Is vacuuming up industrial waste (including EPA-hazardous flue dust) from a steel manufacturing plant a taxable 'building or grounds cleaning' service, or nontaxable waste 'collection'?

Subject

Vacuuming Of Industrial Waste (Flue Dust Classified Hazardous By EPA) From A Steel Plant — Nontaxable Waste Collection, Not Taxable Grounds Cleaning

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9311L1267D07

Plain-English Summary

A steel wire manufacturer's plant generates several kinds of industrial solid waste as a byproduct of manufacturing: mill scale, flue dust, lime dust, and sludge. Flue dust is specifically noted as classified as hazardous by the Environmental Protection Agency. A service provider removes these materials from the buildup areas on the plant floor using a vacuum truck and large hoses; the workers who handle the hoses wear special suits with respiratory systems. After vacuuming, the materials are stored at the plant site until final disposal — they are not hauled off the property at that time.

The Comptroller had previously treated this vacuuming activity as a taxable service under Tax Code Section 151.0048(4) (the general "building or grounds cleaning" provision), reasoning that collecting waste on a taxpayer's own premises is taxable when the materials aren't removed entirely from the real property site. The taxpayer's representative pushed back, arguing the service instead fell under Section 151.0048(3)(A) and (B), which use the words "removal or collection." Since the statute doesn't define "collect" or "collection," the taxpayer cited Black's Law Dictionary's definition of "collect" — "to gather together; to bring scattered things into ... one mass" — and argued the vacuuming process fits that definition.

The Comptroller agreed and reversed course. It concluded that the legislature did not intend to tax a single activity like this vacuuming service when it meets the requirements of Section 151.0048(3)(A) or (B), and did not intend for the more general "building or grounds cleaning" language in Section 151.0048(4) to reach it instead. As a result, the vacuuming service purchased by the taxpayer was determined to be not subject to sales tax.

What This Means For You

If you operate a manufacturing plant and hire a vacuum-truck service to remove process waste (including hazardous byproducts like flue dust): This letter indicates the Comptroller treated that kind of service as nontaxable "collection" under Section 151.0048(3)(A)/(B) rather than taxable "building or grounds cleaning" under Section 151.0048(4) — even though the vacuumed material stayed on the plant site afterward rather than being hauled away immediately.

If you're comparing this to other waste-removal or cleaning services: The key distinguishing facts in this letter are that (1) the service was a single, discrete activity (vacuuming to gather scattered waste materials into one mass), and (2) the materials involved were industrial solid waste generated by the manufacturing process itself, including EPA-classified hazardous flue dust — not general facility cleaning.

Caution on reliance: This letter reversed the agency's own prior position on the same taxpayer's activity, and it doesn't spell out the text of Section 151.0048(3)(A) or (B) — only the taxpayer's dictionary-based argument about the word "collection." Businesses with similar but not identical facts (e.g., waste that isn't hazardous, or services that combine vacuuming with other cleaning tasks) should not assume the same result applies without their own current guidance.

Q&A

Q: Was this vacuuming service ultimately taxed?
A: No. The Comptroller determined the service was not subject to sales tax, reversing its earlier position that had treated it as taxable "building or grounds cleaning" under Tax Code Section 151.0048(4).

Q: Why did the Comptroller previously think this was taxable?
A: Its general policy treated collection of garbage or other waste materials on a taxpayer's own premises as taxable under Section 151.0048(4) when the materials were not removed entirely from the real property site — which was true here, since the vacuumed waste was stored at the plant until final disposition.

Q: What changed the Comptroller's mind?
A: The taxpayer argued the service fit the "removal or collection" language in Section 151.0048(3)(A) and (B) instead, relying on Black's Law Dictionary's definition of "collect" ("to gather together; to bring scattered things into ... one mass"). The Comptroller accepted that the vacuuming process constituted "collection" under that definition and concluded the legislature didn't intend the general "building or grounds cleaning" catch-all in (4) to override the more specific provisions in (3)(A)/(B) for a single activity like this.

Q: Does the fact that flue dust is EPA-hazardous matter to the outcome?
A: The letter identifies flue dust as classified hazardous by the EPA as part of the factual background, and describes the special protective suits and respiratory equipment used by the workers handling the hoses. The letter's legal reasoning, however, turns on the "removal or collection" language in Section 151.0048(3)(A)/(B) versus the "building or grounds cleaning" language in (4) — it does not state that the hazardous classification itself was the deciding factor.

Original ruling text

November 9, 1993

Dear *:

The purpose of this letter is to inform you of the result of our
reconsideration of the taxability of services purchased by your
client, ******, Inc. Our evaluation includes both the
written materials you submitted and the concerns expressed at our
meeting with you and your client. We have determined that the
services, as described below, are not subject to sales tax.

The facts reveal that your client is a manufacturer of steel products,
primarily steel wire. The manufacturing process generates waste
materials, including mill scale, flue dust, lime dust, and sludge.
Each is industrial solid waste, and additionally, flue dust is
classified as hazardous by the Environmental Protection Agency. The
service provider uses a vacuum truck and large hoses to remove the
materials from the plant areas where they build up during the
manufacturing process. The individuals that manipulate the hoses wear
special suits complete with respiratory systems. After the materials
are vacuumed, they are stored at the plant site until final
disposition.

Our previous letters treated the above activity as a taxable service
under Tax Code Section 151.0048(4). The policy of this agency has
generally treated collection of garbage or other waste materials on a
taxpayer's premises as taxable under that section when the materials
are not removed entirely from the real property site. You contend that
the service is excepted from imposition of the tax under 151.048(3)(A)
and (B), noting that the statute refers to both "removal or
collection". "Collect" and "collection" are not defined in the
statute, but "collect" defined in Black's Law Dictionary, Fifth
Edition to mean, "to gather together; to bring scattered things into
... one mass". Under this definition, the vacuuming process described
above constitutes collection.

After due consideration of the facts and circumstances, we feel that
the legislature did not intend to impose tax on any service that is a
single activity, such as the vacuuming performed for your client,
assuming that it meets that provisions of 151.0048(3)(A) or (B), and
did not intend to impose tax on such services under the more general
provisions of 151.0048(4), "building or grounds cleaning".

If you have any further questions or I can be of help in any way,
please feel free to contact me at 1-800-531-5441, extension 3-3939, or
(512) 463-3939.

Sincerely,

Tom Poole
Assistant Manager
Tax Administration

NOTE: Previous Accession Number 9308200L.2 and/or 9308200L