Does a waste collection company owe Texas sales tax on the state solid-waste disposal fee and a city fee for waste containers that it passes on to customers?

Plain-English summary

A taxpayer wrote to the Comptroller asking why it should have to pay sales tax on top of a state fee for solid waste disposal and a city fee imposed on waste containers. The Comptroller's Tax Administration Division answered that these fees don't escape tax — they are part of the taxable charge for waste collection.

The reasoning: Texas sales tax applies to the "sales price" of taxable items, and taxable items include taxable services. Waste collection or removal is classified as a taxable real property service. By law, the sales price of a taxable item is the total amount charged, with no deduction for the cost of materials, labor, or other expenses. Because the state disposal fee and the city container fee are expenses incurred by the waste collection company, they become part of the sales price of the waste collection service — and sales tax applies to that whole amount, not just to a reduced charge that excludes the fees.

What this means for you

Waste collection and disposal businesses

If your business passes along a government-imposed disposal fee or a container fee to customers as part of your waste collection charge, you can't back that fee out of the taxable sales price. The full amount you bill for the waste collection service — including pass-through fees like these — is subject to Texas sales tax.

Business owners and accountants

When calculating sales tax on a taxable service, remember that Texas law defines "sales price" broadly: it's the total charge, without deductions for costs the seller incurs to provide the service (materials, labor, or other expenses). A fee being government-imposed on the seller doesn't automatically make it non-taxable when re-billed to the customer as part of a taxable service charge.

Common questions

Q: Why does the state fee for solid waste disposal get taxed — isn't it just a pass-through of a government charge?
A: Under Texas law, the sales price of a taxable item is the total amount charged, without any deduction for expenses the seller incurs, including fees like this one. Since waste collection is a taxable service, the total price for that service — fees included — is subject to sales tax.

Q: Does the same logic apply to the city fee on waste containers?
A: Yes. The letter treats both the state disposal fee and the city container fee the same way: both are expenses of the waste collection company that become part of the taxable sales price of the waste collection service.

Q: Could this answer change based on different facts?
A: Yes. The letter itself notes that the opinion is based on the facts presented, and that the opinion may change if there are additional or different facts.

Citations and references

No statutes or rules are cited by name in this letter. The Comptroller describes general principles of Texas sales tax law — that taxable items include tangible personal property and taxable services, that waste collection/removal is a taxable real property service, and that "sales price" is defined as the total amount charged without deduction for costs — without citing specific statute or rule numbers.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9303978L

Original ruling text

March 16, 1993

Dear **:

Thank you for your letter of February 15, 1993, concerning the application of
state and local sales taxes on the state fee for solid waste disposal and the
City of ** fee imposed on waste containers.

The Texas sales tax law imposes a sales tax on the sales price of taxable
items. Taxable items include tangible personal property and taxable services.
Waste collection or removal is a taxable real property service. The sales tax
law defines the sales price of a taxable item as the total amount for which a
taxable item is sold without a deduction for the cost of materials used, labor
or service employed, or other expenses.

These fees are expenses incurred by the waste collection company and are part
of the sales price of the waste collection service as prescribed by law.

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

February 15, 1993

Controller of Public Accounts
Capital Station
Austin, TX 78774
Attn: Tax Policy

Gentlemen:

Please send an explanation as to why we should pay sales tax in addition to
state and local fees.

I appreciate your prompt attention.

Thank you.

Sincerely,