When did municipal utility districts collect Texas sales tax on residential garbage service billed with water and sewer charges?

Plain-English summary

Several municipal utility districts hired and paid a waste company to serve single-family residences. The districts separately itemized a garbage fee on homeowners' monthly water and sewer bills.

Under those facts, each district had to collect sales tax from residents on the garbage fee and report the tax to Texas.

The Comptroller gave two nontaxable alternatives under Rule 3.356(i):

• garbage service supplied by a governmental entity without a specific charge as part of services funded through its general tax or fee structure; or
• a garbage fee combined with other nontaxable services instead of separately itemized on the monthly bill.

The districts could give the garbage contractor an exemption certificate instead of paying tax to the contractor.

What this means for you

Under this historical guidance, itemization and the governmental billing structure controlled who collected tax and whether the resident-facing charge was taxable.

Common questions

Was a separately itemized garbage fee taxable? Yes.

Was garbage service without a specific charge taxable? No.

What if the garbage fee was combined with other nontaxable services? The letter said no tax was due on the combined fees.

Citations and references

• 34 Tex. Admin. Code Rule 3.356(i) — historical governmental garbage-collection provision.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8801L0864B11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

January 18, 1988

RE: ** Municipal Utility District
** Municipal Utility District
** Municipal Utility District No. 90
** Utility District
** Water Control and Improvement District No. 109
** Municipal Utility District No. 149

Dear ***:

This letter is to verify the information I had previously given you in
our
telephone conversation concerning garbage collection services provided by
municipal utility districts.

You explained that the above referenced municipal utility districts
contract
with and pay a waste collection and disposal company to provide garbage
collection services for the single family residences within the
districts. The
districts currently collect a separately itemized garbage collection fee
from
each homeowner on the districts' monthly water and sewer bills. Under
these
facts, the districts must collect sales tax from the residents on the
garbage
collection fee and report the tax to this office.

When garbage collection services are provided by a governmental entity
without a specific charge being assessed, such as when the service is
provided as a basic part of services funded by the tax or fee structure
of
the governmental entity, sales tax is not due. Rule 3.356(i). If the
districts choose to combine the garbage collection fee with the charges
for
other nontaxable services rather than separately itemizing the garbage
collection fee on the monthly bills, no tax is due on the combined fees.
The
districts may issue an exemption certificate in lieu of paying tax to the
garbage collection company.

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

I am enclosing a copy of Rule 3.356 on real property services and the tax
bulletin on garbage collection services for your use. Please feel free
to
contact me if you have additional questions. You may write me, call toll
free
1-800-531-5441 from anywhere in Texas or phone 512/463-4600.

Sincerely,
Mona Ezell Shoemate
Tax Policy Division