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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Can a custom flexible packaging manufacturer bill for artwork and printing plates without charging sales tax if the customer provides a manufacturer's exemption certificate?
Yes. The Comptroller confirmed that when a company bills customers for artwork and plates used in manufacturing custom flexible packaging, no state or local sales tax needs to be charged, as long as t…
Does a California company that runs an internet 'mall' website for Texas retailers create Texas sales tax nexus for itself or for the retailer's out-of-state clients, and who is responsible for collecting and remitting the sales tax?
The Comptroller ruled that COMPANY A, a California business that built and ran e-commerce websites for retailers (including some in Texas) and collected payment on their behalf, was responsible for co…
Which fishing baits are exempt from Texas sales tax as perishable bait, and which baits are still taxable?
Exempt. Sales tax is no longer due on perishable fishing bait such as worms, minnows, water dogs, crawfish, live or frozen shrimp, frozen shad, frozen squid, blood baits, and crickets. Fishing lures, …
Is installing or removing window tinting/sunshield film on a commercial building taxable, and does it matter whether the building is residential or nonresidential?
Taxable, if the building is nonresidential. The Comptroller ruled that adding or removing window film or tinting on an existing commercial building (like a store front or office building) is taxable r…
When an event planner bills a client for a mix of food, rentals, decorations, and entertainers, which of those charges are subject to Texas sales tax?
It depends on the item. The Comptroller ruled that food, rentals (tables, chairs, decorations, tents), and most goods transferred to the customer are taxable, while charges purely for live entertainer…
How long does the statute of limitations run on the manufacturing phase-in exemption, and does it differ if the exemption was claimed at the time of purchase versus refunded later?
A four-year statute of limitations applies to purchases made during the last quarter of 1993, 1994, and later periods when the manufacturing phase-in exemption is claimed at the time of purchase (gove…
What counts as exempt 'machinery and equipment' for a Texas enterprise project, and how do the related sales tax refunds work?
The Comptroller ruled that 'machinery and equipment' for a Texas enterprise project under Section 151.429(a) covers essentially all depreciable property purchased for use in the zone -- production mac…
Does the Texas fishing bait exemption put fishermen on the same footing as hunters, and are ice and small containers of honey taxable?
The Comptroller confirmed the perishable bait exemption puts fishermen on an equal footing with the exemptions available for hunters. Separately, ice is taxable even though it is for consumption, beca…
Can a Texas manufacturer buy external packaging supplies like corrugated void-filler and air bags tax free?
Yes. The Comptroller ruled that a manufacturer may give a vendor a properly completed exemption certificate to buy external packaging supplies -- including corrugated void-filler and air bags used to …
Is a service that posts a client's website link and information to other websites' free submission forms taxable in Texas?
Not taxable. The Comptroller ruled that a business which posts a client's website link and information to free listing/submission sites around the internet is providing a service that is not taxable.
When restaurant/food-processing equipment like an ice machine is bought tax-free under the manufacturing exemption but later put to a different use, who owes the tax, and how much?
It depends on when the equipment was bought. A vendor who accepts an exemption certificate in good faith isn't liable for the tax -- the purchaser is. For an ice machine bought tax-free between Octobe…
Is Texas sales tax owed on direct-to-home satellite TV installation, equipment rental, and programming charges, and does local tax apply?
Yes, the tax charge was correct. Equipment rental and installation for direct broadcast satellite TV are taxable at the full state-plus-local rate (6.75% in this case), but programming charges are tax…
Is overhauling a compressor used to lift oil and maintain well pressure a taxable service in Texas, or is it exempt as manufacturing equipment repair?
Taxable. The Comptroller ruled that a compressor used to lift oil from wells and maintain pressure for recovering additional oil is production equipment, not exempt manufacturing equipment, so the ser…
Are hearing aid batteries exempt from Texas sales tax, and does a retailer need an exemption certificate to sell them tax-free?
Exempt. The Comptroller confirmed that hearing aid batteries are exempt from Texas sales tax as a supply or replacement part for hearing aids, which are themselves exempt by statute. The purchaser doe…
Are concession stand food sales taxable when a school district runs the stands at sporting events instead of during the regular school day?
Yes. The Comptroller ruled that food sales from concession stands a school district operates during sporting events are taxable, because the Tax Code 151.314(d)(1) exemption for school food sales only…
Can a retailer avoid collecting and later refunding Texas sales tax on items sold for export to Mexico by routing delivery through a customs broker at the border?
