Did a company have to collect Texas sales tax for pumping, hauling away, and disposing of gasoline-contaminated water from underground fuel storage tanks?

Plain-English summary

The company pumped and disposed of gasoline-contaminated water from underground fuel storage tanks. The letter said the water was not considered hazardous waste by federal or state authorities and, according to the Comptroller's information, qualified as an "industrial discharge" under Chapter 26 of the Texas Water Code.

If the discharge was regulated by the Texas Water Commission and the provider held the required permit, the company did not have to collect tax for pumping, hauling away, and disposing of the liquid. It had to obtain a completed and signed exemption certificate from every customer and retain the certificates for audit review.

What this means for you

The nontaxable result depended on the waste stream's industrial-discharge classification and the provider's regulated status. The opinion expressly warned that different facts could produce a different answer.

Common questions

Was the removal charge taxable? No under the stated industrial-discharge facts. Was a customer document required? Yes, a completed and signed exemption certificate. Did the provider need to retain it? Yes, for possible audit review.

Citations and references

• Texas Water Code Chapter 26 (industrial-discharge regulation)
• Rule 3.356 (the waste-removal rule cited by the letter)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9110L1140F03

Original ruling text

October 28, 1991

Dear ***:

Thank you for your recent letter. I understand that your company
is engaged in the business of disposing of water from underground
fuel storage tanks. The water is contaminated with gasoline, and
is not considered hazardous waste by federal or state authorities.
You ask whether your service is taxable.

According to our information, fuel-contaminated liquid from an
underground storage tank is defined as an "industrial discharge"
under Chapter 26 of the Texas Water Code. Its disposal is regulated
by the Texas Water Commission, and the service provider is required
to hold a TWC permit.

If this fits your situation, then you are not required to collect
tax on a charge to pump, haul away and dispose of fuel-contaminated
liquid from an underground storage tank. See enclosed Rule 3.356.
You must obtain a completed and signed exemption certificate from
each customer for whom you provide this service. You must keep
these certificates on file for review in the event of an audit.

This opinion is based on the facts presented. Different facts, though
similar, might lead to different answers. If you have further
questions, feel free to write or call me at 1-800- 252- 5555
ext. 3-3889.

Sincerely,

John Christian
Attorney
Tax Administration Division