City legal: Texas guidance supports charging sales tax on a municipal garbage fee

Vice Mayor Pro Tem Amy Peck asked the committee whether the newly implemented $5 administrative garbage fee would be subject to sales tax and why the public models did not show a separate sales-tax charge.

Eric, a city attorney's office representative, told the committee: "As, required under state law, municipalities have to charge a sales tax on certain services that it provides." He explained that a broad category in state law called "real property services" is defined to include garbage collection and that the city had "wrote to the comptroller to ask them to advise about this specific fact, issue." According to the city attorney's summary of the comptroller's response, "Sales tax is applied to the receipts of the money for that activity." Council members asked staff to follow up on comparable fees (for example, container-lease and drainage fees) and staff said they would return with more detail.

Amy Peck expressed concern that the sales tax reduced the amount flowing to the combined utility system compared with earlier models; staff acknowledged the difference and said other municipalities do levy sales tax on similar garbage fees.