Is a company's cleanup and removal of non-hazardous spills from Texas highways — including its rolloff-box charges — a taxable real property service, even when billed to a state agency?

Plain-English summary

A licensed hazardous/non-hazardous waste removal company cleans up spills (gasoline, oil, diesel, antifreeze, and similar contaminants) on Texas highways when the Texas Department of Transportation (TxDOT) calls it in. It asked the Comptroller three questions, and lost on all three:

1. Is the cleanup taxable? Yes. "Real property services" include removal or collection of garbage, rubbish, or other solid waste, and the company's documentation showed its waste was classified as Class 1-3 non-hazardous — the statutory exclusion is only for actual EPA/TCEQ-classified "hazardous" (Class H) waste, which this wasn't.
2. Does billing a government agency (TxDOT) change that? No. The governmental-entity exemption only covers items/services sold directly to the government — it doesn't cover real property services performed on government-owned or -maintained property, or services a government mandate triggers, unless the sale is directly to the government or the cleanup happens in a formally declared disaster area. The Comptroller also formally superseded its own 1993 guidance (STAR Accession No. 9310L1267A12) that had suggested government-mandated cleanups were automatically nontaxable — that guidance lacked supporting analysis and no longer applies.
3. Are rolloff-box charges taxable? Yes — drop-off, rental, and pickup charges for the waste containers are part of the total sales price of the taxable waste-removal service, not a separate nontaxable item.

What this means for you

Environmental/waste-removal companies working with state or local agencies

Don't assume a government contract, or a spill you're required to clean up by law, makes your service tax-exempt. The exemption is narrow: it applies only when you sell directly to the government entity itself, or when the work happens in an officially declared disaster area. Billing a state agency for cleanup after a third party caused the spill does not, by itself, exempt the charge.

Businesses using rolloff boxes/containers as part of a taxable service

If you charge for waste containers as part of an overall taxable removal/cleanup service, those container charges (delivery, rental, pickup) are folded into the taxable total — you can't separately state them to avoid tax. You may still buy or rent the boxes tax-free from your own supplier using a resale certificate if you transfer care, custody, and control of the box to your customer.

Accountants and tax professionals

Watch the hazardous-waste exclusion in § 151.0048(a)(3): it only applies to waste formally classified "H" (hazardous) by EPA/TCEQ standards — a taxpayer's own general environmental license doesn't automatically make its removed waste "hazardous" for tax purposes. Also note the ruling formally supersedes STAR Accession No. 9310L1267A12 on the government-mandate question, since that older guidance wasn't grounded in statutory text.

Common questions

Q: If a spill happens on public property and a state agency requires the cleanup, is that automatically tax-exempt?
A: No. Unless the service is sold directly to the government entity or performed in a declared disaster area, real property services on government property are still taxable — even when a state law or agency mandate required the cleanup.

Q: Does classifying waste as hazardous for environmental/licensing purposes make it exempt from sales tax?
A: Only if it's actually classified as Class "H" hazardous waste under EPA/TCEQ rules and properly documented as such. Class 1-3 non-hazardous waste doesn't qualify for the exclusion, even if the company doing the removal is separately licensed to handle hazardous materials.

Q: Can I rely on this ruling for my own waste-removal business?
A: No. It binds the Comptroller only for the taxpayer and facts described. If your waste is properly classified hazardous, or you contract directly with a government entity, your analysis could differ.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051 (Sales Tax Imposed); § 151.010 (Taxable Item)
• Tex. Tax Code § 151.0101(a)(11) (real property services); § 151.0048(a)(3) (waste removal/collection)
• Tex. Tax Code § 151.007(a)(2), (a)(4) (sales price includes related charges)
• Tex. Tax Code § 151.309 (governmental entities exemption); § 151.350(c)(1)-(2) (disaster-area labor exemption)
• 34 Tex. Admin. Code § 3.356(a)(3)(D) (hazardous waste, Real Property Services); § 3.285(b)(6) (resale certificate for rolloff boxes)

Cited/superseded prior guidance:

• STAR Accession No. 9310L1267A12 (Oct. 18, 1993) — SUPERSEDED by this ruling's government-mandate analysis

Source

• Landing page (STAR search): https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/202506019L

Original ruling text

June 27, 2025

RE: Private Letter Ruling No. PLR20241125170238

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters. [ENDNOTE 1] We are responding to your request dated November 30, 2024, and additional information received April 10, 2025. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on whether the waste removal services provided by your client are real property services subject to Texas sales and use tax.

Facts Presented

** (Taxpayer), is a waste removal company that specializes in the removal of Class 1-3 non-hazardous waste from Texas roadways and highways. Taxpayer is licensed by the Texas Commission on Environmental Quality (TCEQ) and the United States Environmental Protection Agency (EPA) for the cleanup, removal, and disposal of all classes of hazardous waste.

Texas Department of Transportation (TXDOT) contacts Taxpayer when there is a spill of materials, such as gasoline, used motor oil, diesel, antifreeze, jet fuel, and other contaminants on Texas highways. Taxpayer responds to the location with company personnel, vehicles, and cleaning materials and equipment to clean and dispose of the contaminants.

Taxpayer is responsible for the entire waste removal process. This includes cleanup of all waste or contaminants and transportation to and disposal of the material at an approved disposal site. Taxpayer disposes waste in a Class 1 landfill which accepts Class 1 hazardous materials. Taxpayer must perform periodic testing on waste or contaminants collected as required by TCEQ, and for approved disposal in Class 1 landfills.

