How did Texas tax garbage-collection costs when Houston reimbursed a homeowners association and residents paid the difference?

Plain-English summary

A Houston subdivision hired a garbage contractor, and the City of Houston reimbursed the subdivision up to a predetermined limit.

If the homeowners association billed each resident for the difference between the contractor's cost and the city reimbursement, tax was due only on that difference. The association could give the contractor a resale certificate and collect tax from homeowners on the amount billed to them; the fee billed to Houston was exempt.

If the association itself absorbed the difference instead of billing residents, the contractor's entire charge to the association was taxable. The letter also said that any future separately itemized garbage fee charged by Houston to the association or homeowners would be taxable in full.

What this means for you

Who bore the unreimbursed cost changed the collection method and taxable amount. Billing residents allowed tax to follow only the resident-funded difference, while the association's own payment made the contractor's full charge taxable.

Common questions

What if residents paid the amount above Houston's reimbursement? Tax applied only to that difference.

What documentation did the association use with the contractor? A resale certificate in lieu of paying tax to the contractor.

What if the association paid the difference itself? The contractor's entire charge to the association was taxable.

Was the fee billed to Houston taxable? No, the letter called it exempt.

Citations and references

• No statute or administrative rule is cited in the ruling text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9101L1070A11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

January 31, 1991

Dear ** :

We received your letter questioning the taxability of garbage
collection services reimbursed to your subdivision by the City
of Houston.

Your subdivision, which is located in the City of Houston, con-
tracts with a garbage contractor to collect garbage in your
subdivision. The City of Houston then reimburses the subdivi-
sion for its expenses at a predetermined limit.

If the homeowners association bills each resident for the dif-
ference between the cost of the garbage collection and the re-
imbursement from the City of Houston, then tax is due only on
the difference. The homeowners association should issue the
garbage contractor a resale certificate in lieu of the tax and
collect tax from the homeowner on the amount billed the home-
owner. The fee billed to the City of Houston is exempt.

However, if the homeowners association pays for the difference,
then the entire charge by the contractor to the homeowners as-
sociation is taxable.

If the City of Houston charges the Association or the homeowners
a separately itemized fee for garbage collection services in the
future, then this fee will be taxable in total.

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

If you have any questions you may call or write Tax Administra-
tion Division. You may call toll free 1-800-252-5555, or our
regular number is 512/463-4600. My extension is 3-4658.

Sincerely,
Sherry Buckley
Tax Administration Division