When were sales and delivery of dirt, sand, gravel, equipment, and construction services taxable in Texas?

Plain-English summary

A sand and equipment company delivered construction materials, rented equipment, supplied equipment with operators, and performed work at residential and nonresidential sites.

The Comptroller said unprocessed dirt, sand, or gravel was not a taxable item, and its delivery charge was also not taxable. Washing, sizing, or sorting did not change that result. Mixing the material with other materials or crushing it made the product taxable. For taxable construction items, the taxable sales price included transportation or delivery charges even when separately stated.

Equipment rented without an operator was taxable on the total charge, including transportation. Supplying equipment with an operator was a service, whose taxability depended on the work performed. Labor for new construction and residential repair or remodeling was not taxable under the letter, while the entire charge for nonresidential repair, remodeling, or restoration was taxable.

The letter also treated landscaping and nonhazardous garbage or waste removal as taxable services. Site preparation for new construction was not landscaping. Moving another person's property was not taxable when it was not connected to a taxable sale, rental, lease, or service.

What this means for you

The invoice needed to identify both the material and the work. The same hauling charge could be nontaxable when attached to unprocessed material or a standalone move, but taxable when connected to processed material, an equipment rental, or a taxable service.

Common questions

Was delivery of unprocessed dirt, sand, or gravel taxable? No, if the invoice documented the material as unprocessed.

Could the material be washed, sized, or sorted? Yes, without becoming taxable under the letter. Mixing or crushing it made it taxable.

Was equipment rented without an operator taxable? Yes, including separately stated delivery charges.

Was equipment supplied with an operator automatically taxable? No. That was treated as a service, and taxability depended on the service performed.

Was site preparation landscaping? No. The letter distinguished foundation-site leveling for new construction from taxable landscaping.

Citations and references

• 34 Tex. Admin. Code Rule 3.291 — new construction
• 34 Tex. Admin. Code Rule 3.356 — landscaping, waste removal, and other real-property services
• 34 Tex. Admin. Code Rule 3.357 — residential and nonresidential real-property repair and remodeling

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9106L1116F01

Original ruling text

June 21, 1991

Dear **:

Thank you for your recent letter concerning sales tax changes that affect

our sand and equipment company.

The major changes in The sales and use tax law that affected your

business have been in effect for several years. On October 1, 1987, certain

real property services became subject to sales tax. These taxable services

included landscaping and waste removal among others. I have enclosed Rule

3.356 on real property services which details these taxable services.

Another major change in the sales and use tax law was effective on

January 1, 1988. The regular or remodeling of nonresidential real property

became a taxable service on that date. This taxable service is detailed in

Rule 3.357 on real property repair and remodeling which I have also enclosed.

According to your letter, your company delivers dirt and related

construction materials to residential and nonresidential jobs. It is important

to know how to charge sales tax on the various materials you are selling. When

you sell unprocessed dirt, sand, or gravel you are not selling a taxable item.

The transportation charge to deliver these unprocessed materials will not be

taxable either. The sale of unprocessed materials should be noted as such on

the invoice to the customer to document why no tax was charged. The unprocessed

materials can be washed, sized, or sorted without becoming taxable. If the

unprocessed materials are mixed with other materials or are crushed, then they

become taxable because they are not processed materials.

When you sell processed materials and other taxable construction items,

you should charge the sales tax on the total charge to the customer. The total

charge includes any transportation or delivery charge even if separately

stated.

The rental or lease of Equipment without operators to your customers is

taxable on the total charge, including any separately stated transportation or

delivery charge. A company that is renting Equipment from you to perform a

taxable service must pay tax on the rental. they cannot issue a resale

certificate for the rental just because they will collect sales tax on their

service.

You also stated in your letter that your company provides equipment with

operators for both residential and nonresidential construction. When you

provide Equipment with an operator you are performing a service rather than

renting or leasing equipment. The service will be taxable based on what type of

service is performed. Labor is not taxable when performing new construction of

residential or nonresidential real property. See Rule 3.291 concerning new

construction.

The labor to repair or remodel residential real property is also not

taxable. The entire charge is taxable when repairing, remodeling, or restoring

nonresidential real property. The contract between the customer and you should

be clear as to what is being done to avoid confusion when it is a nontaxable

service being performed.

Landscaping is a taxable service. Landscaping is the activity of

arranging and modifying areas of land and natural scenery for aesthetic effect,

considering the use to which the land is put. Site preparation for new

construction is not landscaping and is not taxable. Site preparation involves

leveling the land so that a foundation can be poured.

Another taxable service is garbage and waste removal. It is not taxable

if the waste that is removed is identified or listed as hazardous waste by the

administrator of the United States Environmental Protection Agency or by other

appropriate federal or state agencies as provided in section (a)(4)(D) of Rule

3.356. In this situation, your company must obtain a properly completed

exemption certificate from the customer and evidence that the waste is

hazardous under the above-outlined provision. This evidence must include

manifest or other appropriate official document showing the waste's disposal in

a suitable, regulated facility.

In your letter you had a question concerning the moving of heavy

equipment by truck and low-boy. The charge for transporting the equipment is

taxable if you are performing a taxable service with the equipment. When the

service that you are performing with the equipment is not taxable, then the

transportation charge is not taxable either.

A transportation charge connected to the sale, rental, or lease of a

taxable item is also subject to tax. It is not taxable to move another

person's property from one location to another. This would be the case as long

as the transportation is not connected to a sale, rental, or lease of a taxable

item or to the performance of a taxable service.

It is important that your invoices and contracts specify what work is

being done. There are times when you are required to obtain an exemption

certificate from your customer. An example of this is if you were doing work

to help landscape a church. The invoices and contract may clearly indicate

that it is a church, but you must have a valid exemption certificate from the

church.

It is not necessary to obtain an exemption certificate to show that the

work is new construction or the repair and remodeling to residential property.

The contract between you and your customer will be sufficient if it is clear

what work is being done.

This opinion is based on the facts presented. If there are additional or

different facts, the opinion may change.

You may call me toll-free at 1-800-252-5555, extension 33690. The

regular number is 512/463-3690. You may also write to Tax Administration

Division, Comptroller of Public Accounts.

Sincerely,

David Sommerville

Tax Administration Division