Texas Letter Ruling 9406L1307A03: Hazardous Waste/Excluded Waste — Containers/Drums/Roll — Off Boxes — Used To Provide Nontaxable Removal Services — Provider Cannot Issue Resale Certificate

Plain-English summary

A hazardous waste hauler asked the Comptroller whether it could issue a resale certificate to buy containers, drums, and roll-off boxes tax-free, on the theory that those items are resold to customers as part of the waste removal job. The Comptroller said no.

The Comptroller's long-standing position is that a person performing a nontaxable service cannot give a resale certificate for the items it uses to perform that service. Resale certificates exist so that tax is collected once, from the ultimate purchaser — if a nontaxable-service provider could buy its working materials tax-free, no one would ever pay tax on those items, undermining the resale system. Hazardous waste removal specifically is carved out of the taxable "real property service" definition in Tex. Tax Code § 151.0048, which taxes removal of "garbage, rubbish, or other solid waste" but expressly excludes hazardous waste. Because hazardous waste removal is therefore a nontaxable service, the containers used to remove it are taxable to the contractor when purchased.

The letter adds a fallback holding: even if hazardous waste removal were treated as a taxable service, the containers would still be taxable. Under Tex. Tax Code § 151.302(b), tangible personal property used to perform a taxable service is not considered "resold" unless care, custody, and control of that property passes to the customer. Here, the containers are consumable, one-time-use items that the contractor uses on the job site and never hands over to the customer — so they would be taxable regardless of which characterization applied.

What this means for you

Hazardous waste removal and remediation companies

You cannot use a resale certificate to buy drums, containers, or roll-off boxes used to collect and haul hazardous waste. Because hazardous waste removal is excluded from the taxable "real property service" category, you are the end consumer of those containers and must pay sales tax when you buy them, just like any other business buying supplies for its own use.

Accountants and tax professionals advising waste-service clients

Watch for clients who assume that because their service touches "removal" or "waste," the general real-property-service resale/taxability framework applies uniformly. Hazardous waste removal is a specific carve-out from § 151.0048's definition of taxable real property service, which flips the usual analysis: the service itself is nontaxable, but that means the provider — not the customer — bears sales tax on consumables like containers. Also flag the independent fallback rule under § 151.302(b): even for taxable services, packaging or containers that never transfer custody to the customer are taxable purchases, not resale items.

Businesses that generate hazardous waste and hire haulers

This ruling addresses tax owed by the removal contractor on its own equipment purchases, not tax you owe as the waste generator. You generally would not see sales tax separately itemized on containers as part of your hazardous waste removal service.

Common questions

Q: Can a hazardous waste removal company buy drums and roll-off boxes tax-free with a resale certificate?
A: No. Because hazardous waste removal is a nontaxable service, the contractor is treated as the end user of the containers and must pay sales tax when purchasing them.

Q: Why is hazardous waste removal treated differently from ordinary garbage/rubbish removal?
A: Tex. Tax Code § 151.0048 defines "real property service" to include removal of garbage, rubbish, or other solid waste, but specifically excludes hazardous waste from that definition, making hazardous waste removal a nontaxable service.

Q: What if hazardous waste removal were considered a taxable service — would the containers be tax-free then?
A: No. Under Tex. Tax Code § 151.302(b), tangible personal property used to perform a taxable service isn't considered "resold" unless custody of it transfers to the customer. The containers here are one-time-use items retained and used by the contractor, not handed over, so they would be taxable either way.

Q: Does this ruling change based on whether the containers are reused or disposed of after one job?
A: The letter treats the containers as consumable, one-time-use items on the job site, which supports taxability under both the nontaxable-service rationale and the care-custody-control test. It does not separately analyze reusable equipment.

Citations and references

• Tex. Tax Code § 151.0048 (defines "real property service"; excludes hazardous waste removal from the taxable garbage/rubbish/solid waste removal category)
• Tex. Tax Code § 151.302(b) (tangible personal property used to perform a taxable service is not resold unless care, custody, and control transfer to the customer)
• 34 Tex. Admin. Code § 3.285, Resale Certificates; Sales for Resale (cited in the STAR ALERT header for current guidance on care, custody, and control)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9406L1307A03

Original ruling text

ALERT: For specific guidance relating to the care, custody and control of TPP when providing a taxable service, please see Rule 3.285, Resale Certificates; Sales for Resale (amended 11/01/2017.

June 23, 1994

Dear **:

It has been a long standing position of this office that a person
performing a non-taxable service may not give a resale certificate for items
used in performing the service. The purpose behind a resale certificate is
that it allows vendors to purchase items without payment of tax because the tax
will be collected from the ultimate purchaser of the item. If providers of
non-taxable services were allowed to give resale certificates on items
purchased by them to perform their services, the underlying intent of the
resale provision would be undermined. This was our interpretation of the law
before services became taxable and has remained our policy as to all services
which were not made taxable. I do not anticipate our office changing this
position.

The tax on waste removal contained a specific exclusion for the removal
of hazardous waste. Sec. 151.0048 which defines real property service reads in
part as follows:

"Real property service" means:

(3) The removal or collection of garbage, rubbish, or other solid waste
other than:

(a) hazardous waste

Therefore, the removal of hazardous waste is not a taxable service.
Following the position of this office that tangible property used by a service
provider in providing a non-taxable service is subject to tax when purchased by
the service provider, containers used in removing hazardous waste are subject
to sales tax.

Even if the containers were used in performing a taxable service. They
would be subject to sales tax because they are not transferred to the customer
as part of the service. Sec. 151.302, Tex. Tax Code, provides in part:

(b) Tangible personal property used to perform a taxable service is not
considered resold unless the care, custody, and control of the tangible
personal property is transferred to the purchaser of the service.

As you described the use of the containers, they are consumable items
used on the job site on a one-time use basis. They are used by the contractor
in performing the service and are not transferred to the customer.

I hope this satisfactorily explains why containers used by contractors to
remove hazardous waste are subject to sales tax when purchased by the
contractor. Should you have any further questions, please feel free to write me
at 111 E. 17th Street, Austin, Texas 78774, or call me at 1-800-531-5441,
extension 3-4004.

Sincerely,

Wade Anderson
Assistant Director
Tax Administration

NOTE: Previous Accession Number 9406107L