Were crushed gravel and delivery taxable when sold to farmers for stock pens, roads, and driveways, and how were unprocessed materials treated?

Plain-English summary

A seller bought crushed gravel and charged farmers one amount based on cubic yards, including delivery. Farmers used the gravel in stock pens and for farm roads and home driveways.

Crushing or mixing dirt, gravel, sand, or similar material was processing, so both the processed material and its delivery charge were taxable.

A farmer could give a valid exemption certificate when crushed gravel qualified under Rule 3.296—for example, when used as a desiccant or drying agent in stock pens. Gravel used to build or repair farm roads, residential roads, or driveways remained taxable.

Furnishing, delivering, or hauling unprocessed dirt, sand, gravel, and similar material was a nontaxable service. Material that had only been washed or sorted remained unprocessed, so both the material and delivery charges were nontaxable regardless of billing method.

STAR carries an alert that a 2011 amendment later required Comptroller-issued registration numbers for certain agricultural and timber exemptions beginning January 1, 2012. This page describes the 1989 ruling.

Common questions

Were crushed gravel and delivery taxable? Yes.

Could stock-pen gravel qualify for exemption? Yes, when used as a drying agent and supported by a valid certificate.

Was road or driveway gravel exempt? No.

Was hauling washed or sorted unprocessed material taxable? No.

Citations and references

• 34 Tex. Admin. Code Rule 3.296

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8910L0961A11

Original ruling text

ALERT: This document may be affected by changes to the Tax Code which was amended by H.B. 268, 82nd Reg. Legislative Session, 2011. The amendment required persons claiming a sales tax exemption for certain agricultural and timber products to apply for and provide a registration number issued by the Comptroller, effective 01/01/2012.

October 3, 1989

Dear *:

Thank you for your inquiry regarding the taxability of gravel.

You state that you purchase crushed gravel and sell it to farmers. You charge
the farmer for the number of yards of crushed gravel which includes the
delivery charge.

In our phone conversation of September 27, 1989, you also indicated that you
were collecting sales tax on your total charge for materials and delivery. You
stated that the farmers purchased the crushed gravel to repair roads, put into
stock pens, and put in the driveway for their home.

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. Since
processing includes operations such as crushing or mixing the materials, your
charges for crushed gravel and delivery are taxable.

However, you may accept a valid, properly completed exemption certificate from
the farmer in lieu of sales tax on the crushed gravel (and any delivery
charges) if the gravel qualifies for exemption under the enclosed Comptroller's
Rule 3.296 (Agriculture, Animal Life, Feed, Seed, Plants, and Fertilizer).
Specifically, the gravel will qualify for exemption if it is used as a
desiccant (drying agent) in the stock pens. I have also enclosed a Texas Sales
Tax Exemption Certificate which you may reproduce as needed.

Although gravel used as a desiccant may qualify for exemption, the gravel used
to build or repair residential and farm roads (including driveways) is taxable.
Under these circumstances, the gravel is taxable because there is no exemption
for these materials under Rule 3.296.

You should note that 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.

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

If you have any question, 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.