Were on-site waste processing and sales of the microorganisms, nutrients, and aerator systems used in that process taxable in Texas?

Plain-English summary

The company processed waste at customer locations, reducing it to carbon dioxide and water without removing waste. Its processing charge was nontaxable and was not a taxable waste-collection charge because nothing was removed.

The service provider owed tax to suppliers on equipment and other items used to break down the waste.

Microorganisms, nutrients, and aerator systems were not exempt merely because they were used in waste treatment. Their sale to customers was taxable unless the customer was an exempt entity, such as a city, or the particular use independently qualified for an exemption.

Common questions

Was the on-site processing charge taxable? No.

Why was it not taxable waste collection? No waste was removed.

Who owed tax on equipment and inputs used by the processor? The processor.

Were microorganisms and aerators automatically exempt? No.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9005L1022E09

Original ruling text

May 18, 1990

Dear **:

Thank you for your recent letter to Mr. Swenson. I have
been asked to respond.

As I understand it, ** processes waste for its
customers and reduces it to carbon dioxide (which presumably
is released into the atmosphere) and water. The process is
done at the customers location and no waste removal occurs.

The charge for processing the waste is not taxable and,
since no waste is removed, the charge is not taxable as
waste collection. **** owes tax to their suppliers on
their purchase of items and equipment used to break down the
waste.

Microorganisms, nutrients and aerator systems are not exempted
in the sales tax statute. So, ** is required to charge
tax to their customers on the sale of these items unless
the customer is an exempt entity such as a city or the items are
used in a way that causes them to be exempted. The fact that
the items were used to break down waste products would not
cause them to be sales tax exempt.

I am not immediately aware of other tax information you may
need. But, I would be glad to answer your specific questions.

This opinion is based on the facts you presented. Other
facts, though similar, may yield different results.

Feel free to call or write me if you have questions. You can
reach me by calling toll free 800-531-5441 or FAX (512)475-0900.

Sincerely,

Al Van Allen
Taxability Section
Legal Services Division