Did bond financing under the Regional Waste Disposal Act create the same sales-tax exemption for pollution-control equipment as the Clean Air Financing Act?

Plain-English summary

This July 9, 1986 letter corrected an April 16 letter about machinery, equipment, materials, and supplies incorporated into a Red River Authority pollution-control facility financed with pollution-control bonds.

The Comptroller distinguished two statutes. The Clean Air Financing Act contained a tax exemption for equipment purchased under that act. The Regional Waste Disposal Act did not contain a comparable purchase exemption. The corrective letter said equipment under the waste-disposal arrangement could qualify only when purchased by the river authority as described.

The attached internal history explained that prior advice had sometimes treated water-pollution equipment like exempt air-pollution equipment without recognizing the statutory difference. It also described a proposed decision taxing the end-user where the contract did not vest title to the facilities in the agency.

Common questions

Did the Regional Waste Disposal Act itself exempt equipment purchases? No.

Why were air-pollution purchases treated differently? The letter said the Clean Air Financing Act contained an express tax exemption.

Did bond financing alone create an exemption? No. The source of authority and the purchasing party mattered.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8607L0744G09

Original ruling text

July 9, 1986

Dear ***:

This letter is to correct my letter of April 16, 1986 concerning the
taxability of machinery, equipment, materials and supplies that are
incorporated into and/or become a pollution control facility financed
with pollution control bonds issued by the Red River Authority of Texas.

The Clean Air Financing Act contains a provision exempting from taxes
equipment purchased under this act. The Regional Waste Disposal Act does
not contain an exemption for purchases such as is found in the Clean Air
Financing Act. Equipment purchased under the Regional Waste Disposal Act
may qualify for exemption only if the equipment "as purchased hereby, by
the river authority.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at
the Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division

BOB BULLOCK
COMPTROLLER OF
PUBLIC ACCOUNTS

DATE: September 4, 1985

TO: Wade Anderson, Associate Deputy Comptroller
FROM: Bob Frederick, Legal Services Division
SUBJECT: Sales Tax on Water Pollution Control Equipment

Should we tax sales of water pollution control equipment when purchased
under the Regional Waste Disposal Act (Water Code).

We have previously exempted all purchases of air pollution equipment
under color of Art. 4477-5a, called the Clean Air Financing Act, which
provides that "the issuers should not be required to pay any tax or
assessment on the control facilities or any part thereof, and the bonds
issued hereunder and their transfer and the income, therefrom, shall at
all times be free from taxation within this state." Enclosed are memos
written by Mark Weiss to ***, ** and ****.

The Regional Waste Disposal statutes do not have such a tax exemption.
*** says when she was asked by field auditors about taxability
of pollution control facilities she did not realize the distinction between
air pollution and water pollution (until very recently) and would have
said "its exempt." She does not know if any auditor inquiries concerned
water pollution control facilities question. Recently, ***** asked
our opinion on hypothetical water pollution and we said "taxable."

The Proposed Decision on *** is a broad imposition of tax on the
end-user, the reformed polluter, and concludes that purchase of facilities
is not entitled to the exemption of a state agency even though the contract
between the agency and the polluter could (it does not for *****)
provide that title to facilities vests in the agency upon purchase by
the polluter. It relies on Attorney General Opinion MW-94.

Thus, we have unknown number of water polluters which we may have
exempted while audited and a formal taxpayer inquiry and a proposed hearings
decision which uphold tax. We also have task force hearing (***)
which has both air and pollution purchases. Shall we exempt air pollution
facilities and tax water pollution facilities?

BOB BULLOCK
COMPTROLLER OF
PUBLIC ACCOUNTS

DATE: December 13, 1985
TO: Bob Frederick--Legal Services
FROM: Gerald Eskew--- 2I04
SUBJECT: Red River Authority Waste Disposal Act Purchases

Per our telephone conversation December 2, 1985, I am enclosing the
installment sale agreement between Red River Authority of Texas and
***, regarding the purchases of material for the pollution
control equipment.

We would like your opinion on the taxability of the material purchased
for the Waste Disposal aspect of the agreement.