This week, I came across an article in The Washington Post reporting that, thanks to an uptick in protests since President Donald Trump was elected, the portable toilet industry is booming in Washington, D.C. Not surprisingly, this led me to ponder whether businesses around the country tasked with answering the call of nature are required to collect and remit sales tax associated with providing portable toilets and maintenance services.
The answer likely depends on whether the state treats the transaction as a taxable transfer of tangible personal property or a nontaxable sale of service. North Carolina, for example, focuses on “the nature of the agreement between the business and its customers.” Specifically, a lessor of portable toilets must collect and remit sales tax on the toilets as well as the maintenance charges if the lease includes a provision mandating that the lessor maintains the toilets. The lessor can, however, purchase chemicals and other supplies to fulfill its maintenance obligations as a tax-exempt “sale for resale” because tax on these items will eventually be paid by the lessee.
The rules in North Carolina are a little different if the agreement provides for optional maintenance of portable toilets. Under these circumstances, the rental of the toilet is subject to sales tax, but charges for maintenance are not taxable as long as they are separately stated on the customer’s bill. In this case, however, the lessor is liable for payment of chemicals and supplies used to maintain the toilets and may not pass the tax liability along to the consumer.
South Carolina also imposes sales tax on certain transactions involving the rental of portable toilets where the transaction’s true purpose is to transfer the toilet and not to provide waste removal services. Taxing authorities will determine whether the rental is taxable by applying the “true object test,” a primarily fact-based inquiry. In Boggero v. South Carolina Dept. of Rev., for instance, the South Carolina Court of Appeals applied this test and affirmed the Administrative Law Court’s holding that a taxpayer providing portable toilets and waste removal services was required to collect and remit tax on these transactions. Specifically, the Court of Appeals focused on the fact that the agreements between the taxpayer and lessees were for “delivery and use” of portable toilets, and many of the invoices issued to the customers demonstrated that the toilets were transferred for a flat fee. Based on these facts, the court found the transactions to be taxable transfers of tangible personal property.
Interestingly enough, despite the demand for “porta-potties” in Washington, D.C., there is no specific guidance on whether businesses renting portable toilets accompanied by maintenance services are required to collect and remit sales on these transactions. Nevertheless, the District’s general rule imposes tax on the sale or rental of tangible personal property and, additionally, on charges for maintenance of tangible personal property.
Benjamin Franklin once said that “in this world nothing can be said to be certain except death and taxes,” but I might argue that the call of nature is also among the world’s certainties. As such, the demand for porta-potties and maintenance services is not likely to die down any time soon—making this particular industry a great source for state sales tax revenue.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Does your state require vendors to collect tax on rental and leases of portable toilets? Are services to maintain porta-potties also subject to state sales tax?
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 Some states also impose tax on the sale of specifically enumerated services, however.
 Boggero v. South Carolina Dept. of Rev., 777 S.E.2d 842 (S.C. Ct. App. 2015).
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