Was a fee for picking up cardboard for baling and resale taxable, and how was the later cardboard sale documented?

Plain-English summary

The recycler charged customers to pick up cardboard, baled it, and sold it to roof-shingle manufacturers.

The pickup fee was taxable garbage collection under Rule 3.356(a)(4). When selling the cardboard to a manufacturer, the recycler had to collect tax or accept a valid, properly completed exemption certificate.

What this means for you

The material's later recycling did not make the collection fee nontaxable. The downstream sale required its own tax or exemption documentation.

Common questions

Was the cardboard pickup fee taxable? Yes.

Could the manufacturer buy the cardboard tax-free automatically? No; the seller needed a valid exemption certificate or collected tax.

Citations and references

• Comptroller Rule 3.356(a)(4) — garbage collection
• Comptroller Rule 3.287 — exemption certificates
• Comptroller Rule 3.300 — manufacturers

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9009L1043G12

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

September 4, 1990

Dear **:

We received your letter questioning the taxability of your recycling
services.

According to your letter and our telephone conversation, you pick up
cardboard from your customers for a fee. You bail the cardboard and
sell it to manufacturers of roof shingles.

Your fee for picking up the cardboard is taxable as a garbage collec-
tion service. See section (a)(4) of the enclosed Rule 3.356 relating
to real property services.

When you sell the cardboard to the manufacturer, you should either
collect tax or a valid and properly completed exemption certificate.
Enclosed are a copy of Rule 3.287 relating to exemption certificates
and a suggested form. I've also included Rule 3.300 on manufacturers
for your reference.

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

If you have any questions you may call or write Tax Correspondence.
You may call toll free 1- 800- 252- 5555, or our regular number is
512/463-4600. My extension is 3-4658.

Sincerely,
Sherry Buckley
Tax Correspondence