Texas State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Texas, with full citations and the original source on every page.
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A systems-integration company partners with a software vendor to implement software the vendor sold directly to a third-party customer. The integration company handles installation/configuration, business consulting, and integration programming — but didn't sell the software itself. Is the installation and configuration work taxable?
Not taxable. Charges for installing and configuring software that the installer did not itself sell to the customer are not taxable in Texas.
A company shifting from pure consulting into internet services asks three things: (1) is ASP programming (which generates HTML) taxable contract programming or a taxable data processing service? (2) is building a webpage using client-supplied graphics taxable? (3) can consulting and custom programming stay nontaxable if separately invoiced from taxable website development?
Mixed answer. Contract programming that creates custom software with exclusive rights transferred to the client is not taxable — but ASP programming that generates HTML documents is a taxable data pro…
A lab calibrates and certifies test/measurement equipment for oil, gas, and petrochemical companies. Louisiana doesn't tax this service when only minor adjustments are needed. Does Texas have a similar exemption for calibration/certification services involving minor adjustments?
No, Texas has no minor-adjustment exemption like Louisiana's. Making adjustments to equipment so it operates within specified tolerances counts as taxable maintenance in Texas, even if the adjustment …
Does an Air Force base have to collect Texas sales tax when it sells a utility system, and more generally, is the U.S. Air Force required to collect Texas sales tax on sales of taxable items?
No collection required, for two independent reasons. First, utility systems (water, wastewater, electric, gas) are improvements to realty, and Texas doesn't impose sales/use tax on real property sales…
A Texas manufacturer takes items out of its tax-free resale inventory, ships them out of state for use (no Texas tax due at that point), and later brings them back into Texas. Does it owe use tax if the items come back after more than a year, and does it matter whether the items go back into inventory for sale versus get used?
It depends on what happens to the item when it comes back, not how much time has passed. Rule 3.346(c)(5)'s one-year rule applies only to items purchased OUTSIDE Texas and brought in. For items made o…
Is labor for slab sawing and hydrohammer breaking taxable in Texas when performed as part of a new construction contract?
No tax on the labor. Slab sawing and hydrohammer breaking labor performed on a contract that qualifies as new construction is not taxable. However, the contractor must still pay sales and use tax on a…
An operator rents booth space to vendors at a computer trade show/flea market and separately charges the general public admission to attend. Is that public admission charge subject to Texas sales tax?
Yes, taxable. Admission charges to attend a flea market or trade show are taxable amusement services under Rule 3.298, regardless of whether any entertainment is provided as part of the admission — a …
If an outside company merely stores a business's physical data-storage media (magnetic tapes, computer discs) off-site and off-line — providing no electronic access to the data and no other services — is that off-site storage taxable as a data processing service?
No. When an outside company merely stores physical data media (tapes, discs, etc.) off-site and off-line — with no electronic access provided and no other data processing services performed — that sto…
A clothing manufacturer uses spreading tables with an attached cutting blade to spread and cut fabric. Does the whole table qualify for the manufacturing exemption because the blade is attached to it, or does only the blade itself qualify?
Only the blade qualifies, not the table. The spreading table itself does not qualify for the manufacturing exemption because it doesn't directly cause a chemical or physical change to the product. The…
A medical device manufacturer sells a range of electrotherapy and rehabilitation products (TENS units, muscle stimulators, incontinence devices, iontophoresis systems, dynamic splints, cervical traction units, knee rehab devices, and related accessories) both to health care providers and directly to patients on prescription. How does Texas sales tax treat each product, and does it matter who buys it?
It varies by product and by buyer. For most of these therapeutic electrotherapy devices (TENS, NMES, sEMG, Innova incontinence device, Pronex cervical traction), the pattern is the same: taxable when …
A new business installs automatic insecticide spray systems in homes. Does it need a Texas sales tax permit and have to collect tax on its charges, and can it buy the spray equipment it installs tax-free?
Yes to collecting tax, yes to buying equipment tax-free. Installing an automatic home insecticide spray system is a structural pest control service — a taxable real property service under Rule 3.356. …
Is the Safehip hip protector — an undergarment designed to prevent hip fractures and injuries — exempt from Texas sales tax, and does it matter whether it's sold to an individual or to a hospital/nursing home?
