Is a grease-control service that adds bacteria to a plumbing system to break down grease taxable in Texas?

Plain-English summary

A company that provides a grease-control service — introducing a bacterial product (Mitey-Bac G) into a plumbing system to degrade grease, which is then carried away through the sewer — asked whether its service is taxable. The Comptroller said it is not taxable, on two independent grounds:

• It is not taxable under Rule 3.356 — the company does not provide garbage or solid-waste collection or disposal.
• It is not taxable as a real-property repair service under Rule 3.357 when the Mitey-Bac G is introduced into a plumbing system that is connected to a sewer system.

But the provider is not off the hook entirely on the input side: it is required to pay sales tax on the equipment and products it uses to provide the service (it is the consumer of those items).

What this means for you

Grease-control and drain-treatment services

Adding a grease-digesting bacterial product to sewer-connected plumbing is a nontaxable service in Texas — it is neither waste collection/disposal (Rule 3.356) nor real-property repair (Rule 3.357). Don't charge customers sales tax on this service.

You still pay tax on your supplies

Because your service is nontaxable, you are the consumer of the bacterial product and equipment you use — pay sales tax on those purchases. Build that cost into your pricing.

Common questions

Q: Is a grease-control bacteria service taxable in Texas?
A: No. The Comptroller held it is not taxable garbage/solid-waste collection or disposal (Rule 3.356) and not taxable real-property repair (Rule 3.357) when the product goes into sewer-connected plumbing.

Q: Do I owe tax on the bacterial product and equipment I use?
A: Yes. You must pay sales tax on the equipment and products you use to provide the service.

Q: Would the answer change if it weren't going into sewer-connected plumbing?
A: The Comptroller's nontaxable conclusion under Rule 3.357 is tied to the product being introduced into a plumbing system connected to a sewer; different facts could change the analysis.

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 — garbage/solid-waste collection and removal; the service did not fall within it.
• 34 Tex. Admin. Code Rule 3.357 — real property repair and remodeling; the service was not taxable repair when introduced into sewer-connected plumbing.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8807L0888C01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

BOB BULLOCK
Comptroller July 21, 1988

Dear *:

Thank you for your letter of July 5, 1988, concerning the taxability of
the
service you provide.

The service you provide is not taxable under Rule 3.356(4). You do not
provide garbage or solid waste collection or disposal. The service is
not
taxable as real property repair service under Rule 3.357 when the
Mitey-Bac G
is introduced into a plumbing system that is connected to a sewer system.
You are required to pay sales tax on the equipment and products used in
providing the service.

This opinion is based upon the facts you presented. If there are
additional or
different facts, this 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,
Eddie C. Washington
Tax Correspondence