When were washed, drained, screened, graded, or crushed sand and related delivery charges taxable, and could customers receive refunds?

Plain-English summary

The seller washed sand, let the water drain away without a drying machine, and graded or screened the sand by size.

Furnishing, delivering, or hauling unprocessed dirt, sand, gravel, and similar materials was a nontaxable service. Washing and sorting did not count as processing, and neither did passive drying by letting water run off. Charges for sand that was only washed, dried that way, and screened were not taxable.

Operations beyond washing or sorting—such as crushing or mixing—were processing. The total charge for sand crushed to size was taxable, and billed transportation or delivery connected with taxable processed material also was taxable under Rule 3.303.

The unprocessed-material policy applied from Rule 3.291's June 13, 1988 effective date and was not retroactive. No refunds were allowed for earlier sales. For tax paid in error on later unprocessed-material sales, the seller first had to refund its customers before seeking a refund from the Comptroller.

Common questions

Was washed and sorted sand taxable? No.

Did letting water drain off count as processing? No.

Was sand crushed to size taxable? Yes.

Were delivery charges on processed sand taxable? Yes.

Could the seller claim a post-June 13, 1988 refund before repaying customers? No.

Citations and references

• 34 Tex. Admin. Code Rule 3.303
• 34 Tex. Admin. Code Rule 3.291

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8909L0969G01

Original ruling text

September 6, 1989

Dear **:

INDIVIDUAL of COMPANY has requested that I send you a response regarding the

taxability of dry sand.

INDIVIDUAL states that the sand is cleaned by washing and drying. The sand is

then graded to categorize sand sizes for specific uses. Furthermore, nothing is

added to the sand. INDIVIDUAL also indicates that you don't deliver sand.

I understand that drying the sand doesn't involve any kind of a drying machine.

In particular, the sand is dried by merely allowing the water to run off.

Persons furnishing, delivering, or hauling dirt, sand, gravel, and similar

unprocessed materials are performing a nontaxable service. Specifically,

materials that are washed or sorted are considered unprocessed. Because these

activities are considered nontaxable services, delivery and material charges

are not subject to tax regardless of the manner of billing. For example, if you

only washed, dried, and screened the sand, the charge for the sand wouldn't be

taxable.

On the other hand, charges for both processed materials and delivery charges

for these items are taxable. In particular, any operation on dirt, gravel,

sand, and similar materials other than washing or sorting is considered

processing. However, drying the sand isn't considered processing. Accordingly,

processing would include operations such as crushing or mixing the materials.

Therefore, your total charge for sand which is crushed to size is taxable.

In addition, delivery or transportation charges which you bill to your customer

in connection with the sale of taxable items (such as processed materials) are

taxable. I have enclosed Comptroller's Rule 3.303 (Transportation and Delivery

Charges) which addresses the taxability of these charges.

The policy of treating the furnishing, delivering, or hauling of dirt, sand,

gravel, and similar unprocessed materials as a nontaxable service is applicable

from the effective date of Comptroller's Rule 3.291 (Contractors), June 13,

1988. I have enclosed an excerpt from this rule which addresses the taxability

of dirt and gravel activities. Since the change in policy was an administrative

decision, this policy will not be applied retroactively. Therefore, no refunds

of sales or use taxes paid on these materials will be allowed for sales prior

to this date.

If you refund tax to your customers on sales of unprocessed materials on or

after June 13, 1988, you should follow the procedures in the enclosed "Refund

Procedure for Tax Paid in Error to a Retailer" to obtain a refund. However, you

must refund the tax to your customers before you can obtain a refund of tax.

This opinion is based on the facts presented. If there are additional or

different facts, the opinion may change.

If you have any questions, please contact Tax Correspondence. You may call toll

free 1-800-252-5555, or our regular number is 512/463-4600. My extension is

3-4662.

Sincerely,

Bob Jeffcoat

Tax Correspondence