It depends on the buyer. The Safehip hip protector qualifies for exemption as a therapeutic device and may be purchased tax-free by an individual with a doctor's prescription. But the same product is …
Does a soy-based powdered beverage mix marketed as a milk substitute ('Better than Milk') qualify for Texas's sales tax food exemption?
Yes. "Better than Milk," a soy-based powdered beverage mix, qualifies for exemption from Texas sales tax as a food product milk substitute, based on the label the taxpayer submitted.
Does clothing that provides UVA and UVB sun protection qualify for Texas's over-the-counter drug or medicine exemption (effective April 1, 2000)?
No. Clothing, even clothing that provides UVA and UVB sun protection, does not meet the definition of an over-the-counter drug or medicine, so it doesn't qualify for the exemption effective April 1, 2…
When a taxable (non-exempt) lessor remodels facilities it leases to an exempt entity, how does the Comptroller decide whether the exempt lessee has 'primary use and benefit' of the remodeling services (making them exempt) versus the taxable lessor (making them taxable) — specifically, how is the 'long-term lease' prong measured?
The Comptroller applies a two-prong test: (1) the lessee must be an exempt entity under § 151.309 or § 151.310, and (2) the lease must be long-term in reasonable relationship to the LIFE of the improv…
A company runs a subscription website where college students pay to access professor-posted class content, pay extra to print pages, and pay a copyright surcharge to view certain copyrighted articles. Which of these charges are taxable Texas information services, and how does the company determine Texas vs. out-of-state tax treatment for students located both inside and outside Texas?
Mostly taxable, with multistate nuance. Student subscription fees, printing fees, and copyright surcharges are ALL taxable information services (20% exempt per § 151.351). A separate copyright clearan…
A company runs a broad errand-service business — document delivery, transporting seniors and pets, personal/grocery shopping, dry cleaning pickup/delivery, lunch delivery, notary services, and process serving. Are any of these services subject to Texas sales tax?
None of the nine services described are taxable. Delivering documents/x-rays/medical records, transporting seniors or pets, grocery/gift shopping, dry cleaning pickup/delivery, lunch delivery, notary …
Does a pagination system — computer hardware and software used to design, edit, and assemble page layouts for commercial printing and newspaper production — qualify for Texas's manufacturing exemption from sales and use tax?
Yes. A pagination system — a combination of computer hardware and software that lets a printer/publisher design, edit, and assemble page layouts before the files are sent to pre-press to make negative…
When a single invoice includes items taxed at two different combined local tax rates (e.g., because they ship to different taxing jurisdictions), should the seller compute and round tax separately for each rate group, or add all the taxable amounts together first and round once at the end?
Round separately by rate group, not combined. Rounding tax due is generally prohibited — tax must be added to the sales price using the statutory bracket system (Rule 3.286(d)(5)). When an invoice has…
When a company leases construction equipment (with its own employees as operators) from its parent, and uses that equipment to unload, transport, and rough-set heavy generators for a general contractor, who owes Texas sales/use tax at each step — and should equipment bought for this purpose be purchased under a resale certificate or with tax paid up front?
It depends on what the equipment is actually used for. A company that uses leased equipment and its own employees to receive, unload, transport, and rough-set items for a customer is providing a nonta…
If a vendor refuses to accept a properly completed Texas resale certificate, can the buyer still avoid paying sales tax on items it intends to resell?
Yes, indirectly. A vendor is not required to accept a resale certificate even if it is properly completed. If a supplier refuses one, the buyer can reimburse itself for the Texas sales tax it paid on …
Does an independent contractor who performs state-required accessibility (TAS) plan reviews and inspections on buildings, and also does related consulting, owe Texas sales tax or need a sales tax permit?
No sales tax is due on the review and inspection fee charged to determine compliance with the Texas Accessibility Standards (TAS), and expert or professional consultation services are not taxable eith…
Can an architecture firm get a Texas sales and use tax permit to buy computer equipment for a project, and avoid paying tax on that purchase by reselling the equipment to a tax-exempt government customer (a municipal airport)?
