What Is the True Object of that Porta Potty?
- Jan 29, 2015 | Gail Cole
The lease of a portable toilet with no waste removal services is a taxable service in Baton Rouge, Louisiana. The provision of waste removal and cleaning services to a portable toilet owned by someone else is an exempt service*. But what happens if you lease a toilet and provide waste removal/cleaning services? Is the transaction taxable or exempt?
Believe it or not, a dispute over this question went all the way to the Louisiana Supreme Court. The case: Pot-O-Gold Rentals, L.L.C. versus City of Baton Rouge.
Pot-O-Gold leases portable toilets with or without waster removal/cleaning services. It also provides waste removal/cleaning services to portable toilets that it does not own. The company’s waste removal/cleaning services are optional.
A bit of background
The trial court determined that “non-taxable services remained non-taxable regardless of whether the services were performed for rental customers in conjunction with a rental.” Therefore, the waste removal/cleaning services provided with the lease of a toilet remain exempt.
The court of appeal disagreed, arguing that “the taxability of a transaction must be determined as a whole, and that such a determination is made based on the taxability of the ‘true object’ of the transaction.” It determined that the cleaning services and the leasing services are “inexorably intertwined,” and the whole transaction was subject to sales tax.
If it doesn’t fit, you must acquit
The Louisiana Supreme Court first noted this important fact from Ultelcom, Inc. v. Bridges:
“Taxing statutes are to be interpreted liberally in favor of the taxpayer and against the taxing authority.”
With that in mind, it proceeded to “agree with the trial court.” Two reasons were given:
- “[T]o hold that providing cleaning services for portable toilets is not a taxable event if the toilet is owned by someone else, but is a taxable service if the toilet is owned by the lessor, creates an absurd result.”
- The true object of the services provided could reasonably be described as “the removal of human waste,” which is a non-taxable transaction. At the very least, the true object of transaction is debatable. When there is doubt, the court is required “to adopt the interpretation urged by the applicant as the least onerous to the taxpayer.”
So there it is.
* See Sales and Use Tax Ordinance 10127, (9)(p).
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