Are fees for disposing oil and gas waste at a permitted landfill, and separately for washing out the trucks that hauled it, taxable in Texas?

Plain-English summary

The Texas Comptroller ruled that a Railroad Commission-permitted landfill's both revenue streams — oil and gas waste disposal fees AND separately-billed truck wash-out fees — are nontaxable, for two entirely different legal reasons.

The landfill receives, processes, and disposes of nonhazardous oil and gas drilling waste (contaminated soils, drilling fluids, tank bottoms) under a state regulatory permit, and separately washes out the tractor-trailer rigs that haul the waste to the site. Texas generally taxes "real property services" including garbage/solid waste removal, but specifically excludes oil and gas waste disposal from that taxable category — so the core disposal business is nontaxable by statute, regardless of how the landfill is regulated or operated. The truck wash-outs got to the same nontaxable result through a completely separate rule: Texas treats washing a motor vehicle as vehicle maintenance, and vehicle maintenance is carved out of Texas's taxable-services list — so cleaning the customers' waste-hauling trucks is nontaxable maintenance, unrelated to the disposal-fee analysis.

What this means for you

Oil and gas waste disposal operators

Waste disposal specific to oil and gas drilling/production activity is excluded from Texas's general solid-waste-removal tax, unlike ordinary municipal garbage collection — you don't need a special exemption certificate; the exclusion applies by the nature of the waste itself.

Businesses offering vehicle washing as an ancillary service (trucking yards, fleet operators, service centers)

Motor vehicle washing/cleaning is treated as nontaxable vehicle maintenance in Texas, separate from any car-wash-specific rules — this applies broadly to commercial vehicle cleaning services, not just consumer car washes.

Accountants and tax professionals

Two independent statutory carve-outs support the "nontaxable" conclusion: the oil-and-gas-waste exclusion from real property services in Section 151.0048(a)(3)(C), and the motor-vehicle-maintenance exclusion from taxable services in Section 151.0101(a)(5)(C), following STAR Accession No. 200006386L (2000) on vehicle washing as maintenance.

Common questions

Q: Is oil and gas waste disposal taxable as a real property "solid waste removal" service in Texas?
A: No. Section 151.0048(a)(3)(C) specifically excludes oil and gas waste disposal from the taxable real property services category, even though ordinary garbage/solid waste removal generally is taxable.

Q: Is washing a commercial truck or vehicle a taxable service in Texas?
A: No. Washing a motor vehicle is treated as vehicle maintenance, which is excluded from Texas's list of taxable services.

Q: Can another oil and gas waste disposal company rely on this ruling?
A: No. It's binding on the Comptroller only for the requesting taxpayer and facts presented, and cannot be relied on by any other taxpayer.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.0048(a)(3), (a)(3)(C) (Real Property Services — solid waste removal; oil and gas waste exclusion)
• Tex. Tax Code § 151.0101(a)(5)(C) (Taxable Services — motor vehicle maintenance exclusion)
• Tex. Tax Code §§ 151.010, 151.051 (taxable item; imposition)
• Tex. Tax Code § 152.001(3)(B) (Definitions — motor vehicle)
• STAR Accession No. 200006386L (June 7, 2000) (washing a motor vehicle is maintenance)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/201710016L

Original ruling text

October 19, 2017

RE: Private Letter Ruling No. 2017010142

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters.[1] We are responding to your request dated April 18, 2017. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on the taxability of waste disposal and motor vehicle cleaning services.

Facts Presented

** (Taxpayer), a Delaware limited partnership, is in the business of disposing non-hazardous oil and natural gas waste associated with the production of oil and natural gas at the ** landfill (Landfill) in CITY, Texas. Taxpayer is permitted by the Railroad Commission of Texas (RRC).[2]

Customers bring oil and gas waste to the Landfill. Upon receipt of the waste, Taxpayer processes the waste in accordance with instructions set out by the Taxpayer’s RRC permit (Disposal Process). The permit authorizes Taxpayer to dispose of: water- and oil-based drilling fluids and associated cuttings, tank bottoms, waste material from water collecting pits, contaminated soils, and other RRC regulated non-hazardous waste.

In addition, Taxpayer washes and cleans the vehicles in which customers transport the waste to the Landfill for disposal (Truck Wash Outs). Taxpayer charges separate fees for the Disposal Process and Truck Wash Outs.

Questions, Rulings, and Analysis

Our reinstatement of your questions are shown below, followed by our responses and analysis.

Question One: Are charges for the Taxpayer’s Disposal Process a nontaxable service?

Ruling One: Taxpayer’s Disposal Process is a nontaxable service.

Question Two: Are charges for Truck Wash Outs nontaxable services?

Ruling Two: Taxpayer’s Truck Wash Outs are nontaxable services.

Analysis:

Sales tax is imposed on the sales price of each taxable item. Section 151.051 (Sales Tax Imposed). A taxable item is tangible personal property or a taxable service. Section 151.010 (Taxable Item). Taxable services are listed in Section 151.0101 and include real property services.

Real property services include “the removal or collection of garbage, rubbish, or other solid waste.” Section 151.0048(a)(3) (Real Property Services). However, real property services do not include oil and gas waste disposal. See Section 151.0048(a)(3)(C).

Taxpayer receives, processes, and disposes of solid and semisolid waste that is a byproduct of drilling and producing oil and gas. Taxpayer’s RRC Permit authorizes Taxpayer to receive, store, handle, treat, and dispose of certain nonhazardous oil and gas waste at the Landfill. Because Taxpayer disposes of waste incidental to the drilling and production of oil and gas, Taxpayer’s services are not real property services. Section 151.0048(a)(3)(C). Therefore, Taxpayer provides a nontaxable service.

Taxpayer charges a fee for washing and cleaning tractor trailer rigs transporting the oil and gas waste to the Landfill. These rigs are motor vehicles. Section 152.001(3)(B) (Definitions). Tax Policy guidance provides washing a motor vehicle is considered maintenance of a motor vehicle. See STAR Accession No. 200006386L (Jun. 7, 2000). Taxpayer’s Truck Wash Outs are maintenance of a motor vehicle and are nontaxable services. Section 151.0101(a)(5)(C).

Comptroller’s Decisions and STAR documents cited are available on the Comptroller’s State Tax Automated Research (STAR) system. The Texas Tax Code, Texas Administrative Code, and the STAR system are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 2017010142.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTES:

[1] Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.

[2] RRC Permit No. * Amended, effective Feb. 21, 2017.