How did Texas tax excavation and disposal when an underground storage tank was removed or replaced?

Plain-English summary

The requester asked the Tax Administration Division to review two earlier opinions concerning underground-storage-tank removal and information services. The Comptroller confirmed that those opinions reflected current agency policy at the time.

The letter added that excavating an underground storage tank for disposal or replacement was demolition of a real-property improvement and was nontaxable. Hauling away and disposing of the tank was taxable waste removal. The Comptroller compared the distinction to demolishing a building versus hauling away its debris.

A lump-sum charge combining taxable and nontaxable services was presumed fully taxable when the taxable portion exceeded 5% of the total. The provider could overcome that presumption by separately stating a reasonable charge for the taxable services.

What this means for you

Tank contractors should separately price excavation, hauling, and disposal. A single combined price can make the entire charge taxable under the rule described in this letter.

Common questions

Was excavating the tank taxable? No. Was hauling and disposal taxable? Yes. What happened to a mixed lump-sum charge? It was presumed fully taxable if taxable services exceeded 5%, unless reasonable taxable charges were separately stated.

Citations and references

• The letter confirms earlier agency opinions but does not identify a numbered statute or administrative 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/9201L1150C06

Original ruling text

January 3, 1992

Dear ****:

Larry Koenig asked me to answer your letter of June 11, 1991, in which
you asked us to review two previous opinions issued by the Tax Administration
Division regarding the taxability of underground storage tank removal services
and information services provided by your client. I apologize for the delay in
responding. I confirm that the opinions expressed in those letters reflect
current agency policy.

I would like to add that a charge to excavate a UST in order to dispose
of it or to replace it with a new UST constitutes demolition of an improvement
to realty. This is a nontaxable service. The actual hauling away and disposal
of a UST is, however, a taxable waste removal service. These services are
comparable to (a) demolishing a building, and (b) hauling away the debris.

A lump-sum charge for taxable and nontaxable services is presumed to be
taxable in its entirety if the portion of the charge relating to taxable
services constitutes more than 5% of the total charge. The service provider
may, of course, overcome the presumption by separately stating a reasonable
charge for taxable services.

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