Is hydraulic dredging of dirt, mud, silt, and sand from channels, rivers, ponds, and boat slips a taxable service in Texas?

Plain-English summary

A hydraulic dredging company asked the Comptroller whether its service — dredging dirt, mud, silt, and sand from channels, rivers, ponds, boat slips, and waterways — is subject to Texas sales tax. The Comptroller looked at the service described in the company's brochure and concluded it is a taxable real property service under Rule 3.356, the rule governing real property services, which lists solid waste removal as a taxable service.

The answer is not absolute, though. Rule 3.356 defines "garbage or other solid waste," and subsection (4) of the rule excludes certain things from that definition. To the extent the company performs work that falls outside the rule's definition of garbage or other solid waste, that work would not be taxable. So whether a given dredging job is taxable depends on exactly what is being removed and whether it fits the rule's solid-waste definition.

What this means for you

Dredging and waterway-maintenance contractors

Treat dredging that removes solid material from waterways as a taxable real property service by default. Because Rule 3.356 carves some material out of its "garbage or other solid waste" definition, review subsection (4) against what your specific job actually removes — some dredging work can fall outside the taxable category.

Documenting mixed jobs

If part of a job is taxable solid-waste removal and part falls outside the rule's definition, keep your scope of work and invoicing specific enough to support the treatment you apply.

Common questions

Q: Is hydraulic dredging taxable in Texas?
A: Generally yes. The Comptroller treats the dredging service described here as a taxable real property service under Rule 3.356, which includes solid waste removal.

Q: Is all dredging automatically taxable?
A: No. Work that falls outside Rule 3.356's definition of "garbage or other solid waste" (see subsection (4)) would not be taxable, so it depends on what is removed.

Q: Which rule controls?
A: 34 Tex. Admin. Code Rule 3.356, on real property services.

Q: Can I rely on this 1988 letter for my own dredging business?
A: Treat it as guidance only. It is based on the specific facts and brochure presented and can change with different facts; on the STAR system it binds the Comptroller only as to the taxpayer it was issued to and may no longer reflect current policy.

Citations and references

Rules:

• 34 Tex. Admin. Code Rule 3.356 (real property services; solid waste removal is taxable, with exclusions from the "garbage or other solid waste" definition in subsection (4))

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8810L0908C08

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

October 25, 1988

Dear ****:

Thank you for your letter of October 17, 1988, regarding hydraulic
dredging.

The service described in your brochure is a taxable service, as defined
in Rule 3.356 concerning real property services. The ruling includes solid
waste removal as a taxable service. Some services which you may perform in
your business are excluded from the term "garbage or other solid waste", as
defined in section (4) of Rule 3.356, and would not be taxable.

A copy of Rule 3.356 is enclosed for your reference.

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 our
toll-free number
1-800-531-5441. The regular number is 512/463-4600. You may write me at
the Tax Correspondence Division.

Sincerely,
Curt Swenson
Tax Correspondence Division