Is removing waste from a restaurant's grease trap taxable, and what about cleaning the sewer line it's connected to?

Plain-English summary

A business asked the Texas Comptroller's Tax Policy Division about the tax treatment of removing wastes from restaurant grease traps using microbes. The Comptroller explained that removing wastes from a grease trap that is part of a sewer system is a non-taxable service. However, sewer line cleaning services are taxable when performed for non-residential customers, such as restaurants.

The letter draws a line between the two activities: if a business only removes grease from a commercial customer's grease holding tank located in a sewer line, that charge is non-taxable. But if the business simultaneously cleans out the sewer line itself, the entire charge becomes taxable — unless the service is performed on a scheduled, periodic basis, or the business separately states the charge for cleaning the line. If the line-cleaning charge is separated out, that separated charge is subject to tax (while the grease-removal charge remains non-taxable).

What this means for you

Businesses that pump or clean restaurant grease traps

If you only remove grease waste from a commercial grease trap connected to a sewer line, that service is non-taxable. But if you also clean the sewer line at the same time, be careful how you bill it — combining both services into one undifferentiated charge makes the whole thing taxable (unless the work is done on a regular, scheduled basis).

Restaurants and other non-residential customers

Expect a taxable charge for sewer line cleaning services performed at your business, even though the related grease trap waste removal is non-taxable. Ask your service provider to itemize the invoice so you can see which portion, if any, reflects taxable sewer line cleaning versus non-taxable grease removal.

Accountants and tax professionals

This letter shows the Comptroller applying a bundling rule: combined charges for a non-taxable service (grease trap waste removal) and a taxable service (sewer line cleaning) become entirely taxable unless (1) the work is performed on a scheduled, periodic basis, or (2) the taxable line-cleaning charge is separately stated on the invoice.

Common questions

Q: Is pumping grease out of a restaurant's grease trap taxable?
A: No. The letter states that removal of wastes from grease traps that are part of a sewer system is a non-taxable service.

Q: Is cleaning a sewer line at a restaurant taxable?
A: Yes. The letter states that sewer line cleaning services are taxable when performed for non-residential customers such as restaurants.

Q: What happens if a provider does both grease removal and sewer line cleaning in the same visit?
A: The entire charge becomes taxable unless the service is performed on a scheduled, periodic basis or the charge for cleaning out the line is separately stated. If separately stated, only the line-cleaning charge is taxable.

Q: Does doing the work on a recurring schedule change the tax treatment?
A: Yes — the letter says the entire combined charge is taxable "unless the service is performed on a scheduled, periodic basis," which is one way to avoid the full charge becoming taxable even without separately stating the line-cleaning fee.

Citations and references

No specific statutes or administrative rules are cited in the text of this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9503L1345F05

Original ruling text

March 28, 1995

Dear *****:

Thank you for your inquiry concerning the removal of wastes from restaurant
grease traps by use of microbes.

The removal of wastes from grease traps that are part of a sewer system is
a non-taxable service. However, sewer line cleaning services are taxable
when performed for non-residential customers such as restaurants.

If you only remove the grease from a commercial customer's grease holding
tank in a sewer line, it will be non-taxable. However, if you simultaneously
clean out the sewer line, the entire charge will be taxable unless the
service is performed on a scheduled, periodic basis or you separate out the
charge to the customer for cleaning out the line. If you separate out the
charge for cleaning the line of grease, the charge is subject to tax.

This opinion is rendered based on the facts you submitted. Other facts,
though similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 3-4680. The direct line
is 512/463-4680. You may also write to Tax Administration,
Comptroller of Public Accounts.

Sincerely,

Al Van Allen
Tax Administration Division

NOTE: Previous Accession Number 9503062L