Is waste and garbage collection service provided to an ocean-going vessel operating under a foreign flag exempt from Texas sales tax?

Plain-English summary

A company that billed ocean-going, foreign-flagged vessels for waste collection and disposal service asked the Comptroller whether that service was exempt from Texas sales tax -- the vessel operators had been deducting the sales tax from the bills and refusing to pay it. The Comptroller said the service is taxable. Texas's Tax Code does not exempt waste collection performed for ocean-going vessels, and the specific exemptions that do exist for vessels -- covering component parts, ship's stores, and materials/services used to repair, restore, or remodel a vessel -- simply don't reach garbage and waste removal. Because the tax was properly added to the bills, the vessel operators (not the company providing the service) are liable for it.

What this means for you

Companies servicing ocean-going or foreign-flag vessels

Don't assume every service sold to a vessel operating in foreign or interstate commerce is covered by Texas's vessel-related sales tax exemptions. Those exemptions are narrow -- they reach a vessel's component parts, its ship's stores, and repair/restoration/remodeling work -- not general services like garbage and waste collection. If a vessel operator disputes the tax on a waste-removal invoice, this ruling supports charging and collecting it.

Vessel operators

You can't rely on the general vessel exemption to avoid sales tax on waste collection and disposal services in Texas. The Comptroller specifically found this is a taxable service, and the operator (not the service provider) bears the liability for the tax.

Accountants and tax professionals

This ruling is a useful boundary marker for the vessel exemptions in the Texas Tax Code: they're limited to a vessel's physical component parts, ship's stores, and repair/restoration/remodeling materials and services. Ancillary services performed for a vessel, like garbage and waste removal, fall outside that scope and remain taxable.

Common questions

Q: Does operating in foreign or interstate commerce exempt a vessel's waste removal service from Texas sales tax?
A: No. The ruling states plainly that the Tax Code does not exempt waste collection services performed for ocean-going vessels in Texas, regardless of the flag or trade the vessel operates under.

Q: Do the vessel exemptions for component parts, ship's stores, or repair work cover waste removal?
A: No. The Comptroller specifically found those exemptions "do not apply to waste collection services."

Q: Who owes the tax if the vessel operator refuses to pay it?
A: The ruling states the vessel operators are liable for the sales tax added to the waste collection bills.

Q: Can I rely on this ruling for my own situation?
A: Only if you're the taxpayer it was issued to. It's based on the specific facts presented to the Comptroller, and if the facts differ, the outcome could too -- consult a licensed Texas tax professional for your situation.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9212209L

Original ruling text

December 7, 1992

Dear **:

Thank you for your letter of December 3, 1992, concerning the taxability of
waste removal services provided to ocean going vessels operating under foreign
flags.

You state that you have been billing these vessels for waste collection and
disposal services and adding Texas sales tax to the bills. The vessel operators
have been deleting the sales tax from the bills and failing to remit the sales
tax to you.

The Texas Tax Code does not exempt waste collection services performed for
ocean going vessels in this state.

The exemptions provided under the Texas Tax Code for component parts of such
vessels, for ship's stores, and materials and services to repair, restore, and
remodel such vessels do not apply to waste collection services. The vessel
operators are liable for the sales tax added to the waste collection bills.

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

You may call toll free 1-800-531-5441, extension 3-4683 if you have any
questions or need more information. You may write to Tax Administration
Division, Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Administration Division