Was a city's environmental protection fee on residential garbage-collection bills subject to Texas sales tax?

Plain-English summary

A city planned to add an environmental protection fee to residential sanitation bills to fund environmental projects. The Comptroller said the fee was taxable when garbage collection was billed separately because it was connected with a taxable real-property service.

The letter distinguished governmental garbage collection provided without a specific charge as part of the government's general tax or fee structure. It also said no sales tax was due when the city combined garbage-collection fees with other nontaxable service charges instead of separately itemizing garbage collection on the monthly bill.

What this means for you

Under this 1990 answer, the tax result depended on whether the governmental entity made a specific, separately identified charge for garbage collection and its associated fee.

Common questions

Was the environmental protection fee taxable when separately billed with garbage collection? Yes.

Why? The Comptroller treated garbage and waste collection as taxable real-property services and the fee as a connected charge.

What if garbage collection was not specifically charged or itemized? The letter said no sales tax was due in the governmental-service situations it described.

Citations and references

• Comptroller Rule 3.356(b), concerning real-property services.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9008L1039B12

Original ruling text

August 24, 1990

Dear **:

In your letter of August 13, you requested information regarding the taxability
of an environmental protection fee.

You state that effective October 1, 1990, the City of ** will begin
charging an environmental protection fee on residential sanitation
collection bills. The fee will provided funding for various environmental
projects.

If the City of ** bills charges for garbage collection separately
from other services, the charge for garbage collection and the associated
environmental protection fee are taxable. As indicated in section (b) of the
enclosed Comptroller's Rule 3.356 (Real Property Service), persons providing
real property services (such as garbage and waste collection services) must
collect tax on all charges for real property services. Because the
environmental protection fee is a charge in connection with a taxable real
property service, the fee is taxable for sales and use tax purposes.

On the other hand, when garbage collection services are provided by a
governmental entity (such as the City of **) without a specific
charge being assessed, such as when the service is provided as a basic part of
services funded by the tax or fee structure of the governmental entity, sales
tax isn't due. If the City of **** combines garbage collection fees
with charges for other nontaxable services rather than separately itemizing
the garbage collection fee on the monthly bills, no tax is due on the
combined fees.

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. You may write me at Tax Correspondence, Comptroller of Public
Accounts.

Sincerely,

Bob Jeffcoat
Tax Correspondence