Were charges for reclaiming nonhazardous petroleum-contaminated soil taxable when the soil was removed for treatment with the intent to return it to the customer?

Plain-English summary

Charges for reclaiming nonhazardous petroleum-contaminated soil were nontaxable when the soil was removed for treatment with the intent to return it to the generator.

The soil retained its identity as real property during temporary removal and decontamination. The service restored the soil rather than merely disposing of waste, and it repaired the real property itself rather than an improvement to realty. Neither the hot-mix plant's charge to the remediation company nor the remediation company's charge to the generator was taxable.

If the generator did not want the processed soil back, the soil ceased to be treated as real property. A hot-mix plant's later retail sale of that processed soil was a taxable sale of tangible personal property.

Common questions

Reclamation with intent to return the soil taxable? No.

Did temporary removal turn the soil into personal property? No.

Retail sale of processed soil not returned taxable? Yes.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9006L1023F09

Original ruling text

June 20, 1990

Dear ****:

Thank you for asking about the taxability of the charge for
reclaiming non-hazardous petroleum-base contaminated soil.

The reclamation procedure is a two stage process involving
an afterburner owned by * and equipment belonging to
various hot mix plants under contract to *. The soil
generator (customer) is charged on a per ton basis by ****
who is in turn billed by the hot mix plant for their portion of
the process.

The soil is usually brought to the * facility by the
customer. After treatment and verification of
decontamination by a laboratory analysis, the soil may be
returned to the customer. On rare occasions at the
customer's request and for a separate charge, * will
subcontract with a third party to load and transport the
soil for the customer.

Sometimes the customer may not want the soil, in which case
it is usually kept by a hot mix plant to be sold in a retail
soil business.

The service you provide is not taxable, The contaminated
soil before it is removed and treated is considered real
property. Removing the soil for decontamination purposes
with the intent to return it does not cause it to lose its
identity as real property. There are two taxable services
applicable to real property that come close to taxing the
soil reclamation service.

Real Property services taxes the disposal of garbage or
waste, but your service involves reclaiming or restoring the
soil and not merely disposing of it. Real Property Repair
and Remodeling taxes the repair or restoration of
improvements to real property. The law does not apply to
repairs of the real property itself. For example, we do not
consider reclaiming land after strip mining as a repair of
"improvements".

Neither the charge by the hot mix plant to *, nor the
charge by * to the soil generator is taxable. However,
when soil has been processed and will not be returned to the
generator it is no longer considered real property. The
sale of the processed soil by the hot mix plant is a taxable
sale of tangible personal property.

This opinion is based on the facts presented. Other facts
though similar may result in a different opinion.

If you have any questions or need more information you may
write or call me at 1-800-531-5441, extension 3-4675. The
regular number is (512) 463-4675.

Sincerely,

Tom Soto
Taxability Section,
Legal Services