Which municipal and commercial garbage-collection contracts qualified for Texas's prior-contract exemption, and did renewals or on-request pickups qualify?

Plain-English summary

Two municipal garbage-collection contracts entered before July 21, 1987 qualified for the prior-contract exemption only through their fixed terms. The CITY A exemption ended November 30, 1988, and the CITY B exemption ended May 1, 1988. Renewals after those dates did not qualify.

The exemption applied to the provider's contracts with the municipalities, not the municipalities' agreements with residents. The cities were buying taxable services for resale rather than consuming the services.

A commercial agreement could qualify only if it was entered before July 21, 1987, had a fixed price, specified a service level such as a number of pickups per week, and covered a stated period. Service provided on request or as needed did not qualify. The letter also said a cancellation or termination clause would not prevent qualification because Rule 3.319(c)(4) was being changed.

What this means for you

The historical exemption depended on the actual contract in force before the cutoff. It did not extend automatically to renewals, downstream resident agreements, special pickups on request, or open-ended service.

Common questions

Did the two city contracts qualify? Yes, only through their respective stated end dates.

Did later renewals qualify? No.

What did a commercial contract need? A pre-July 21, 1987 execution date, fixed price, specific service level, and specified term.

Did on-request or as-needed pickups qualify? No.

Did a cancellation clause prevent qualification? The letter said it would not under the planned Rule 3.319(c)(4) change.

Citations and references

• 34 Tex. Admin. Code Rule 3.319(c)(4) (prior contracts)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8711L0845A01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller November 3, 1987

Dear ***:

This is to follow up our telephone conversation of November 2, 1987,
regarding the municipal and commercial contracts submitted with your
August 31, 1987 letter.

The contract with the CITY A does qualify for the prior contract exemp-
tion. This contract is for a two year period, December 2, 1986, through
November 30, 1988. The prior contract exemption expires November 30,
1988.
The renewal after November 30, 1988, will not qualify for the prior
contract
exemption.

The contract with the CITY B does qualify for the prior contract exemp-
tion. This contract is a two year contract which began June 1, 1986,
and ends May 1, 1988. The renewal of this contract after May 1, 1988,
will
not qualify for the prior contract exemption.

While these contracts with the municipalities which were entered into
before
July 21, 1987, qualify for the prior contract exemption, the prior
contract
exemption does not apply to the agreement between the municipalities and
the
residents. The municipalities are buying taxable services for resale.

The commercial service agreement may qualify as a prior contract if it
is:
(1) entered into before July 21, 1987: (2) at a fixed price; (3) to
provide a
specific level of service (specified number of pick-ups per week, etc.);
and
is for a specified period of time (one year, two years, etc.).

A contract which calls for service to be provided upon request or on an
as
needed basis does not qualify as a prior contract. Any garbage or waste
collection contract which calls for collection on these terms will not
qualify as a prior contract.

Section (c)(4) of Rule 3.319 is being changed. The cancellation or
termination clause in a contract will not prevent a contract from
qualifying
as a prior contract.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions of need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,
Eddie C. Washington
Tax Policy Division

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller October 7, 1987

Dear ***:

Thank you for your letter of August 31, 1987, regarding the applicability
of
the prior contract exemption to contracts entered in to with
municipalities on
or before July 21, 1987, for solid waste disposal service.

The contract with a municipality entered in to on or before July 21,
1987,
qualifies for the prior contract exemption. However, the agreement for
these
services between the municipality and its residents does not qualify as a
prior contract. In essence, the municipality is buying a taxable service
for
resale; the municipality is not the consumer of the service.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,
Eddie C. Washington
Tax Policy Division