Is a separately stated charge for air quality monitoring during an asbestos abatement project taxable in Texas?

Subject

Asbestos Abatement — Air Monitoring Services Separately Stated — Treated As Unrelated Or Stand — Alone Services

Plain-English summary

A taxpayer asked the Comptroller how to tax monitoring equipment, other equipment, and monitoring services billed on a stand-alone basis during an asbestos abatement project.

The Comptroller drew a line between the service charge and the equipment used to provide it. A separately stated charge for air quality monitoring performed during an asbestos abatement project is not taxable. However, the air monitoring equipment and other equipment used to perform the abatement is taxable to the service provider when the provider purchases, leases, or rents it -- the provider pays tax on its own tools, not the customer on the monitoring service.

The letter also addresses a related charge: a separately stated charge for collecting and disposing of the asbestos itself is exempt, treated as removal of hazardous waste.

As with other Comptroller letters of this era, the ruling notes it is based on the facts presented, and other, similar facts could produce a different result.

What this means for you

Asbestos abatement contractors

If you bill air quality monitoring as a separately stated line item during an abatement project, that charge is not taxable to your customer. But don't assume you're off the hook entirely -- you owe tax on the monitoring equipment and other equipment you buy, lease, or rent to perform the work, since that tax falls on you as the service provider rather than being passed through as a taxable charge to the customer.

Businesses hiring asbestos abatement services

Expect your invoice to (potentially) separate out air monitoring charges and asbestos collection/disposal charges from other charges. Under this ruling, both a separately stated air monitoring charge and a separately stated collection-and-disposal charge (as hazardous waste removal) can be nontaxable to you, even though the contractor's own equipment purchases are taxed to the contractor.

Accountants and tax professionals advising abatement contractors

When structuring or reviewing abatement contracts, confirm that air monitoring and asbestos collection/disposal are billed as genuinely separately stated charges -- this ruling's nontaxable treatment turns on that separate statement. Also flag that the equipment-tax obligation sits with the service provider at the point of purchase, lease, or rental, independent of how the service itself is billed.

Common questions

Q: Is a separately stated charge for air quality monitoring during asbestos abatement taxable?
A: No. The letter states this charge "is not taxable."

Q: Is the monitoring equipment itself taxed?
A: Yes, but not to the customer. The air monitoring equipment and other equipment used to perform the asbestos abatement is taxable to the service provider when purchased, leased, or rented by the service provider.

Q: What about charges for collecting and disposing of the asbestos?
A: A separately stated charge for the collection and disposal of the asbestos is exempted, as it is treated as removal of hazardous waste.

Q: Could this outcome be different for another taxpayer?
A: Yes -- the letter says the opinion is based on the facts presented, and other facts, though similar, may provide a different result.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9610933L

Original ruling text

October 17, 1996

Via Fax: ***

Re: Asbestos Abatement- stand alone charges

Dear ***:

This is in response to your request for a ruling on the taxability of
monitoring equipment, other equipment, and monitoring services billed
on a stand alone basis during an asbestos abatement project.

Response: A separately stated charge for air quality monitoring performed
during an asbestos abatement project is not taxable. The air monitoring
equipment and other equipment used to perform the asbestos abatement is
taxable to the service provider when purchased, leased, or rented by the
service provider.

A separately stated charge for the collection and disposal of the asbestos
is exempted as the removal of hazardous waste.

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 Policy Division,
Comptroller of Public Accounts. My Internet address is:
[email protected].

Sincerely,

Gilbert Zamora
Tax Policy Division