Were single-use drums and containers used for exempt hazardous-waste disposal exempt from Texas sales tax?

Plain-English summary

A waste company bought nonreusable fiber, plastic, and steel drums to transport regulated, potentially harmful chemicals for disposal.

Hazardous-waste disposal was exempt, but no exemption covered the provider's containers or equipment. The company consumed the drums in providing the service and owed tax on them.

Rule 3.300 exempted certain necessary materials used in manufacturing to comply with public-health or pollution-control requirements. That did not apply because the drums held waste only after manufacturing was complete and did not directly participate in manufacturing.

The Comptroller also distinguished Southwestern Electric Power Co. v. Bullock, where limestone was necessary, essential, and consumed during manufacturing.

What this means for you

A nontaxable waste-removal service did not make the provider's disposal containers exempt. Timing and direct manufacturing use controlled the pollution-control argument.

Common questions

Was hazardous-waste disposal taxable? No.

Were the disposal drums taxable? Yes.

Did the manufacturing pollution-control exemption apply? No.

Why was the cited power-company case different? Its limestone was consumed as a necessary part of manufacturing; these drums were used afterward.

Citations and references

• 34 Tex. Admin. Code Rule 3.300(d)(3)(B) (manufacturing materials used for public-health or pollution-control compliance)
• Southwestern Electric Power Co. v. Bullock

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9010L1056D07

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller October 30, 1990

Dear ***:

I am responding to your letter regarding the taxability of containers
used to transport chemicals that are potentially harmful wastes. The
chemicals have regulated disposal requirements by various state agen-
cies and are disposed of in either fiber or plastic drums which are
placed in steel drums. The containers are not reusable.

Question: Are the purchases of these waste disposal containers exempt
from Texas Sales and Use Tax?

No. There is no exemption for containers or any other equipment used
in hazardous waste removal. The actual disposal of hazardous waste
is exempt from tax; however, the containers used in providing the ser-
vice are not exempt. The containers/drums purchased by the taxpayer
for its use in proper disposal of hazardous waste are taxable.

According to Rule 3.300 exempt manufacturing items include necessary
and essential materials. Section (d)(3)(B) states "Materials used in
manufacturing to satisfy or comply with requirements of law or regula-
tions for public health or pollution control purposes are exempt". This
section of the rule refers to exempting materials used in manufacturing,
not the containers the waste materials are placed into for disposal.

You have referenced the Southwestern Electric Power Co. v. Bullock case
to support your position of exempting the containers from the tax. This
case does not parallel your situation as the limestone used in the pol-
lution equipment was "necessary and essential" and was consumed during
the manufacturing process. The containers are not materials and can
not be necessary and essential to the manufacturing process since they
are not used until after the manufacturing process has been completed.
The containers are taxable.

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

If you have any question or need more information, please call our toll-
free number 1-800-252-5555, extension 34666. The regular number is
512/463-4600. You may write me at Tax Correspondence, Comptroller of
Public Accounts.

Sincerely,
Jo Ann Dieck
Tax Correspondence