After Texas's scrap tire recycling program was set to expire, an industry association planned to keep charging the same amount but rename it a 'disposal fee' -- would that renamed fee still be taxable as part of the price of a tire?

Plain-English summary

A tire industry association wrote to the Comptroller as Texas's scrap tire recycling program approached its expiration. The association and its members planned to keep the program's spirit alive by continuing to collect the same fee (used to defray the cost of transporting scrap tires to end users), but under a new name: "disposal fee," effective January 1, 1998. They asked whether this renamed fee would be taxable.

The Comptroller ruled that the disposal fee is taxable as part of the sales price of the tire. Tax Code § 151.007(a)(2) defines a taxable item's "sales price" as the total amount the item is sold for, with no deduction for materials, labor, services employed, or other expenses. Because the disposal fee is simply an expense the seller incurs for disposing of used tires, it doesn't matter what it's called -- it remains part of the taxable sales price.

What this means for you

Tire retailers and industry associations

Renaming a fee doesn't change its tax character. If a charge is fundamentally a cost of doing business (like tire disposal), it's part of the taxable sales price under § 151.007(a)(2) regardless of what label you put on the invoice line.

Accountants and tax professionals

This letter is a clean, general illustration of § 151.007(a)(2)'s broad "no deduction for expenses" rule -- useful precedent whenever a client considers relabeling a cost-recovery surcharge and asking whether that changes its taxability.

Common questions

Q: Does renaming a tire recycling fee to a "disposal fee" make it exempt from sales tax?
A: No, per this letter -- it remains part of the taxable sales price regardless of the label used.

Q: Why is a disposal/recycling fee taxable at all?
A: Per this letter, § 151.007(a)(2) defines sales price as the total amount charged, without deduction for the seller's expenses -- and a disposal fee is exactly that kind of expense.

Citations and references

Statutes:

• Tex. Tax Code § 151.007(a)(2) (definition of sales price, no deduction for seller's expenses)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9707572L

Original ruling text

July 10, 1997

Dear ***:

Thank you for your letter of June 25, 1997, concerning the expiration of the
scrap tire recycling program. Hayden asked me to respond to your letter.

The association and its members are in the process of forming policy and
procedures that will keep the program alive and ethical. You anticipate the
generators will continue to collect a fee to defray the cost of transportation
to end users. You need to have clarification on the taxability of this fee
effective January 1, 1998. You propose to continue the same amount of fee, but
use the terminology of "disposal fee." You want to know whether the "disposal
fee" will be taxable.

Response: The disposal fee will be taxable as part of the sales price of the
tire. Texas Tax Code, Section 151.007(a)(2) defines the sales price of a
taxable item as the total amount a taxable item is sold for without a deduction
for materials, labor or service employed, or other expenses. The disposal fee
is an expense the seller incurs for disposing of used tires.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

You may call me at 463-4683. You may also write to Tax Policy Division,
Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Policy Division

cc: Hayden Denham

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