Was a checkout surcharge used to recover junk-automobile waste-handling costs subject to Texas sales tax?

Plain-English summary

A company proposed adding a surcharge at the cash register to recover costs of handling waste generated by junk automobiles. Texas said the surcharge was taxed in the same way as the item sold. It was taxable when the underlying item was taxable, but it was not taxable when the particular sale was exempt because the purchaser bought the part for resale.

What this means for you

A separately listed cost-recovery surcharge did not receive its own tax treatment under this letter. Its treatment followed the underlying sale.

Common questions

Was the waste-handling surcharge generally taxable? Yes, when attached to the sale of a taxable item.

What if the customer bought the part for resale? If that sale was exempt, the related surcharge also was not taxable.

Did placing the charge separately on the receipt change the result? No separate exclusion was recognized; the letter said the surcharge followed the item sold.

Citations and references

The letter did not cite a statute or rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9103L1083C13

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller March 4, 1991

Dear ** :

Thank you for your recent letter which is restated in part with
response below.

Situation: Our company is evaluating a surcharge on each
customer to help recover the costs of handling the various wastes
generated by junk automobiles. This charge would be levied at
the cash register as each customer is paying and included on the
customer's sales receipt.

Question: I am writing to request a written statement from the
Comptroller's Office indicating whether this surcharge is subject
to the state sales tax.

Response: The surcharge is subject to sales tax in the same way
as the item that is sold. If a particular sale is exempt because
the purchaser is buying the part for resale, the surcharge is
also not taxable.

This opinion is based on the facts you presented. Other facts,
though similar, may yield different results.

If you have questions or need more information, please call our
toll-free number 1-800-531-5441. My direct line number is 512-
463-4680 [FAX (512) 475-0900]. You may write to me in care of
Tax Administration Division.

Sincerely,
Al Van Allen
Tax Administration Division