Is the delivery charge for hauling dirt, sand, caliche, or rock taxable in Texas, and does it matter if the rock itself is taxed?

Plain-English summary

A hauling company asked the Comptroller three related questions about delivering rock, dirt, sand, and caliche, and how road-work context changes the answer.

Delivery charges track the taxability of the material. If a hauler buys taxable rock from a vendor and a third party (not the seller) delivers it, the delivery charge itself is not taxable — only a delivery charge billed by the seller of taxable rock is taxable, under Comptroller Rule 3.303. If the rock itself is nontaxable (e.g., certain unprocessed rock), the delivery charge is never taxable, regardless of who bills it or delivers it.

But road work changes everything. Spreading rock — processed or unprocessed, taxable or not — on an existing lease road is treated as restoring, repairing, or remodeling that road, and the entire charge to the customer is taxable, whether or not the rock is separately stated on the bill. The hauler can still buy taxable rock for that job tax-free by issuing a resale certificate to its own vendor, since it's ultimately collecting tax on the full job from its customer.

Creating a brand-new road is different: under a lump-sum contract, the hauler collects no tax from the customer at all and instead pays tax on its own rock purchases. Under a separated contract for new-road construction, the hauler can buy taxable materials tax-free for resale and then collect tax only on the separately stated materials charge — a separately stated charge for nontaxable (unprocessed) rock stays untaxed even in a new-construction job.

What this means for you

Rock, sand, dirt, and caliche haulers

Track two things separately: (1) whether the material itself is taxable, which controls whether a seller-billed delivery charge is taxable, and (2) whether the job is repairing an existing road (fully taxable, no matter how you bill it) versus building a new one (nontaxable if lump-sum; materials-only tax if separated).

Oil-field and lease-road contractors

The "existing vs. new road" distinction is the one that matters most for your bottom line — repair work on an existing lease road is taxable on the whole charge even if you carefully separate the rock cost from the labor cost, while new construction gets much more favorable treatment.

Accountants and tax professionals

This letter is a compact illustration of the interaction between the delivery-charge rule (Rule 3.303) and the broader repair-vs-new-construction framework the Comptroller applies to real property services. Confirm which category a road job falls into before advising on delivery-charge taxability, since the delivery-charge answer only controls in isolation, not once the material becomes part of a repair job.

Common questions

Q: Is delivery of rock always taxable in Texas?
A: No. Delivery of nontaxable rock is never taxable. Delivery of taxable rock is taxable only when billed by the seller of the rock — a third-party hauler's separate delivery charge is not taxable.

Q: Does it matter if I'm working on an existing road versus building a new one?
A: Yes, significantly. Spreading rock on an existing lease road is taxable repair/remodeling on your entire charge. Creating a new road under a lump-sum contract is nontaxable (you pay tax on your own materials instead); under a separated contract, only the separately stated taxable-materials charge is taxed.

Q: If I buy taxable rock to repair an existing road, do I owe tax twice?
A: No — you can issue a resale certificate to your rock vendor (buying it tax-free) since you're collecting tax from your customer on the entire repair charge instead.

Q: Can I rely on this ruling for my own hauling business?
A: Not directly. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10). Confirm your own contract structure and material classification with a tax professional.

Citations and references

Statutes and rules:

• Comptroller Rule 3.303 (transportation and delivery charges)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200104321L

Original ruling text

April 4, 2001

Dear **:

Thank you for your recent letter concerning the taxability of services
performed by your firm. You asked the following questions:

1. If we purchase taxable rock from a vendor and have someone else pick up and
   deliver the rock, is the delivery taxable or nontaxable?

Response. The delivery charge is not taxable. A delivery charge by the seller
of the taxable rock would be taxable per enclosed Rule 3.303.

2. If we purchase nontaxable rock and have the vendor deliver the rock, is the
   delivery taxable or nontaxable? If we have someone else deliver the rock, is
   it taxable or nontaxable?

Response. Nontaxable. Since the rock is nontaxable, the delivery is not
taxable even when billed by the seller.

3. Does it make a difference if the location is new or existing, as to whether
   or not you pay tax on the rock or delivery?

Response. When you spread rock (processed or nonprocessed) on an existing
lease road, you are restoring, repairing, or remodeling the lease road. Your
entire charge to your customer is taxable. This is true regardless of whether
you separately state the rock (whether processed or unprocessed to your
customer). If you purchased taxable rock to perform this job, you could issue
a resale certificate in lieu of tax to the vendor.

When you are creating a new road for a customer under a lump-sum contract, you
collect no tax from your customer and pay any applicable taxes on your rock
purchases per Responses 1 and 2 above.

When you are creating a new road for a customer under a separated contract, you
could buy any taxable materials incorporated into your customer's realty tax
free for resale, and collect tax on the separated charge for taxable materials.
A separated charge for nontaxable (nonprocessed) rock would not be subject to
tax.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change. You may call me toll free at
1-800-531-5441, ext. 5-0613. The direct line is 512/475-0613. You may also
write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Kevin Koller
Tax Policy Division