Is collecting and disposing of industrial solid waste taxable in Texas after October 1, 1987, and how do customers claim the exemption and get refunds?

Plain-English summary

A waste hauler asked the Comptroller about the taxability of "collection and disposal of industrial solid waste" after a change in the law. The Comptroller answered a series of questions:

• Is industrial waste no longer taxable? Industrial solid waste — as defined in the Texas Solid Waste Disposal Act (Texas Civil Statutes Art. 4477-7) — is no longer taxable, except industrial solid waste that meets the definition of garbage or municipal solid waste (that stays taxable).
• When is it effective? October 1, 1987.
• How do refunds work for the retroactive period? A customer who qualifies must give the hauler a certification in the form described in Rule 3.356(h). The hauler is then relieved from charging tax on future billings and may refund tax collected in error since October 1, 1987; the hauler is itself entitled to a state refund for tax collected and remitted on those customers after it has refunded the tax to them.
• Who identifies the customers? Customers should come to the hauler and certify that they qualify, taking responsibility for accruing tax on any taxable portion.
• Certificate from each customer? Yes — see the certification answer above.
• What about commingled office and industrial garbage? If a customer commingles office garbage with industrial garbage, all of the waste collections are presumed taxable. The hauler must charge tax until the customer provides the Rule 3.356(h) certification, at which point the customer assumes full responsibility for any taxable portion of the commingled waste.

What this means for you

Waste haulers

Industrial solid waste collection is exempt (since October 1, 1987) — but the exemption is customer-driven. Until a customer hands you a Rule 3.356(h) certification, you must presume the waste is taxable and charge tax. Get the certificate before you stop charging.

The garbage/municipal carve-out and commingling

Waste that is really garbage or municipal solid waste stays taxable. And if a customer mixes office garbage with industrial waste, the whole pickup is presumed taxable until they certify — after which they carry the responsibility for the taxable portion.

Refunds run through the customer

You can recover tax you collected in error since October 1, 1987, but only after you refund it to the customer first. Keep the certifications and refund records.

Common questions

Q: Is industrial solid waste collection taxable in Texas?
A: No, not since October 1, 1987 — as long as it is industrial solid waste under the Texas Solid Waste Disposal Act and is not garbage or municipal solid waste. But it is presumed taxable until the customer certifies.

Q: What does a customer have to do to claim the exemption?
A: Provide the hauler a certification in the form described in Rule 3.356(h). The hauler then stops charging tax going forward.

Q: What if office trash is mixed with industrial waste?
A: All the waste collections are presumed taxable, and the hauler charges tax until the customer certifies, after which the customer assumes responsibility for any taxable portion.

Q: How do refunds work for tax collected since October 1, 1987?
A: The hauler may refund tax collected in error to the customer, and is then entitled to a state refund for tax it collected and remitted on that customer.

Q: Can I rely on this 1988 letter today?
A: Treat it as guidance only. It is based on the facts presented and can change with different facts; on the STAR system it binds the Comptroller only as to the taxpayer it was issued to and may no longer reflect current policy.

Citations and references

• 34 Tex. Admin. Code Rule 3.356(h) — the certification a customer must provide to claim the industrial-solid-waste exemption.
• Texas Solid Waste Disposal Act, Texas Civil Statutes Art. 4477-7 — supplies the definition of "industrial solid waste" (and the garbage/municipal-solid-waste carve-out).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8807L0886D01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

July 20, 1988

Dear ***:

Thank you for your recent letter regarding the taxability of "collection
and disposal of industrial solid waste".

Below, please find our responses to your questions.

Question 1: Am I reading this correct that industrial waste is no longer
to be taxable?

Answer: Industrial solid waste as defined in Texas Civil Statutes, Texas
Solid Waste Disposal Act, Article 4477-7, with the exception of industrial
solid waste which meets the definition of garbage or municipal solid waste
as defined in the Texas Solid Waste Disposal Act, is no longer taxable.

Question 2: When is this effective?

Answer: October 1, 1987

Question 3: If this is effective retroactively to October 1, 1987, do I
refund all customers that fall into this category or how do these customers
get their money back?

Answer: Customers who feel they qualify for exemption should issue to you
certification in the form described in Rule 3.356(h) enclosed. Then you
are relieved from having to charge these customers tax on your future
billings and may refund to them any tax collected in error since October
1, 1987. You are entitled to a refund for tax collected and remitted to
the state on these customers after you have refunded the tax to them.

Question 4: How do I identify customers or should these customers come
to me and identify themselves?

Answer: Customers should come to you certifying that they qualify for the
exemption and take responsibility for accruing tax on that portion of the
charge which represents taxable services.

Question 5: Do I need to get an exemption certificate from each of these
customers?

Answer: See the answer to #3.

Question 6: Your definition of Industrial Solid Waste "is solid waste
resulting from or incidental to any process of industry, or manufacturing,
or mining, or agriculture operations". Relating to this definition, what
classification will a company be in if they commingle their office garbage
with their industrial garbage?

Answer: All of your waste collections will be presumed to be taxable.
You are responsible for charging tax until the customer gives you
certification as mentioned in Rule 3.356(h). The customer thereby assumes
full responsibility for any taxable portion of commingled waste.

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 our toll-free
number 1-800-531-5441. The regular number is 512/463-4600. You may write me
at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Julie Pesl
Tax Correspondence