Does a pollution-control company that collects waste oil, filters, antifreeze, and grit trap waste owe sales/use tax on its collection trucks, truck repairs, and processing tanks/piping?

Plain-English summary

(Note: STAR's own subject heading for this letter reads "Oil And Filter Changes — Motor Vehicle Repairman Charges Lump Sum Vs. Separated," but the actual letter body is entirely about a pollution-control/waste-collection company's trucks and processing equipment — there is no discussion anywhere in the text of a repairman billing lump-sum versus separately for oil/filter changes. A corrected subject_title is used above; the url_slug is left unchanged per standing practice.)

A pollution-control company that collects waste oil, waste filters, waste antifreeze, waste water, and grit trap sump waste — all in compliance with regulatory requirements — asked the Comptroller about the tax treatment of three things: the trucks used to collect these materials, the repairs/maintenance on those trucks, and the tanks/pumps/piping used to process the waste oil before it's resold as burner fuel.

The Comptroller's answer split into three parts:

1. The waste materials themselves: collection and disposal of used oil, used oil filters, used antifreeze, and used brake fluid is regulated under Chapter 26 of the Texas Water Code and is excluded from the definition of "garbage or other solid waste" under Rule 3.356(a)(3)(A) governing waste removal services. Customers can support nontaxable treatment with a properly completed exemption certificate or other documentation citing that Water Code regulation.
2. The collection trucks: these are subject to motor vehicle tax, not sales and use tax — and there is no exemption from motor vehicle tax for either the trucks themselves or their repair parts, though the labor to repair or maintain a motor vehicle is not taxable.
3. Processing tanks, pumps, and piping: these generally do not qualify for exemption unless they're component parts of manufacturing or processing equipment — and the Comptroller asked for more detail about the specific "processing" activity performed on the waste oil before concluding on this point.

What this means for you

Environmental services and waste collection businesses

Don't assume your whole operation is tax-favored just because the underlying waste-removal service itself may be nontaxable. Your collection trucks fall under motor vehicle tax (with its own separate rules and no blanket exemption), while holding tanks and piping need to be shown as actual component parts of processing/manufacturing equipment to get any exemption — a bare storage tank generally won't qualify.

Accountants and tax professionals

This letter is a useful three-way split for classifying an environmental-services business's equipment: the waste-handling service itself (potentially nontaxable under Rule 3.356 and Water Code Chapter 26), the vehicle fleet (motor vehicle tax, separate regime, no exemption on the vehicle or repair parts), and processing equipment (ordinary manufacturing-exemption component-part analysis, fact-intensive).

Common questions

Q: Is collecting and disposing of used oil, filters, and antifreeze subject to sales tax as a waste removal service?
A: These specific materials are excluded from the "garbage or other solid waste" definition under Rule 3.356(a)(3)(A) because they're regulated under Chapter 26 of the Texas Water Code — a proper exemption certificate can document nontaxable treatment.

Q: Do the collection trucks qualify for a sales tax exemption?
A: No — they're subject to motor vehicle tax instead of sales and use tax, and there's no exemption on the trucks or their repair parts (though repair labor is nontaxable).

Q: Are the tanks and piping used to process the waste oil exempt?
A: Generally not, unless they're shown to be component parts of manufacturing or processing equipment — a bare holding tank and piping typically doesn't qualify.

Citations and references

Rule:

• 34 Tex. Admin. Code § 3.356(a)(3)(A) (waste removal services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9910800L

Original ruling text

October 15, 1999

Dear **:

This is in response to your request for a ruling based on the following fact
situation and questions:

Our company is in the business of pollution control. We pick up waste oil,
waste filters, waste antifreeze, waste water, and clean and remove grit trap
waste from sumps. All methods used are in compliance with all regulatory
agencies.

The grit trap waste and waste water is taken to a regulatory controlled
landfill. Waste oil is brought to our facility for processing and re-sold as
burner fuel. Fuel is then delivered to end users. Waste filters are brought to
our facility and removed by a filter recycling company. Waste antifreeze is
delivered to an antifreeze recycling company.

Please advise if the trucks purchased to remove products are exempt from sales
tax as well as the repairs and maintenance done to these trucks.

Also, would the tanks and related components, including pumps and piping used
for processing this waste be exempt from sales tax

Response: The collection and disposal of used oil, used oil filters, used
antifreeze, and used brake fluid is subject to regulation under Chapter 26 of
the Texas Water Code and is excluded from the definition of garbage or other
solid waste. See Rule 3.356(a)(3)(A) on waste removal services. You may accept
a properly completed exemption certificate or other documentation from your
customers stating that these materials are excluded because of regulation under
Chapter 26 of the Texas Water Code.

Purchase of trucks to perform this service are subject to motor vehicle tax
rather than sales and use tax. There is no exemption from motor vehicle tax on
the purchase of or the repair parts for the trucks. The labor to repair or
maintain a motor vehicle is not taxable.

You will need to provide more detail as to the "processing" activity performed
on the waste oil before it is sold. Generally a holding tank and piping do not
qualify for exemption from sales tax unless they are component parts of
manufacturing or processing equipment.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts. You may also e-mail our tax help section at:

Sincerely,

Gilbert Zamora
Tax Policy