Did packaging, unpacking material, and broken pallets count as industrial solid waste for the nontaxable-removal treatment in Rule 3.356?

Plain-English summary

The Comptroller refused to classify shipping refuse—including packing and unpacking materials and broken pallets—as industrial solid waste for the nontaxable waste-removal treatment referenced in Rule 3.356.

The requester argued that packaging and shipping were incidental to manufacturing. The letter instead read the Solid Waste Disposal Act as addressing potentially harmful waste, including hazardous and industrial waste, produced by actual manufacturing and processing activities. It noted that packaging and shipping refuse was not regulated under that chapter.

Because the shipping refuse fell outside that definition, it did not qualify as industrial solid waste under the policy the requester asked the Comptroller to reconsider.

What this means for you

Manufacturers and waste haulers

Do not classify ordinary shipping debris as industrial solid waste merely because a manufacturer generated it. The letter focused on whether the waste resulted from actual manufacturing or processing and was within the regulatory purpose of the Solid Waste Disposal Act.

Accountants and tax professionals

The letter addressed the definition used for Rule 3.356's nontaxable-removal category. It did not provide a broader analysis of every possible waste-removal charge.

Common questions

Were broken pallets industrial solid waste? No, as part of the shipping refuse described in the letter.

Did packaging become industrial waste because manufacturing businesses needed it? No. The Comptroller distinguished shipping activity from actual manufacturing and processing.

What definition did the Comptroller use? Health and Safety Code § 361.003(15), read with the Solid Waste Disposal Act's policy in § 361.002(a).

Citations and references

• 34 Tex. Admin. Code Rule 3.356 (waste-removal services)
• Texas Health and Safety Code § 361.003(15) (industrial solid waste definition)
• Texas Health and Safety Code § 361.002(a) (Solid Waste Disposal Act policy)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9201L1162A01

Original ruling text

January 30, 1992

Dear **:

Thank you for your letter, which Adina Whittemore transferred
to me for reply. As I understand it, you are requesting
reconsideration of our policy regarding the definition of
industrial solid waste whose removal is a nontaxable service
according to Rule 3.356. Specifically, you indicate that
"shipping refuse" should be included in the definition, contrary
to our current policy. For the following reasons, we believe that
shipping refuse is not industrial solid waste.

We refer to the Texas Solid Waste Disposal Act for guidance
regarding the definition of industrial solid waste. The Act
provides as follows:

"Industrial solid waste" means solid waste resulting from or
incidental to a process of industry or manufacturing, or mining
or agricultural operations.

Health And Safety Code Section 361.003 (15).

Pointing out that manufacturers must package and ship their
products, you argue that the words "incidental to a process
of industry or manufacturing" should necessarily include
shipping refuse relating to any stage of manufacturing
operations (i.e. packing and unpacking material, broken
pallets, etc.).

However, one has only to read the statement of policy and
purpose behind the Solid Waste Disposal Act to gain insight
into the type of waste it regulates:

It is the state's policy and the purpose of this chapter to
safeguard the health, welfare, and physical property of the
people and to protect the environment by controlling the
management of solid waste, including accounting for hazardous
waste that is generated.

Health and Safety Code Section 361.002 (a).

Essentially, the Solid Waste Disposal Act exists to regulate
the disposal of the potentially harmful waste products,
including hazardous waste and industrial solid waste, that
result from actual manufacturing and processing activities.
The Texas Water Commission, the Texas Department of Health,
and other state and federal agencies closely monitor the
disposal of these types of waste products. Packaging or
shipping refuse is free from regulation under this chapter.

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