How did Texas tax sales of recyclable cardboard and a hauler's fee for taking the cardboard to a dealer when the hauler and customer shared sale proceeds?

Plain-English summary

The requester asked about recyclable corrugated cardboard, related hauling charges, and local-tax sourcing.

The Comptroller said recyclable goods were taxable when sold. A dealer could instead provide a valid resale certificate or an exemption certificate stating that the goods would be further manufactured into tangible personal property for resale. The permitted seller had to retain the certificates for audit.

Local tax on garbage-collection services was based on where the garbage or trash was picked up. Local tax on the recyclable-goods sale was based on the location of the seller's place of business making the sale.

The $75 charge to haul the customer's recyclable-cardboard dumpster to a dealer was not taxable garbage collection. Because the hauler and customer shared the cardboard sale proceeds, the fee was transportation associated with selling tangible personal property, and no tax was collected from the customer on that fee.

What this means for you

The same physical pickup could be classified differently depending on the transaction. Shared proceeds from selling recyclable property supported transportation treatment rather than taxable garbage removal.

Common questions

Was the cardboard sale taxable? Yes, unless the purchaser supplied an appropriate resale or manufacturing exemption certificate.

Was the $75 hauling fee taxable? No.

Why was the fee not garbage collection? The hauler and customer shared the proceeds from selling the cardboard, making the charge transportation tied to that sale.

Where was local tax sourced? Garbage collection to the pickup location; recyclable-goods sales to the seller's place of business.

Citations and references

• The letter did not cite a numbered statute, regulation, or case.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9105L1108A04

Original ruling text

May 6, 1991

Dear **:

Thank you for your letter concerning the taxability of
recycling fees and credits connected with the fee for garbage services. I
apologize for the lengthy delay.

Your first question #1a asks, is the sale of corrugated
cardboard to the dealer of the recyclable goods taxable? The response is yes,
recyclable goods are taxable when sold. However, the dealer may give a
properly completed and valid resale or exemption cer- tificate stating the
recyclable goods are purchased for resale or purchased for further
manufacturing into tangible personal property that will be resold,
respectively. Because your company is required to hold a sales tax permit, you
must maintain the certificates in lieu of tax for audit purposes.

In question #1b, you asked what is the local tax based upon?
Local taxes for garbage collection services are based upon the location of the
garbage or trash being picked up. Local taxes for the sale of the recyclable
goods are based upon the location of your place of business making the sale.

Regarding your question #2, the $75 charge to haul your
customer's dumpster of recyclable corrugated cardboard to a dealer of
recyclable goods is not taxable as garbage collection and removal. Based upon
the fact that both you and your customer share in the amount for which the
recycled cardboard is sold, this $75 fee is considered transportation
associated with the sale of tangible personal property. (See response to #1a.)
You do not charge your customer tax on any portion of this fee.

This opinion is based on the facts presented. If there are
additional or different facts, the opinion may change. You may
write to Tax Administration Division, Comptroller of Public
Accounts.

Sincerely,

Tax Administration Division