Ezel / Tax Rulings / TX
TX 9204L1166A06 Sales and/or Use Tax (State,Local,MTA) 1992-04-16

How did Texas tax soil decontamination, disposal, hauling, and backfill sales by a facility treating petroleum-contaminated soil?

Short answer: Decontaminating the soil was nontaxable regardless of reimbursement. Disposing of soil after treatment was taxable waste removal; hauling untreated soil could be nontaxable if it was a regulated industrial discharge. Processed-soil backfill was taxable, while unprocessed soil was not.

Apply this to your situation

This page answers the general question as of 1992. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1992
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The Comptroller gave four answers for a Texas Water Commission-approved facility that used a rotary kiln to remove hydrocarbons from petroleum-contaminated soil that was not classified as hazardous.

First, decontaminating the soil was not taxable whether the charge was reimbursed by the Commission's fund or paid directly by the responsible generator. Second, disposing of the soil after decontamination was taxable waste removal. Hauling and disposing of the soil before treatment could be nontaxable if it met the definition of an industrial discharge regulated by the Commission under Water Code Chapter 26.

Third, backfill made from the facility's decontaminated soil was taxable because the Comptroller treated it as processed soil. Unprocessed soil sold as removed from the ground was not taxable.

What this means for you

The tax result changed with both timing and processing. Treatment itself was nontaxable, but disposal after treatment was taxable. Untreated fuel-contaminated soil required the stated industrial-discharge classification, and processing converted soil sold as backfill into a taxable item.

Common questions

Did reimbursement by the Texas Water Commission fund matter? No. Decontamination was nontaxable with or without reimbursement.

Was disposal after decontamination taxable? Yes, as waste removal.

Could hauling untreated contaminated soil be nontaxable? Yes, if it qualified as an industrial discharge regulated under Water Code Chapter 26.

Was decontaminated soil sold as backfill taxable? Yes. The letter treated it as processed soil; unprocessed soil was not taxable.

Citations and references

  • Texas Water Code Chapter 26

Source

Original ruling text

April 16, 1992

Dear ***:

Thank you for your recent letter asking about sales tax on the services
provided by your company.

Facts: *** is a Texas Water Commission (TWC) approved facility.
We use a rotary kiln to eliminate hydrocarbons from contaminated soil. The
soil we treat is not classified by TWC as hazardous. It is classified as
petroleum-substance contaminated waste.

Situation 1. We treat contaminated soil and our charge is reimbursed by
TWC reimbursement fund.

Response: A charge for decontaminating soil is not taxable.

Situation 2. We treat contaminated soil and our charge to the generator
is not reimbursed by the TWC reimbursement fund.

Response: A charge to the person responsible (the generator) for
decontaminating the soil is not taxable even if reimbursement does not
come from the TWC reimbursement fund.

Situation 3. We charge for disposal of the decontaminated soil.

Response: A charge for the removal of decontaminated soil is taxable as
a waste removal service. In other words, if you dispose of the soil after
the soil has been decontaminated, the charge for disposal is taxable.

If you haul off the soil before it is decontaminated, the charge for
hauling away and disposal of fuel-contaminated soil will not be taxable
provided the soil meets the definition of an "industrial discharge"
subject to regulation by the TWC under Chapter 26, Water Code.

Situation 4. We charge for backfill material used to fill in the
underground storage tank hole.

Response: If the material you sell to fill in the hole is the soil you
have decontaminated, the charge is taxable. We consider this soil to be
"processed," and a charge for processed soil is taxable. If you sell
unprocessed soil (soil just as it is removed from the ground), the charge
will not be taxable.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any additional questions or need more information, you may
call me toll free at 1-800-252-5555, extension 3-4633. The regular number
is 512/463-4633. You may also write to the Tax Administration Division.

Sincerely,

Wanda Hutcheson
Tax Administration Division

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