Yes. An architecture firm — even one not typically in the business of reselling equipment — can obtain a Texas sales and use tax permit in order to purchase computer equipment that will be resold, and…
When an advertising agency has printed folding advertisement cards made and places them in racks at hotels/motels for tourists to take, and charges restaurant clients a flat fee to be featured on the cards, is the agency selling a nontaxable advertising service or a taxable sale of tangible personal property?
It's a taxable sale of tangible personal property, not a nontaxable advertising service. Rule 3.321(c) treats an advertising agency in this fact pattern as a retailer of the advertising cards it produ…
When a commercial-production company gives its raw daily footage ('dailies') to the client at no extra charge, alongside the paid final production, does it owe sales tax on that transfer?
No. Sales tax is not due on the transfer of dailies (raw, unedited daily footage from filming) to the client when the client pays nothing extra for them and receives no separate consideration in retur…
Is the ink-jet addressing equipment a mailing house uses to address envelopes exempt from tax, and does charging sales tax on a single combined bill for printing and mailing services matter?
The ink-jet addresser itself does not qualify for a tax exemption, because it's used to provide a nontaxable mailing service rather than to manufacture a product for sale. But a separately stated char…
Can a designated Enterprise Project get a state sales/use tax refund on building materials where the tax was paid by its contractor under a cost-plus construction contract, if the invoices separately itemize the material cost and tax passed through to the client?
It depends on whether the underlying contract is genuinely lump-sum or separated — the Comptroller couldn't answer definitively without reviewing the actual contract and billings, but cautioned that a…
If a tax-exempt nonprofit hires a for-profit company to produce a carnival-style amusement event on its behalf, does the for-profit company's ownership of the amusement rights and share of any profit make the event's admission charges subject to Texas sales tax?
No. A nonprofit (non-governmental) organization can hire a for-profit company to produce an amusement event without losing its sales tax exemption, as long as the nonprofit holds itself out as the pro…
Can a private boat/yacht club buy the floating drums for its members' boat-slip docks tax-free under a resale certificate, since the club already charges its members sales tax on boat slip rental? And can it buy free-to-use member boats tax-free the same way?
No for the floating docks, yes for the boats transferred to members. A private boat/yacht club cannot buy the floating drums and materials for its members' boat docks tax-free under a resale certifica…
When is a portable building, prefabricated steel shelter, or similar item like playground equipment or picnic tables just taxable tangible personal property, and when does installing it turn the deal into a real-property improvement contract instead?
It depends on the installation. Items sold free-standing or that only need above-ground mounting/anchoring (like playground equipment, picnic tables, benches, and outdoor athletic equipment) stay tang…
Does simply exhibiting at a trade show in Texas create nexus, requiring an out-of-state exhibitor to hold a Texas sales and use tax permit?
Yes, if the exhibitor sells taxable items at the show, takes orders there that are later accepted out of state, or uses the show to promote future sales. Per Comptroller Publication 96-276, any exhibi…
Can an engineering firm doing work for tax-exempt entities (like municipalities) buy surveying/CAD services, software, and testing materials tax-free, on the theory that those items end up transferred to the exempt client as part of the engineer's service?
No — the engineer must pay tax on those items when it buys them, even though they end up transferred to the exempt client after the engineer uses them. Under Tax Code § 151.151, a purchaser may only u…
For a software/hardware consulting company doing internet-era work — rendering vs. creating HTML documents, server co-location/administration tasks, and charging for access to a database it maintains online — which of these services are taxable in Texas, and how?
A mixed bag. Rendering (reformatting) an existing HTML document is taxable data processing, same as creating one (Rule 3.330(a)); as of October 1, 1999, 20% of data processing/information service char…
When a company leases GPS units to golf courses that in turn charge golfers a fee to use them, who owes Texas sales tax — the company leasing to the course, or the course charging the golfer?
The golf course collects the tax, on the rental payment from the golfer — not the leasing company on its lease to the course. The golf course may issue the leasing company a resale certificate for GPS…
Is power/pressure washing taxable in Texas, and does it matter whether you're washing a motor vehicle, other tangible personal property, or a building/sidewalk/parking lot?
It depends on what's being washed. A charge for power washing a motor vehicle (including tractor-trailer rigs, commercial vans, armored vehicles, tree-trimming vehicles, and bread vans) is NOT taxable…
How is Texas sales tax reported on coin-operated bulk vending machines that dispense toys, stickers, candy, or soft drinks, and is there an exemption for cheap toys sold this way?
