Is capping a hazardous landfill a taxable service under Texas sales tax?

Subject

Landfills — Capping Hazardous Landfill With Clay Under Permit And Direction Of The Texas Natural Conservation Commission

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9409L1314E13

Plain-English Summary

A company was closing a hazardous landfill under a permit from the Texas Natural Resources Conservation Commission, which required capping the landfill with materials meeting specific qualifications. The company asked the Comptroller whether the capping work, and the materials used for it, were subject to Texas sales tax.

The Comptroller ruled that capping a hazardous landfill is not a taxable service — it doesn't count as remodeling of real property or as landscaping, so no tax applies to the capping work itself.

On the materials side, the answer depends on where they come from and whether they're processed. Some of the capping material came from land the company already owned, and moving it from that land to the landfill was not taxable. Other material was to be purchased from a quarry in West Texas. Here the Comptroller drew a line: unprocessed dirt, sand, and gravel — and the transportation of that unprocessed material — are not taxable. But if the West Texas quarry material is processed before it's sold, both the material cost and its transportation become subject to sales tax.

What This Means For You

Environmental remediation contractors

If you're capping or closing a landfill under a state permit, the underlying capping work itself is not a taxable service in Texas — it isn't treated as remodeling real property or as landscaping. You don't need to collect or pay sales tax on the labor of installing the cap.

Landfill operators and companies sourcing fill material

Pay close attention to where your capping material comes from and its processing state. Moving unprocessed dirt, sand, or gravel from land you own to the landfill is not taxable. Purchasing unprocessed material from a third party (like a quarry) and transporting it is also not taxable. However, once that quarry material has been processed, both its purchase price and the cost of transporting it become taxable — so confirm with your supplier whether the material is being sold "as is" from the ground or after processing.

Q&A

Q: Is capping a hazardous landfill considered a taxable real property service in Texas?
A: No. The Comptroller confirmed that capping a hazardous landfill is not a taxable service — it is not considered remodeling of real property or landscaping.

Q: Does it matter whether the fill material is purchased or comes from land the company already owns?
A: Not for taxability of the transportation in either case — moving material from company-owned land to the landfill is not taxable. But for purchased material, whether it's processed or unprocessed determines whether tax applies.

Q: If I buy unprocessed sand and gravel from a quarry to use as landfill cap material, do I owe sales tax?
A: No, as long as the material is unprocessed. Neither the cost of unprocessed dirt, sand, or gravel nor its transportation is subject to tax. If the quarry processes the material before selling it to you, both the material cost and the transportation become taxable.

Citations

No statute is cited in the original ruling text.

Original ruling text

September 16, 1994

Dear ***:

The you for your letter following our telephone conversation earlier
this month. You were concerned about the tax ramifications of capping
a hazardous land fill. ** is closing a hazardous landfill
under the permit and direction of the State of Texas, Texas Natural
Resources Conservation Commission. The "cap" has to meet certain
qualifications.

There is no taxable service involved in capping a hazardous landfill.
It is not considered remodeling of real property or landscaping.

As I recall from our conversation, some of the capping material would
come from land owned by ****. Other materials, as indicated in
your letter, would be purchased from a quarry in West Texas. Basically,
the purchase of non-processed dirt, sand, and gravel and their
transportation are not taxable. The only caveat I would have about the
materials to be purchased by the company is that if the material purchased
from West Texas is processed, it would be subject to sales tax on both the
material costs and the transportation. If the company is simply purchasing
unprocessed quarry material, neither the cost of the material nor the
transportation of the material is subject to tax. The transportation of
the material from land owned by the company to the land fill is not
subject to tax.

I hope this satisfactorily answers your questions. Please feel free to
call me at 1-800-531-5441, extension 3-4004 if you have further questions.

Sincerely,

Wade Anderson
Assistant Director, Tax Administration

NOTE: Previous Accession Number 9409571L