Sales Tax State Activity Update -October 2008

Mold Removal and Disposal Services Taxable in Texas

The removal and disposal of mold and mold-contaminated debris from residential and nonresidential property are taxable real property services. Neither Federal nor State agencies have laws that define mold as a hazardous waste material. As a result the exemption afforded hazardous waste removal did not apply.

Summary Fact Finding
1. The Petitioner provides mold remediation, asbestos removal, and related services for residential and commercial customers.
2. The Petitioner was audited for sales and use tax compliance and assessed a deficiency of tax, penalty, and interest by Texas Notification of Audit Results. The Petitioner filed a timely redetermination request.
3. Petitioner uses high efficiency particulate air (“HEPA”) equipment, including specialized vacuums and filters used to remove mold spores from buildings and structures.
4. The examining auditor reviewed Petitioner's proposals, estimates, contracts, and invoices, which contained separate descriptions and charges for services and items in connection with mold remediation. The auditor made a taxability determination for each category of charges, and scheduled taxable charges on a detailed basis.
5. Charges for hauling away sheet rock, insulating materials, waste materials from the HEPA vacuums and filters, and other debris were also scheduled as taxable real property services. The Petitioner disposed of the mold and mold-contaminated materials by placing them in dumpster along with other refuse and trash. There are no special requirements for the disposal of moldy materials.

Decision
The Tax Division takes the position that when the Petitioner removes the mold and contaminated materials and places it in landfills, it is engaged in the removal or collection of garbage, rubbish, or other solid wastes, a taxable real property service. The Tax Division further maintains that vacuuming and cleaning mold from buildings is also a real property service, either as a part of the waste removal, or as a cleaning service. The Petitioner contends the entire mold remediation process is solid waste removal. The Petitioner further contends that the mold remediation services fall within the exclusion stated in Section 151.0048(a) (3) (A). Under that subsection, a service that would otherwise be taxable as solid waste removal is excluded from the tax when the service is “the removal or collection of hazardous waste.” The statutory definitions are expanded in the Comptroller’s Rule 3.356(a) (3)(D) as any waste “identified or listed as a hazardous waste by the administrator of the United States Environmental Protection Agency or by other appropriate federal or state agency.” For this reason the Petitioner’s contention is denied.

This decision may be viewed at the Texas Comptroller of Public Accounts web site.
(Texas Comptroller of Public Accounts, Hearing No. 45,021, 5/27/08)

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