. Your request meets the requirements for issuance of a technical advice letter.

Based on the facts provided in your letter, [Redacted Text] (Taxpayer) specializes in waste removal and recycling by providing a roll off dumpster (dumpster) to jobs sites or a buyer’s place of residence. Once the dumpster is full, the Taxpayer will remove the dumpster and properly dispose of the contents, through recycling or other means.

Under the current payment structure, the Taxpayer provides the delivery and pickup of the dumpster for a flat rate based on a [Redacted Text] rental and an initial [Redacted Text] weight allowance. The Taxpayer may charge an additional cost for any waste disposal over the initial [Redacted Text] allowance or for any additional days. Finally, in addition to the charges above, the Taxpayer is charging a 6% sales tax on all transactions within Michigan. In your request you are seeking guidance on the following items:

1. Whether the Taxpayer is providing a service that may be exempt under Michigan tax law.
2. Whether the Department’s “Incidental to Service” test may apply to the Taxpayer’s business model.
3. Whether the Department will grant a credit for sales/use tax paid in [Redacted Text] on acquisition of the dumpster, if the Taxpayer opts to pay use tax on the use of the dumpster in Michigan, and not collect a tax on the rental stream.

Michigan’s General Sales Tax Act (GSTA) imposes tax at a rate of 6% of the sales price of tangible personal property on “all persons engaged in the business of making sales at retail, by which ownership of tangible personal property is transferred for consideration….” MCL 205.51(1). Michigan’s Use Tax Act (UTA) imposes tax at a rate of 6% of the purchaser price “for the privilege of using, storing, or consuming tangible personal property in this state….” MCL 205.93(1). “Sales price” and “purchase price” are defined to include “the total amount of consideration paid by the consumer to the seller, including cash, credit, property, and services, for which tangible personal property or services are sold, leased, or rented, valued in money, whether received in money or otherwise, and applies to the measure subject to use tax.” MCL 205.51(1)(d)(iii) and MCL 205.92(1)(f)(iii). A lessor may either pay sales or use tax upon acquisition of property it leases and not remit tax on its rental receipts or, alternatively, a lessor may elect to purchase property for lease exempt from sales and use tax and remit tax on its rental receipts. MCL 205.95(4). Below are responses to your specific questions:

1. Whether the Taxpayer is providing a service that may be exempt under Michigan tax law.

Regardless of whether the Taxpayer’s business is a service, it may choose to either pay sales or use tax upon acquiring any tangible personal property it leases and not remit tax on its rental receipts or, alternatively, it may make the lessor election and remit use tax on its rental receipts. To the extent the taxpayer chooses the latter option, it must remit tax based on the total purchase price of the lease, including any charges for mandatory services necessary to complete the lease of the dumpsters. MCL 205.92(1)(f)(iii).

2. Whether the Department’s “Incidental to Service” test may apply to the Taxpayer’s business model.

Regardless of application of application of the incidental service test under Catalina Marketing Sales Corp v Michigan Dep’t of Treasury, 470 Mich 13 (2004), the Taxpayer may either pay sales or use tax upon acquiring any tangible personal property it leases and not remit tax on its rental receipts, or it may make the lessor election and remit use tax on its rental receipts.

3. Whether the Department will grant a credit for sales/use tax paid in [Redacted Text] on acquisition of the dumpster, if the Taxpayer opts to pay use tax on the use of the dumpster in Michigan, and not collect a tax on the rental stream.

Assuming [Redacted Text] affords a like exemption for sales or use tax paid to Michigan for property brought into [Redacted Text], yes, Michigan would allow credit for sales or use tax paid in [Redacted Text] up to 6% of the purchase price of the property. MCL 205.94(1)(e). To the extent the property was taxed at a rate of less than 6% of the purchaser price the Taxpayer is liable for the difference.

This letter is limited to the transaction and facts described herein. To the extent those facts change or are not accurate, you may not rely on this letter. If you have any follow up questions, please do not hesitate to contact me.

Sincerely,

/s/ Dave Matelski

Administrator

Indirect Tax Division