71 N.Y.2d 933 (1988)

Payments to independent haulers for the collection, transportation, and disposal of industrial fly ash constitute receipts from the taxable service of maintaining real property under New York Tax Law § 1105(c)(5).

Summary

Spodek challenged a sales tax deficiency assessment imposed by the New York State Tax Commission, arguing that payments made to independent haulers for removing fly ash from its power plants should not be subject to sales tax. The Court of Appeals affirmed the Tax Commission’s determination, holding that fly ash removal constitutes a taxable maintenance service to real property. The court reasoned that fly ash is a waste product, its removal is a maintenance service, and the tax law explicitly includes “trash removal from buildings” as a taxable service, irrespective of whether it falls under a general exclusion for interior cleaning services.

Facts

Spodek, an entity operating power-generating plants, contracted with independent haulers to collect, transport, and dispose of fly ash, a waste byproduct of coal combustion. The New York State Tax Commission assessed a sales tax deficiency against Spodek, contending that these payments for fly ash removal constituted taxable receipts for real property maintenance. Fly ash has little to no economic value and is disposed of in landfills.

Procedural History

The Tax Commission determined that Spodek’s payments were subject to sales tax. Spodek challenged this determination, arguing that fly ash removal should be tax-exempt. The Appellate Division upheld the Tax Commission’s assessment. Spodek appealed to the New York Court of Appeals.

Issue(s)

1. Whether payments to independent haulers for the removal of industrial fly ash constitute receipts from the taxable service of maintaining real property under Tax Law § 1105(c)(5)?

2. Whether fly ash removal qualifies for a tax exemption as trash removal from buildings related to ordinary janitorial services?

3. Whether fly ash removal is exempt from taxation pursuant to Tax Law § 1115(a)(12) as machinery or equipment used for the production of electricity?

4. Whether fly ash removal constitutes a non-taxable transportation service?

Holding

1. Yes, because the removal of fly ash from power-generating plants constitutes a maintenance service to real property, specifically enumerated as a taxable item under Tax Law § 1105(c)(5).

2. No, because fly ash removal is considered “trash removal from buildings” and is explicitly excluded from the tax exclusion for interior cleaning and maintenance services under Tax Law § 1105(c)(5).

3. No, because fly ash is not machinery or equipment; it is a waste product.

4. No, because the collection, hauling, and disposal of fly ash constitute an integrated service taxable under § 1105(c)(5), not merely transportation.

Court’s Reasoning

The court reasoned that Tax Law § 1105(c)(5) imposes a sales tax on receipts from services that maintain real property. The statute specifically excludes interior cleaning and maintenance services performed regularly for at least 30 days, but then carves out exceptions to this exclusion, including “trash removal from buildings.” The court found that fly ash removal falls under the category of “trash removal,” regardless of whether it is considered part of a broader cleaning service.

The court rejected Spodek’s argument that