Could a taxable landscaping provider buy the city's later removal of collected grass, trees, and organic debris tax-free for resale?

Plain-English summary

A landscaper removed grass clippings, trees, and other organic waste as part of a taxable landscaping service and charged tax on the total customer price, including waste removal.

The landscaper held the debris until enough accumulated, then paid the city to haul it to the dump. Because the landscaper was reselling the removal service as part of its taxable customer service, the Comptroller allowed it to give the city a resale certificate instead of paying tax on the city's further-removal charge.

The letter relied on the facts that the landscaper was not processing wood products for resale and that its own total service charge was taxable.

What this means for you

Under the 1988 guidance, a taxable service provider could buy a subcontracted waste-removal component for resale when that component was included in the taxable service sold to the customer.

Common questions

Did the landscaper charge tax on waste removal? Yes, as part of the total taxable landscaping charge.

Could the city charge be purchased for resale? Yes. The landscaper could issue the city a resale certificate for further debris removal.

Was the landscaper processing the wood for resale? No.

Citations and references

The letter referred to an enclosed rule covering real-property services but did not identify the rule number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8805L0893E14

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF AUSTIN
AUSTIN, 78774

May 31, 1988

Dear *****:

I'd like to apologize for the length of time its for us to get
this letter out to you. When I found that it hadn't been mailed,
I decided to type it personally.

As I understand it, you do landscaping and as part of your service
you remove grass clippings, trees and other organic waste items.
Your clients are charged tax on your total charge which includes
the waste removal.

You said that you retain these items until you have sufficient
quantity and then call the city to haul it to the dump. You also
said that you are not processing any of the wood products for
resale but simply providing a taxable service which includes waste
removal.

Based on this information, you may issue the city a resale certif-
icate in lieu of tax on their charge for further removal of the
debris. I'm enclosing a copy of the rule covering Real Property
Services and a sample resale certificate for your use.

Please don't hesitate to call me if I can be of any further help.
My toll free number is 800-531-5441.

Sincerely,
Al Van Allen
Tax Policy Division