After completing the waste removal services, Taxpayer submits an invoice to the party responsible for the spill. If Taxpayer is unable to collect from the responsible party, Taxpayer will invoice TXDOT who will reimburse Taxpayer for its services.

Taxpayer charges sales and use tax on its waste removal services when billed to the responsible party. Taxpayer does not charge sales tax when it bills TXDOT. Taxpayer also does not charge sales tax for spills on drainage infrastructure such as roadside ditches.

Additionally, Taxpayer charges for the use of “rolloff boxes” used as part of its hazardous material cleanup operations. Taxpayer charges hourly rates for use of the rolloff boxes and trucks for hazardous material cleanup invoiced along with the other cleanup fees. Taxpayer also provides rolloff boxes directly to customers, such as construction companies, for waste removal. The rolloff boxes are delivered to the customer and left at the project location. Once the project is completed, or the rolloff box is full of waste and debris, Taxpayer retrieves the rolloff box. Taxpayer charges drop-off and pick-up fees, along with monthly rates for residential and commercial construction projects.

Questions, Rulings, and Analyses

Our restatement of your questions is shown below, followed by our responses and analyses.

Question One: Is Taxpayer’s collection, removal, and disposal of Class 1-3 non-hazardous waste and contaminants from Texas roadways and highways subject to sales and use tax as a real property service?

Ruling One: Yes, Taxpayer’s collection, removal, and disposal of Class 1-3 non-hazardous waste and contaminants is subject to sales and use tax as a taxable real property service.

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). Section 151.010 (Taxable Item) defines a taxable item to include tangible personal property and taxable services. Only specifically enumerated services listed in Section 151.0101 (Taxable Services) are taxable. This includes real property services. Section 151.0101(a)(11).

Real property services include the removal or collection of garbage, rubbish, or other solid waste. Section 151.0048(a)(3) (Real Property Services). Section 151.0048(3)(A) and (B) specifically exclude the collection of hazardous waste and industrial hazardous waste from the services subject to tax.

Hazardous waste is defined by the administrator of the EPA and is implemented by the TCEQ for this state. Rule 3.356(a)(3)(D) (Real Property Services).

TCEQ requires those who handle waste to make an accurate determination as to whether the waste is hazardous. 30 Tex. Admin. Code §335.504(a) (Hazardous Waste Determination). TCEQ requires classification of hazardous waste as “H” and filing of specific reports identifying the waste as hazardous. See 30 Tex Admin. Code §335.510(a) (Sampling Documentation).

Taxpayer’s documentation does not show that the waste collected is classified as a class “H” hazardous waste under EPA or TCEQ guidelines. Instead, the waste being cleaned and disposed of is classified under class 1, 2, or 3 non-hazardous waste as defined in 30 Tex. Admin. §335.503(a)(2) (Waste Classification and Waste Coding Required). As a result, the cleanup, removal, and disposal is subject to sales and use tax under Section 151.0048(a)(3).

Question Two: Are real property services taxable when required by a state or federal agency and performed on exempt real property owned by a governmental entity?

Ruling Two: Yes, real property services are taxable when required by a state or federal agency or performed on real property owned by a governmental entity.

Analysis: Section 151.309 (Governmental Entities), exempts taxable items sold, used, or consumed by a governmental entity. The exemption does not include real property services performed on real property owned, leased or maintained by exempt entities. Unless sold directly to the governmental entity or performed in a declared disaster area as defined by Section 151.350(c)(1) and (2) (Labor to Restore Certain Property), sales tax applies.

STAR Accession No. 9310L1267A12 (Oct. 18, 1993), specifically states that the cleanup of oil spills on Texas roadways are subject to sales and use tax as a real property service. The letter also provides that services to cleanup an oil spill on a Texas waterway pursuant to a governmental mandate are nontaxable.

There are no relevant facts or analysis included in the letter to support that determination relating to governmental mandates. As a result, STAR Accession No. 9310L1267A12 will be superseded.

Taxpayer has also not included any documentation that it provides waste removal services in Texas waterways, or any relevant documentation showing there are any governmental rules or regulations mandating the removal of waste. There are also no provisions in Section 151.0048 (Real Property Service) that state a real property service becomes nontaxable if mandated by a government rule or regulation, or if performed on a waterway.

Question Three: Are Taxpayer’s charges for rolloff boxes subject to sales and use tax as the sale of real property service?

Ruling Three: Yes, Taxpayer’s charges for rolloff boxes are part of the removal and collection of garbage, rubbish, or other waste which is subject to sales and use tax as a real property service.

Analysis: Section 151.007(a)(2) and (a)(4) (Sales Price or Receipts) includes all expenses and transportation incident to the performance of a taxable service in the total sales price of a taxable service. All costs including the drop off, rental charges, and pick up fees for the rolloff boxes are associated with the removal or collection of garbage, rubbish, or other solid waste as defined in Section 151.0048(a)(3), and are therefore subject to sales or use tax.

Under Section 151.0048(a)(3), rolloff boxes used in providing taxable waste removal services may be purchased or rented tax-free by issuing a resale certificate to suppliers provided care, custody, and control to the boxes is transferred to the purchaser of the taxable waste removal service per Rule 3.285(b)(6) (Resale Certificate; Sales for Resale).

The Texas Tax Code and Texas Administrative Code are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. PLR20241125170238.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE

1 Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.