Are environmental testing, waste analysis, and disposal services for underground storage tank (UST) remediation taxable in Texas?

Subject

Tank — Underground Storage Tank (Ust) — Hauling Away/Disposal

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9408963L

Plain-English Summary

This is a follow-up letter ruling that walks through a list of specific invoices from an environmental contractor's work on an underground storage tank (UST) removal and cleanup project, telling the taxpayer which charges are taxable and which are not.

The pattern is consistent: testing, sampling, lab analysis, and disposal-approval services are nontaxable, because they are professional/analytical services rather than sales of, or repairs to, tangible personal property. That covers a Texas Water Commission (TWC) waste summary survey, filter-cake TCLP (metals/volatiles) lab analysis, work-area air sampling, soil BTEX/TPH analysis, and waste-stream/disposal-site approval reviews.

Two items came out taxable, however: (1) the actual removal of the underground storage tank (a service to real property/tangible personal property, not a testing service), and (2) a "turn key" sludge disposal-and-transportation charge that bundled multiple services into a single non-itemized fee. The letter also flags that soil excavation, transportation to a landfill, and use of an excavator/loader with an operator (all tied to the actual UST soil removal and disposal) were treated as nontaxable in this instance, but stresses that the outcome depends heavily on the specific facts and on how the invoice is stated.

The Comptroller closes with a key practical rule: waste-stream sampling/analysis and disposal-site review/approval charges are nontaxable only if separately stated on the invoice from any taxable service. Bundling nontaxable testing with a taxable service into one lump-sum charge risks making the whole thing taxable.

What This Means For You

Environmental contractors and remediation firms

Structure your invoices so that nontaxable analytical/testing/consulting services (sampling, lab analysis, waste classification, disposal-site approval) are billed as separate line items from any taxable services (such as tank removal or bundled "turn key" disposal/transportation packages). Combining them into one non-itemized charge can cause the Comptroller to treat the entire invoice as taxable.

Businesses removing or closing underground storage tanks

Expect the physical removal of the tank itself to be treated as a taxable service. Related soil excavation, hauling, and disposal charges may be nontaxable depending on exactly how they are described and billed, so get an itemized invoice from your contractor.

Accountants and tax professionals

This ruling is a good illustration of Texas's general approach to mixed environmental-services invoices: pure testing/analysis/consulting is nontaxable, but service work directly tied to removing, handling, or disposing of tangible property (especially bundled "turn key" arrangements) can be taxable. Always check whether a similar invoice separately states the nontaxable analytical components.

Q&A

Q: Is environmental sampling and lab analysis for UST remediation taxable in Texas?
A: No. Waste-stream sampling, TCLP/metals/volatiles lab analysis, air sampling, and soil BTEX/TPH analysis were all found nontaxable in this ruling.

Q: Is removing an underground storage tank itself taxable?
A: Yes. The invoice for "Underground storage tank removal" was specifically found taxable, unlike the surrounding testing and disposal-approval services.

Q: Are disposal and transportation charges taxable?
A: It depends. Disposal of contaminated soil and its transportation to a landfill were nontaxable in this ruling, but a separate "turn key" charge that bundled filter-cake sludge disposal and transportation into one non-itemized fee was taxable.

Q: How can I keep my nontaxable testing charges nontaxable if my invoice also includes taxable work?
A: Separately state the nontaxable services (such as waste-stream sampling/analysis and disposal-site review/approval) from any taxable service on the invoice. The ruling specifically notes these charges are nontaxable "if separately stated to the customer."

Citations

No specific Texas statutes, rules, or STAR document numbers are cited in the body of this letter. It applies general Texas sales and use tax principles distinguishing nontaxable professional/analytical services from taxable services to tangible personal property, based on the facts of invoices tied to an earlier letter dated November 5, 1993 (responding to a request dated October 20, 1993).

Original ruling text

August 10, 1994

Dear **:

This is in response to your letter providing additional information to facts
submitted by INDIVIDUAL, with CORPORATION, in his letter of October 20, 1993,
to which I responded on November 5, 1993.

Based on the additional information provided, following is the taxability of
the specific invoices addressed in my earlier letter and to the additional
invoice that you provided with this letter.

INVOICE NUMBER: 7TOl892
DESCRIPTION: TWC Annual Waste Summary and Waste Minimization survey
TAXABILITY: Nontaxable

INVOICE NUMBER: 7TO2492
DESCRIPTION: Treatment plant filter cake TCLP volatiles, semi-volatiles and
metals analysis
TAXABILITY: Nontaxable

INVOICE NUMBER: 7TO3192
DESCRIPTION: Work area air sampling and lab analysis
TAXABILITY: Nontaxable

INVOICE NUMBER: 7TO4592
DESCRIPTION: UST soil excavation, BTEX/TPH analysis for soil disposal approval

• soils metal analysis TWC waste code
  TAXABILITY: Nontaxable

INVOICE NUMBER: 7T04692
DESCRIPTION: Underground storage tank removal
TAXABILITY: Taxable

INVOICE NUMBER: 7T06192
DESCRIPTION: UST tankhold over excavation additional charges
TAXABILITY: Nontaxable
DESCRIPTION: Additional backfill soil 58 trucks
TAXABILITY: Nontaxable

INVOICE NUMBER: 7TO9792
DESCRIPTION: Underground Storage Tank soil: disposal 406 Cyds
TAXABILITY: Nontaxable
DESCRIPTION: transportation to BFI landfill
TAXABILITY: Nontaxable
DESCRIPTION: excavator/loader and operator
TAXABILITY: Nontaxable
DESCRIPTION: disposal facility waste stream approval
TAXABILITY: Nontaxable
UST Closure Plan Nontaxable

INVOICE NUMBER: 8TO9793
DESCRIPTION: Treatment Plant Filtercake sludge disposal and transportation,
(turn key) TAXABILITY: Taxable

Waste stream sampling and analysis and disposal site review and approval, would
not be taxable if separately stated to the customer.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

You may call me toll-free at 1-800-531-5441, extension 3-4502. The direct line
is 512/463-4502. You may also write to Tax Administration, Comptroller of
Public Accounts.

Sincerely,

Gilbert Zamora
Tax Administration Division