Were truck-time and per-gallon charges for disposing of oil and water from a groundwater test well taxable as waste removal?

Plain-English summary

The provider charged truck time and a per-gallon disposal fee to remove oil and water from a groundwater test well during underground-water cleanup. Those charges were nontaxable if the waste was an industrial discharge regulated by a Texas Water Commission permit under Chapter 26 of the Texas Water Code.

The letter said a waterborne substance resulting from a process of industry, manufacturing, trade, or business—including oil operations—qualified as industrial waste under Water Code § 26.001(11). The provider had to obtain a signed exemption certificate from each customer identifying the excluded waste.

For a completely excluded waste stream, the certificate could say the waste was totally excludable. For mixed taxable and nontaxable waste, it had to state that the customer would accrue tax on the taxable portion. Without a signed and properly completed certificate, the service was presumed taxable under Rule 3.356(h).

What this means for you

The waste classification and documentation worked together. A qualifying permitted discharge could receive nontaxable treatment, but the provider needed a certificate that accurately addressed total or mixed waste.

Common questions

Were truck-time and disposal charges taxable? No under the qualifying industrial-discharge facts. Was a certificate required? Yes. What if the customer had mixed waste? The customer had to accrue tax on the taxable portion. What if no valid certificate was obtained? The service was presumed taxable.

Citations and references

• Texas Water Code Chapter 26 (permit regulation)
• Texas Water Code § 26.001(11) (industrial-waste definition)
• Rule 3.356(h) (waste-removal exemption certificates)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9110L1136E13

Original ruling text

October 16, 1991

Dear ****:

Thank you for your recent letter and sample invoice. You ask whether
tax is due on charges for the disposal of oil and water from a
groundwater test well. This service is provided for the purpose of
cleaning up underground water.

The "truck time" charge and the per-gallon disposal fee are not
taxable, provided the waste is an industrial discharge subject to
regulation by a permit issued by the Texas Water Commission pursuant to
the Texas Water Code, Chapter 26. If the waterborne substance of which
you are disposing resulted from "any process of industry, manufacturing,
trade, or business", including oil operations, then it qualifies as
"industrial waste" under Water Code Section 26.001(11).

Be sure to obtain a signed exemption certificate (blank copy enclosed)
from each customer for whom you provide such services. The certificate
should specify the type of waster being excluded and either that the
waste being collected is totally excludable or that the customer has
both taxable and nontaxable waste and the customer will be responsible
for accruing tax on the portion of the charge that represents taxable
waste removal services. Rule 3.356(h). Absent a signed and properly
completed exemption certificate, your service would be presumed to be
taxable.

This opinion is based on the facts presented. Different facts, though
similar, might lead to different answers. If you have further questions,
feel free to write or call me at 1-800-252-5555, ext. 3-3889.

Sincerely,

John Christian
Attorney
Tax Administration Division