If I rent out roll-off garbage containers and charge a $50 setup fee, is the whole charge taxable, and which city's local sales tax applies?

Plain-English summary

In this December 3, 1992 letter, the Texas Comptroller's Tax Policy Division addressed how sales tax applies to daily and monthly rental fees for sanitation roll-off containers, including a $50 fee charged to physically set the container in place.

The Comptroller drew a line between two situations:

1. Containers provided as part of garbage collection service. Whether or not the container is billed separately, it's treated as part of the taxable garbage collection service. The total charge — including the $50 setup fee — is taxable, and local sales tax is based on where the garbage is collected.
2. Containers rented without collection service (or where collection is optional and separately charged). These are treated as rentals of tangible personal property, not a collection service. The total charge, including the $50 fee, is still taxable, but local sales tax is based on the vendor's place of business, and local use tax may also apply.

The letter notes it is based on the facts as presented, and that the answer could change with different facts.

What this means for you

Waste haulers and container rental companies

Whether you bundle roll-off containers with a garbage collection service or rent them out standalone matters for figuring out which city's or district's local tax rate applies — not whether tax applies at all (it does, either way, including any setup/delivery fee). If collection service is included, source local tax to the collection point. If it's a bare rental (or collection is optional/separately priced), source local tax to your own place of business, and check whether local use tax is also owed.

Accountants and tax professionals

This letter treats the $50 "set fee" as inseparable from the taxable charge in both scenarios — there's no attempt to carve it out as a nontaxable service fee. The key classification question is whether the container is functionally part of a collection service or a standalone equipment rental, since that determines local tax sourcing rules (collection point vs. vendor's place of business) under general Texas sales/use tax sourcing principles for services versus tangible personal property rentals.

Common questions

Q: Is the $50 fee to set the container in place taxable?
A: Yes. The letter states the total charge to the customer is taxable, including the $50 set fee, in both the collection-service scenario and the standalone-rental scenario.

Q: How do I know which local sales tax rate applies?
A: If the container is provided as part of a garbage collection service, local sales tax is based on where the garbage is collected. If the container is rented separately from any collection service (or collection is optional and separately charged), it's a rental of tangible personal property, and local sales tax is based on the vendor's place of business — with local use tax potentially also due.

Q: Does it matter if the container fee is billed separately from the collection fee?
A: Not for whether collection service is happening — the letter says containers "provided to the customer as part of the garbage collection, whether or not a separate fee is made, are a part of the taxable service." What matters is whether collection service is actually part of the deal, not how the invoice is itemized.

Q: Can I rely on this letter for my own business?
A: Only if you were the taxpayer who requested it. Texas STAR letters are based on the specific facts presented to the Comptroller and can only support a detrimental-reliance claim for the taxpayer they were issued to. This 1992 letter may also no longer reflect current Comptroller policy.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9212L1206G01

Original ruling text

December 3, 1992

Dear ****:

Thank you for your letter regarding the sales tax applicability to
daily/monthly rental fees for sanitation roll-off container service.

The total charge to the customer is taxable, including the $50 set fee for the
cost of service to physically put a roll-off container in place. Containers
provided to the customer as part of the garbage collection, whether or not a
separate fee is made, are a part of the taxable service. The local sales taxes
on garbage collection are due based on the point of collection.

Containers rented to customers without providing a garbage collection service,
or which are optional to the customer and for which a separate charge is made
are considered to be rentals of tangible personal property. The total charge,
including the S50 fee would be taxable. The local sales taxes on rentals of
tangible personal property are based on the vendor's place of business. Local
use taxes may also be due.

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 additional information, you may call me toll
free at 1-800-252-5555, extension 3-4666, or the regular Austin number
512/463-4666. You may write to Tax Administration Division.

Sincerely,

Jo Ann Dieck