Does Texas sales tax apply to a company's service of picking up hazardous chemical waste, processing it to meet state disposal requirements, and hauling it to a disposal site?

Plain-English summary

A company ("Company A") asked the Comptroller how sales tax applies to its business of picking up or receiving hazardous chemical waste, processing that waste to meet state requirements before disposal, and then transporting it to a disposal site. The Comptroller ruled that this entire service — pickup/receipt, processing, and transport to disposal — is not subject to sales tax. However, Company A still owes sales/use tax on the supplies, materials, and equipment it uses to perform the service, citing 34 Tex. Admin. Code Rule 3.356(a)(3)(D).

The letter also addresses two related points. First, Company A does not qualify as a manufacturer/processor for purposes of the manufacturing exemption, because the material it processes is not held exclusively for sale — it's waste being processed for proper disposal, not a product being made for resale. Second, transportation and delivery charges associated with the sale, lease, or rental of a nontaxable item or nontaxable service are themselves not taxable, which confirms that the hauling-to-disposal-site leg of Company A's service doesn't create separate tax exposure.

The ruling is expressly fact-bound ("this opinion is based on the facts presented; different facts, though similar, might lead to different answers"), so its holding applies specifically to the pickup-process-transport service model described, not necessarily to every waste-handling arrangement.

What this means for you

Hazardous waste processors and remediation companies

If your business picks up hazardous waste, processes/treats it to bring it into compliance with disposal requirements, and then transports it to a disposal site, that combined service is not subject to Texas sales tax under this ruling's facts. But don't assume that means tax-free operations across the board — you still owe sales or use tax on the supplies, materials, and equipment you consume in providing the service, since you're treated as the end consumer of those inputs rather than a manufacturer selling a taxable product.

Businesses claiming a manufacturing/processing exemption

This letter is a reminder that the manufacturing/processing exemption turns on whether the processed item is held exclusively for sale. A company that processes hazardous waste for disposal — rather than to create a product it will sell — does not meet that definition, even though "processing" is happening in a physical sense.

Anyone billing transportation or delivery charges alongside a nontaxable service

Transportation and delivery charges tied to a nontaxable service (or the sale, lease, or rental of a nontaxable item) are themselves not taxable. If your core service is nontaxable, you generally don't need to add tax to the delivery/hauling charges billed with it.

Common questions

Q: Is a hazardous waste processing and disposal-transport service taxable in Texas?
A: No — based on the facts in this letter, picking up hazardous waste, processing it to meet state disposal requirements, and transporting it to a disposal site is not a taxable service.

Q: If the service itself isn't taxed, does the processor owe any tax at all?
A: Yes. The processor still owes sales or use tax on the supplies, materials, and equipment it uses to provide the service, per 34 Tex. Admin. Code Rule 3.356(a)(3)(D).

Q: Can a hazardous waste processor claim the manufacturer/processor exemption?
A: Not under these facts. The company doesn't meet the definition of a manufacturer/processor because the waste it processes isn't held exclusively for sale.

Q: Are the transportation charges for hauling the waste to the disposal site taxable?
A: No. Transportation and delivery charges associated with a nontaxable service (or the sale, lease, or rental of a nontaxable item) are not taxable.

Citations and references

• 34 Tex. Admin. Code § 3.356(a)(3)(D) — governs taxability of supplies, materials, and equipment used by a service provider in performing a nontaxable service; cited as the basis for Company A owing tax on its own inputs even though its service to customers is nontaxable.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9406L1305D04

Original ruling text

June 2, 1994

Dear *****:

Thank you for your letter dated May 24, 1994, regarding
sales tax as it applies to "processing" hazardous chemical
waste and the subsequent transportation of the waste to a
disposal site.

Company A picks-up or receives hazardous chemical waste,
processes the waste to meet state requirements before disposal,
then transports the waste to a disposal site. The service
provided by COMPANY A is not subject to tax; however, COMPANY
A owes tax on all supplies, materials, and equipment used to
provide the service. See the enclosed Rule 3.356(a)(3)(D).

COMPANY A does not meet the definition of a
manufacturer/processor because the product being processed
is not held exclusively for sale.

Transportation and delivery charges associated with the
sale, lease or rental of a nontaxable item or nontaxable
service are not taxable.

This opinion is based on the facts presented. Different
facts, though similar, might lead to different answers. If
you have any questions or need more information, please
write or call me toll free at 1-800-531-5441, extension
5-0330, or 512-475-0330.

Sincerely,

Bettie Peterson
Tax Administration Division

NOTE: Previous Accession Number 9406408L