Is collecting and transporting materials taxable in Texas when the customer keeps control, and does it matter whether the materials are 'waste'?

Plain-English summary

A representative asked about a client that uses air-moving vehicles to collect and transport materials, where the customer never gives up control of the materials and they are hauled to another location under the customer's control. Is that collection-and-transportation charge taxable?

The Comptroller said it depends on what the materials are — and it couldn't tell from the facts whether they were "waste" or merely materials needing further processing before they can be marketed. So it gave a conditional answer:

• If the materials are "waste" → the collection fee is taxable. And it stays taxable even though the customer keeps control and the materials are moved to another site the customer controls.
• If the materials are "industrial solid waste" as defined by the Texas Solid Waste Disposal Act → no tax is due on the collection and transportation (the letter cites Rule 3.356(a)(4)(E)).
• If the materials are not waste at all → no tax is due on the fee for collection and transportation alone.

What this means for you

Waste haulers and material-collection services

The taxability of your collection service hinges on the classification of what you haul. Ordinary "waste" collection is a taxable service, and routing it to another of the customer's own sites — with the customer retaining control — does not make it nontaxable.

Two ways out of the tax

If what you collect is "industrial solid waste" under the Texas Solid Waste Disposal Act, the collection and transportation are not taxable (Rule 3.356(a)(4)(E)). And if the materials are not waste — for example, product that still needs processing before sale — then a charge for collection and transportation alone is not taxable. Be ready to document which category applies.

Common questions

Q: Is garbage/waste collection a taxable service in Texas?
A: Yes, if the materials are "waste," the collection fee is taxable.

Q: Does it help that the customer keeps control and the material goes to their own second site?
A: No. For "waste," the Comptroller said that fact does not change the taxability of the service.

Q: When is the collection and transportation not taxable?
A: When the materials are "industrial solid waste" as defined by the Texas Solid Waste Disposal Act (Rule 3.356(a)(4)(E)), or when they are not waste at all and the charge is for collection and transportation alone.

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(a)(4)(E) — cited for the exclusion of "industrial solid waste" (as defined by the Texas Solid Waste Disposal Act) collection and transportation from tax.
• Texas Solid Waste Disposal Act — supplies the definition of "industrial solid waste" the Comptroller relies on.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8807L0911E06

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller July 20, 1988

Dear *****:

Ms. Angus asked me to answer your letter of June 30, 1988, con-
cerning waste collection.

I understand your client uses air-moving vehicles to collect and
transport materials. The customer does not relinquish control of
the materials, and the materials are transported to another loca-
tion under the customer's control.

Based on the information provided, I cannot determine whether
the materials are "waste" or merely materials that need further
processing before they can be marketed.

If the materials are "waste", then the collection fee is taxable.
The fact that the materials are collected and transported to
another location under the customer's control will not change the
taxability of the service. If the materials are "industrial solid
waste" as defined by the Texas Solid Waste Disposal Act, tax is
not due on the collection and transportation. [see Rule 3.356 (a)
(4) (E)] If the materials are not waste, then tax is not due on
the fee for collection and transportation alone.

This opinion is based on the facts presented. If there are addi-
tional 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
512/463-4614. You may write me at the Tax Correspondence Divi-
sion.

Sincerely,
Adina Whittemore
Tax Correspondence Division