A bulk vending machine is a coin-operated device that dispenses unsorted items randomly, in roughly equal amounts, with no customer selection of a particular item or type. Toys or similar items design…
Is a personal errand service — shopping, transportation to appointments, picking up/returning videos or dry cleaning, charging a fee plus reimbursement for items bought — taxable in Texas?
No — as described, an errand service is not taxable, because it's a transportation or delivery service. Using the letter's own example: if a customer gives you a list of videos, you rent them and deli…
Does a waste transportation broker that arranges hauling of both hazardous and non-hazardous waste, and rents out roll-off boxes/tankers/vans as part of the job, need a Texas sales tax permit — and can it buy or rent that equipment tax-free?
Yes, a sales tax permit is needed — the business is a seller of a transportation service (garbage/waste collection). Charges for transporting NONHAZARDOUS waste are taxable under Rule 3.356; roll-off …
When a contractor rents scaffolding to perform a construction project (including for a tax-exempt entity), is the labor to erect/assemble the scaffolding taxable, and does it matter who does that labor — the rental company, a third party, or the contractor's own employees?
It depends who does the erection work. If the scaffold rental company itself charges for labor to erect/assemble the scaffolding, that charge is taxable as part of the total rental/lease price — even …
Can a retailer buy the shopping bags it hands out to customers tax-free from its bag supplier, treating them as wrapping/packaging supplies purchased for resale?
No. Texas sales tax law does not exempt wrapping and packaging supplies for retailers, and the resale exemption does NOT apply to shopping bags a retailer provides to customers who are buying other it…
When repairing property damaged in a governor- or president-declared disaster area (like tornado damage), does the Texas labor-to-restore-property exemption cover the cost of scaffolding or other equipment rented to do the repair work?
No — the exemption does not extend to rented scaffolding or other equipment. Tex. Tax Code § 151.350 exempts separately itemized LABOR ONLY to restore real or tangible personal property damaged by the…
When a software consultant charges for a business 'assessment or discovery service' that may (or may not) lead a customer to later buy software, is that assessment charge taxable, and what does it mean for the charge to be 'unrelated' to a taxable sale?
Software installation, modification, and technical support charges on software you sold, leased, or licensed are taxable; a separately stated training charge is not (Rule 3.308(b)(3)). For a broader c…
When two corporations consolidate portions of their businesses into a joint venture through a multi-step reorganization — forming and merging several single-member LLCs and a limited partnership along the way — does any step trigger Texas sales or use tax?
No Texas sales or use tax applies to any step of the described reorganization. Two corporations consolidating parts of their businesses into a joint venture — through forming wholly-owned LLCs, contri…
Can a jewelry retailer buy the gift boxes it delivers merchandise in tax-free, on the theory the box cost is baked into the item's sales price and the box is effectively purchased for resale?
No. A retailer that buys boxes to deliver jewelry or other items to customers cannot buy those boxes tax-free, even though the box cost is effectively included in the item's sales price. Prior to Octo…
Is a fee paid to a contract draftsman who is hired only to review/check the work of a company's own staff draftsmen, without producing any drawings themselves, taxable in Texas?
No. A charge for a contract draftsman hired solely to check the work of a company's staff draftsmen — where the contract draftsman does not produce any drawings or other tangible personal property — i…
Can a retailer buy decorative wrapping items like colored tissue and ribbon tax-free for resale on the theory that they're 'part of the gift,' and does the same rule apply to the wicker or straw baskets the gift is arranged in?
Decorative wrapping items (colored tissue, ribbon, etc.) may NOT be purchased tax-free for resale — the Tax Code makes no distinction between 'decorative' and 'common' wrapping/packaging supplies, and…
Do stickers sold through a bulk vending machine qualify for the same sales tax exemption as candy and toys, and does it matter whether the customer can choose which sticker they get?
Stickers qualify for the bulk vending machine exemption (50 cents or less, effective July 1, 1999, up from the prior 25-cent threshold) ONLY if the sticker machine dispenses stickers randomly, with no…
When a 501(c)(7) social/country club merges into an IRC Section 528 nonprofit homeowners association (with the homeowners association as the surviving entity), does the surviving entity have to collect sales tax on green fees, swimming pool fees, dues, and similar amusement charges?
