Browning-Ferris Industries, Inc. v. State Tax Commission

• Decision Date: 24 May 1978
• Docket Number: BROWNING-FERRIS
• Citation: 375 Mass. 326,376 N.E.2d 568
• Parties: INDUSTRIES, INC. v. STATE TAX COMMISSION. 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 568

376 N.E.2d 568

375 Mass. 326

BROWNING-FERRIS INDUSTRIES, INC. v. STATE TAX COMMISSION. ¹

Supreme Judicial Court of Massachusetts,Suffolk.

Argued March 7, 1978.

Decided May 24, 1978.

Timothy F. Fidgeon, Boston, for taxpayer.

John F. Hurley, Jr., Asst. Atty. Gen., for State Tax Com'n.

Before HENNESSEY, C. J., and KAPLAN, WILKINS, LIACOS and ABRAMS, JJ.

KAPLAN, Justice.

At issue is an assessment of sales tax under G.L. c. 64H on the rental of certain rubbish containers. The taxpayer's business was rubbish removal. Three methods were used to collect rubbish from customers: (1) the manual emptying into the taxpayer's trucks of conventional barrels and the like; (2) the pick-up of rubbish with hydraulic front-end and rear-end loaders; and (3) the "roll-off" method which gave rise to this controversy.

Roll-off customers were provided by the taxpayer with special containers for the deposit of their trash. These weighed 4,000 pounds empty, were five feet high, eight feet wide, and twenty-two feet long, and held twenty-five cubic yards of matter. Trucks appropriately equipped would come to carry away full containers and replace them with empties. Sometimes a container would be emptied and then returned to the same customer, but the containers did not have any individually identifying characteristics.

Customers using the roll-off method received monthly invoices listing two charges. One charge, termed "slips," was a variable figure representing the sum of charges for the month's pick-ups and disposals. The other monthly charge was deemed a "service" charge by the taxpayer (and was specified as "container service charge" on an invoice to be found among the exhibits). The latter charge was held by the State Tax Commission to be one for rental of the roll-off containers on which the taxpayer should have collected and remitted sales tax under the following provisions of law: G.L. c. 64H, § 2, imposing an excise "upon sales at retail of tangible personal property"; and § 1(12)(a ) defining "sale" to include "(a)ny transfer of title or possession, or both, exchange, barter, lease, rental, conditional or otherwise, of tangible personal property for a consideration, in any manner or by any means whatsoever."

The taxing authorities' view of the question was first stated in 1967 in response to a request by the Massachusetts Rubbish Haulers Association for a ruling. The then Commissioner of Corporations and Taxation assumed the facts of the roll-off method just described, and responded that a separate charge "for the use of the container . . . is taxable under the sales and use tax law and the haulers are required the collect the tax thereon. If, however, there is only one charge for the container, transportation and dumping with no separation thereof, the charge would not be subject to tax. The container charge incorporated therein would be exempt under (G.L. c. 64H, § 1(13)) as an inconsequential (sales) element (of an essentially personal service transaction) for which no separate charge is made." The precise statutory text referred to was that part of § 1(13) which states that "(s)ale at retail" shall not include "(c ) . . . personal service transactions which involve . . . sales as inconsequential elements for which no separate charges are made."

Accordingly, when the present taxpayer elected not to make a single comprehensive charge and failed from April, 1966, through September, 1973, to collect and pay over sales taxes on the separate so-called "service" charge to its customers, the State Tax Commission (commission) sent notice of intention to assess $16,227.36 of taxes, interest, and penalties. The taxpayer paid the assessment and duly filed applications for abatement. Abatement was denied by the commission on November 8, 1974, and, on appeal, by the Appellate Tax Board (board) in October, 1976. The case, including the board's findings, report, and opinion of August 1, 1977, comes to this court by direct appeal under G.L. c. 58A, § 13. Here the taxpayer renews three arguments against imposition of the tax 1. The board found that the "service" charge was a separately stated charge for the rental of containers put into the customers' possession, and thus was subject to the tax. According to the taxpayer, there was no rental within the statute; it argues that the customer was interested only in enjoying a rubbish removal service, and the tangible property was supplied to him solely for the convenience of the service provider. ² But even if that description of the customer's attitude is accurate, there was nothing to obviate the incidence of the tax where a discrete charge was made for the tangible personal property. We then have a sale conforming to the terms of § 1(12)(a ) quoted above.

The three cases on which the taxpayer relies, cited in the margin, ³ only point up that problems of characterization under a sales tax on tangible goods can arise only where a single charge is made integrating taxable (tangible goods) and nontaxable (service) elements. Where the seller has decided to charge separately for taxable goods, no considerations of fairness or administrative simplicity exist to relieve him of the consequences of his choice. Compare Houghton Mifflin Co. v. State Tax Comm'n, --- Mass. ---, --- ^a, 370 N.E.2d 441 (1977), where a single charge was made and "the services and the property (were) inseparable" because the services created the property.

Similar to our case was Chayet v. Commissioner of Corps. & Taxation, 367 Mass. 908, 328 N.E.2d 521 (1975), where the sales tax was held properly levied on charges for telephone equipment left with the taxpayer for which there was a billing separate from that for the telephone service which was tax free. Illustrative also is In re S. Santini Storage Corp. v. Gerosa, 13 A.D.2d 762, 215 N.Y.S.2d 378 (N.Y.1961), where customers of a storage company, in addition to charges for the storage service, paid a separate charge for each wardrobe they used. Because the wardrobes were subject to an invariable $1.50 apiece charge, whether or not delivered to the customer, sales tax was imposed in the absence of a "showing of any extra service in connection with" these items. Id. at 763, 215 N.Y.S.2d at 378.

The taxpayer also argues that its customers did not have "possession" of the containers within the meaning of § 1(12)(a ) and the commission's regulation, ⁴ and points to the fungibility of the containers and their fitness for use only in connection with the roll-off service. But the board's finding was otherwise as to possession, and it cannot be said that that was unwarranted as matter of law. See Houghton Mifflin Co. v. State Tax Comm'n,supra, --- Mass. at --- ^b, 370 N.E.2d 441. There was control in the customer while the container was on his premises sufficient to make out a "possession."

2. Even if one does regard the "service" charge as separate from the "slips," still, argues the taxpayer, considering the former charge in and of itself, it was not made primarily for the rental of tangible property, and should fall within the exclusion of § 1(13)(c ) for personal service in which the sale element is inconsequential. The board adopted the taxpayer's requested finding that the "service"...