If I dig up caliche and haul it to a customer's job site, do I have to charge Texas sales tax on the hauling/delivery charge?

Plain-English summary

In this December 15, 1992 letter, the Texas Comptroller's tax administration division answered a taxpayer's question about whether transportation charges for hauling caliche are taxable. The answer turns entirely on whether the caliche has been processed.

If the caliche is simply dug out of the ground and hauled straight to the customer's site, neither the sale of the caliche nor the transportation charge is taxable. If the caliche is processed in some way before delivery, both the caliche itself and the transportation charge become taxable — and that's true whether the seller hauls it themselves or hires a common carrier to do it.

The letter draws a specific line on what counts as "processing": mixing, crushing, and cutting are processing (making the sale and hauling taxable), but washing, screening, and sorting are not (leaving an unprocessed sale/haul non-taxable).

What this means for dirt, sand, caliche, and rock haulers

If you sell and haul raw, unprocessed caliche

If you dig the caliche out of the ground and place it on a truck (yours or a common carrier's) for delivery straight to the customer, you should not collect sales tax on either the caliche or the delivery charge, according to this letter.

If you process the caliche before delivery

Mixing, crushing, or cutting the caliche turns it into a taxable sale, and the transportation charge tied to that sale becomes taxable too — regardless of whether you use your own trucks or a common carrier.

Washing, screening, and sorting don't count as processing

The letter specifically carves these three activities out of "processing." A hauler who only washes, screens, or sorts the caliche (without mixing, crushing, or cutting it) can still treat the caliche and the haul as non-taxable under this letter's reasoning.

Common questions

Q: Does it matter who does the hauling — the seller or a common carrier?
A: No. The letter says the transportation charge is taxable (when the caliche is processed) "whether you haul the caliche yourself or have a common carrier do it for you."

Q: What counts as "processing" under this letter?
A: Mixing, crushing, and cutting. The letter expressly says processing "does not include washing, screening and sorting."

Q: Is this letter binding on the Texas Comptroller for other taxpayers?
A: No. Per STAR's own disclaimer, letters like this can only be relied on by the taxpayer to whom they were issued, and STAR documents may no longer reflect current policy even if not marked superseded.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9212999L

Original ruling text

December 15, 1992

Dear **:

After we spoke on the telephone yesterday, I asked a specialist in our tax
administration division about the taxation of transportation charges for
hauling caliche. The answer is that if the caliche is simply removed from the
ground and hauled to the customer's site, neither the sale of the caliche nor
the transportation charges are taxable. If, on the other hand, the caliche is
processed in some fashion, the charges for both the caliche and the
transportation charges are taxable whether you haul the caliche yourself or
have a common carrier do it for you. Processing includes mixing, crushing, and
cutting, but does not include washing, screening and sorting.

Therefore, if you simply remove the caliche and place it on a common carrier
for delivery to a customer, you should not collect any sales tax.

I hope this satisfactorily answers your questions.

Sincerely,

Wade Anderson
Assistant Director of Tax Administration