No sales tax collection is required — but only because the 501(c)(7) social club entity ceases to exist after the merger. If, after the merger, only the IRC Section 528 nonprofit homeowners associatio…
Is natural gas and electricity used to perform failure-analysis testing on metals, plastics, coatings, and other materials exempt as utilities used in manufacturing or processing?
No. The sales tax law exempts utilities (gas and electricity) used in manufacturing or processing tangible personal property FOR SALE as tangible personal property — but a failure-analysis testing ser…
Is landscaping a taxable real property service in Texas, and is hardscape work like retaining walls, ponds, or sprinkler systems taxed the same way?
No, not the same way. Landscaping and lawn/yard maintenance (planting, mowing, pruning, fertilizing) are taxable real property services on which you collect tax from the customer. Hardscape work (reta…
Are herbal dietary supplements taken for weight loss or other medicinal purposes exempt from Texas sales tax as over-the-counter drugs and medicines?
Yes. Effective April 1, 2000, Texas exempts over-the-counter drugs and medicines, vitamins, minerals, and nutritional supplements — including herbal dietary supplements taken for weight loss or other …
Is a multi-level marketing company required to hold a Texas sales tax permit and collect state and local sales tax on the sales its distributors make, and how should it account for local tax across different jurisdictions?
Yes. A direct sales organization (including a multi-level marketing company) is responsible for collecting and remitting Texas sales and use tax — state and all applicable local taxes — on taxable sal…
In a Section 338(h)(10) deemed asset sale of an S corporation holding QSSSs, which entities recognize gain for Texas franchise tax, and how is the goodwill gain sourced?
The QSSS subsidiaries recognize the deemed-asset-sale gain, the holding parent recognizes none, and goodwill is sourced to the payor's legal domicile. In a proposed sale of a Texas S corporation (ABC …
Is a computer vendor's 'price update service' — reformatting a manufacturer's electronic price/part-number data and selling it to dealers on tape or diskette — a taxable data processing service, an information service, or exempt, and does the 20% partial exemption apply?
It's a taxable information service (not data processing), but that distinction doesn't matter here: the update service qualifies for the 20% partial exemption that applies to both data processing and …
When an engineering and design firm creates original plans for a client and also produces a prototype, is the prototype production taxable, and does it matter whether the client later requests identical or altered copies?
It depends on what's being produced. The original prototype tied to the firm's nontaxable engineering/design service (even if separately invoiced) is not taxable — but once the client asks for additio…
If a corporation files the No Tax Due Information Report, does it keep its business-loss carryover, and what is the difference between franchise-tax extension forms 05-141 and 05-110?
A no-tax-due filer keeps its remaining loss years but still must apply the loss against earned surplus, and the two extension forms are interchangeable. On the business-loss questions, Tax Code Sec. 1…
When a city secures vacant buildings from unauthorized entry or demolishes them under its police powers (as opposed to hiring an outside security company), does it owe sales tax on those charges?
No. A city's charge for securing vacant buildings from unauthorized entry, exercised under its police powers, is not a taxable security service — the same reasoning that made a city's mowing of vacant…
Are nutritional supplement drinks and dietary products sold to hospitals and nursing homes for their patients exempt from Texas sales tax?
Yes. Texas exempts food products, meals, soft drinks, and candy served to a patient or inmate of a state-licensed hospital or care institution, or to a permanent resident of a retirement facility hous…
For the franchise-tax throwback rule on partnership sales, do you look at whether the corporation or the partnership is taxable in the destination state, and does general- versus limited-partner status matter?
You look at whether the corporation, not the partnership, is subject to tax in the destination state, and general- versus limited-partner status changes the answer. Addressing the throwback rule for g…
Must a non-licensed captive insurer that pays the Texas insurance premium tax also pay Texas franchise tax, or is it exempt?
The insurer is exempt from franchise tax, and its franchise-tax payments are credited against the premium-tax assessment. Following an audit, the Comptroller assessed a non-licensed Vermont captive in…
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These are official tax letter rulings and advisory opinions issued by Texas's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.