Was licensed collection and hauling of special or infectious medical waste for the Texas prison system taxable?

Plain-English summary

A business collected medical waste and transported it to a disposal site for the Texas Department of Corrections. Although the request described the waste as not infectious, the contract required licensing for “special/infectious waste,” and the Comptroller analyzed the regulated-waste rules.

Rule 3.356 excluded hazardous waste from ordinary garbage and treated collection or hauling of hazardous waste as a nontaxable service. The provider's service to the Department was therefore nontaxable, and the bid document served as the required certification.

The provider could not buy its operating property for resale or use the customer's exempt status to issue an exemption certificate. It owed tax on containers, air-conditioning units, and all property used to store, collect, and haul the infectious medical waste.

What this means for you

Exemption of the collection charge did not exempt the service provider's equipment and supplies. The ruling also relied on the contract's licensing language and certification, not merely the taxpayer's informal description of the waste.

Common questions

Was the waste-collection service taxable? No.

Could the provider buy containers for resale? No.

Did contracting with an exempt state agency exempt the provider's purchases? No.

What purchases were taxable? Containers, air-conditioning units, and all items used to store, collect, and haul the waste.

What satisfied the certification requirement? The bid with the Texas Department of Corrections.

Citations and references

• Texas Civil Statutes art. 4590f (regulated waste licensing)
• 34 Tex. Admin. Code Rule 3.356(a), (c)(2), and (h) (real-property and waste-collection 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/9011L1056C01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

November 14, 1990

Dear ****:

Thank you for your recent letter regarding the taxability of the ser-
vice provided by your business.

Information provided in your letter and during our telephone conver-
sations indicate your business collects and transports to a proper
disposal site medical waste. You have stated that the waste is not
"infectious medical waste."

Waste which requires specific licensing under Texas Civil Statutes,
Article 4590f, and rules adopted by the Texas Board of Health under
that law is "hazardous waste." "Hazardous waste" includes materials
listed or identified as hazardous waste by the administrator of the
United States Environmental Protection Agency (EPA) or by other ap-
propriate federal or state agency.

The term "hazardous waste" means a solid waste, or combination of
solid wastes, which because of its quantity, concentration, or physi-
cal, chemical, or infectious characteristics may pose a substantial
present or potential hazard to human health or the environment when
improperly treated, stored, transported, or disposed of, or otherwise
managed.

The term "medical waste" means any solid waste which is generated in
the diagnosis, treatment, or immunization of human beings or animals,
in research pertaining thereto, or in the production or testing of
biologicals.

Enclosed is a copy of the amended Rule 3.356 that was issued April 25,
1988, which excludes hazardous waste from the definition of garbage.
Section (h) of the rule addresses persons providing collection ser-
vices for customers having waste that is excluded from the definition
of "garbage or other solid waste" under section (a) of the rule. Please
note that section (h) classifies the collection or hauling of hazard-
ous waste as a nontaxable garbage collection service.

A copy of your bid with TDC was obtained and on page 3, item No, under
the heading of requirements it reads in part ".....vendor is and shall
be permitted and licensed by all regulatory and governmental agencies
requiring permits and licenses for disposal of special/infectious waste."
(Emphasis added.)

Section(c)(2) of Rule 3.356 Real Property Services does not apply to
equipment used in providing medical waste collection or removal. The
service * is providing to the Texas Department of Corrections
is a nontaxable service. The provider of a nontaxable waste collec-
tion service may not purchase tax free for resale the containers used
in providing the nontaxable service. Nor may the containers be pur-
chased tax free by issuing an exemption certificate just because your
contract is with an exempt entity. ** owes sales tax on the con-
tainers, air-conditioning units, and all items used to store, collect,
and haul the infectious medical waste.

The bid with TDC will serve as the required certification under section
(h) of the rule.

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

If you have any questions or need additional information, you may call
me toll free at 1-800-252-5555, extension 5-0330. The regular number
is 512/463-4600, or write me at Tax Correspondence.

Sincerely,
Bettie U. Peterson
Tax Correspondence Division