Is a consulting and monitoring service that tells a customer when to have their trash compactor emptied subject to Texas sales tax?

Subject

Trash Compactor Consulting And Monitoring Service Is Not Taxable, But Company Owes Tax On The Monitoring Equipment

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9309L1265G08

Plain-English Summary

A company ("Company A") provides a consulting and monitoring service to its customers. It installs a monitoring system at each customer's location, and uses that system to take readings of how full the customer's trash compactors are. Based on those readings, Company A calls the customer to recommend the best time to call the waste hauler to empty the compactor. The equipment placed at the customer's location is not sold to the customer, and it is not rented to the customer either. The purpose of the service is to save customers money by avoiding paying to have compactors dumped when they are less than full.

The Comptroller's response: consulting, monitoring, and advising the customer on how full their trash compactor is, on a stand-alone basis, is not taxable. However, Company A owes tax on the monitoring equipment and all other supplies and materials it uses to perform the service, at the time it purchases them.

The letter notes that the opinion is based on the facts presented, and that different facts, though similar, may result in different answers.

What This Means For You

The service itself is not taxable. If your business installs monitoring equipment at a customer's site purely to gather data and then calls or advises the customer based on that data — without selling or renting the equipment to the customer — the letter indicates that consulting/monitoring/advising service, standing alone, is not a taxable sale.

But you owe tax on your own equipment and supplies. Because the monitoring equipment is not sold or rented to the customer, Company A (the service provider) is treated as the end consumer of that equipment and the other supplies and materials used to perform the service, and owes tax on those items at the time of purchase.

Whether equipment changes hands matters. The letter specifically notes that the equipment placed at the customer's location "is not for sale and it is not rented to the customer." If a similar arrangement instead involved selling or leasing the monitoring equipment to the customer, the analysis could differ — this letter only addresses the stand-alone consulting/monitoring service.

This is a facts-specific letter. The Comptroller states the opinion is based on the facts presented and that different facts, though similar, may lead to a different answer, so businesses with a comparable but not identical arrangement should not assume the same result applies to them.

Q&A

Q: Is a trash compactor consulting and monitoring service taxable in Texas?
A: According to this letter, consulting, monitoring, and advising a customer on the fullness of their trash compactor on a stand-alone basis is not taxable.

Q: Does the company that provides this monitoring service owe any sales or use tax?
A: Yes. The letter states Company A owes tax on the monitoring equipment and all other supplies and materials used to perform the service, at the time of purchase.

Q: Is the monitoring equipment sold or rented to the customer?
A: No. The letter states the equipment placed at the customer's location is not for sale and is not rented to the customer.

Q: What does the monitoring service actually do?
A: A monitoring system installed at the customer's location takes readings of how full the customer's trash compactors are. Company A then telephones the customer to recommend the optimum time to call their waste hauler to dump the compactor.

Q: What was the purpose of this service, according to the letter?
A: The letter states the purpose of the service is to save customers money by avoiding paying for full loads when dumping compactors that are less than full.

Q: Can another business rely on this exact answer for its own compactor-monitoring arrangement?
A: Not automatically. The letter states the opinion is based on the facts presented, and that different facts, though similar, may result in different answers.

Original ruling text

September 9, 1993

Dear **:

This is in response to your letter dated August 24, 1993,
regarding sales tax as it applies to the service provided by your business.

FACTS: Company A provides a consulting and monitoring service
to it's customers. A monitoring system is installed at each customers location
and Company A uses it to take readings of the fullness of the customer's trash
compactors. Based on the information received, Company A telephones the
customer to recommend the optimum time to call their waste hauler to dump their
compactor. The equipment placed at the customer's location is not for sale and
it is not rented to the customer (per our telephone conversation 9-8-93). The
purpose of our service is to save our customers money from dumping compactors
that are less than full and paying for full loads.

RESPONSE: Consulting, monitoring, and advising your customer on the fullness
of their trash compactor on a stand alone basis is not taxable. Company A owes
tax on the monitoring equipment and all other supplies and materials used to
perform the service at the time of purchase.

This opinion is based on the facts presented. Different facts, though similar,
may result in different answers. If you have any questions or need more
information, please write or call me at 1-800-531-5441, extension 5-0330, or
512-475-0330.

Sincerely,

Bettie Peterson
Tax Administration Division

NOTE: Previous Accession Number 9308174L.2 and/or 9308174L