Yes. A retailer can avoid collecting and then refunding sales tax on items sold for export to Mexico by shipping the item to a licensed customs broker at the border and having the broker deliver it to…
When a landlord bills a commercial tenant separately for electricity measured through the tenant's own sub-meter, is that billing a taxable sale of electricity, and can a predominant-use manufacturing study exempt it?
No. The Comptroller ruled that billing a tenant for electricity through a separate sub-meter is not a sale of electricity by the landlord -- it's just part of the rental/lease price of the real estate…
Is cleaning, inspecting, and applying a protective monel coating to oilfield equipment like submersible pumps and tank batteries a taxable repair or remodeling service in Texas?
Yes. Coating and re-coating oilfield equipment such as submersible pumps and tank batteries counts as taxable maintenance, remodeling, or repair of tangible personal property under Rule 3.292, so the …
Is a package of disposable products sold to hospitals for use in a heart-lung pump during open heart surgery exempt from Texas sales tax?
Yes. The package of disposable products sold to hospitals for use in a heart-lung pump during open heart surgery is exempt from Texas sales tax, because a heart-lung pump and its accessories and attac…
When is a staffing or subcontractor arrangement exempt as a 'temporary employee' under Texas law, versus a taxable temporary help service?
It depends on meeting all four requirements of Tex. Tax Code § 151.057: the work must normally be done by the client's own employees, the client must supply the equipment, the client must directly or …
How should an apartment complex handle sales tax refunds for electricity used in vacant apartment units that were taxed as commercial accounts, and can it still use exemption certificates for residential accounts billed at commercial rates?
When several tenants' electricity accounts are billed in the apartment complex's name, the complex itself is the buyer and can receive the tax refund directly rather than needing a separate request fr…
When a multi-level marketing company sells vouchers to its distributors that are redeemed for printed goods like trading cards, who owes sales tax on the sales to the final customer?
The company itself, not just its independent distributors, is a 'direct sales organization' responsible for sales tax on the full selling price of the vouchers and related items sold through its distr…
Does a company that operates a can-crushing prize machine owe sales tax on the advertising fees it charges, or on the machine and prizes it buys?
No, the advertising fee charged to companies for placing their logos on the machine is not taxable. But the machine's operator must pay sales tax on the taxable items it buys to run the promotion, inc…
Do casualty insurance agencies owe Texas sales tax on fees they charge clients for services like claims administration, risk inspections, and rate-setting when those fees are paid instead of a sales commission?
Yes. When a casualty insurance agency charges a client a fee -- instead of earning a sales commission -- for services such as claims administration, risk inspections, rate-setting, or claims/loss adju…
Can a caterer, hotel, or restaurant use a resale certificate to buy or rent tables, chairs, decorations, or audio-visual equipment used in providing food service, instead of paying tax on those items?
No. A caterer, hotel, or restaurant that buys or rents equipment (such as tables, chairs, utensils, decorations, or audio-visual equipment) to use while providing food service must pay tax on that equ…
Can a corporation and its affiliates file one combined Texas sales tax return instead of separate returns for each entity?
No. The Comptroller's office will not accept a combined sales tax return or report from a corporation and its affiliates -- Texas requires each entity to file its own separate report, and the agency d…
Is providing equipment with an operator for oilfield lease-site work -- like restoring a wellsite, cutting a pipeline right-of-way, building or maintaining a road, or setting frac tanks -- taxable under Texas sales tax?
It depends on the specific service. Reclaiming an oil and gas lease site back to its pre-drilling condition is not taxable, but restoring other nonresidential real property improvements is taxed. Sett…
Is non-executable source code that a seller licenses to manufacturers, who must substantially re-engineer it before use, a 'completed computer program' subject to Texas sales tax?
Yes. The Comptroller ruled that the seller's non-executable source code -- even though customers must substantially re-engineer it before using it -- meets the dictionary definition of 'source code' a…
Is a biotechnology company's purchase of cell, organ, or tissue taken from a cadaver exempt from Texas sales and use tax?
Yes. The Comptroller reversed an earlier determination and ruled that cell, organ, and tissue purchased or sold by a biotechnology company are exempt from Texas sales tax to the extent they are taken …
Does a process server who files court documents and pulls certified copies of court records owe sales tax on those services?
Filing or serving legal documents like citations, subpoenas, and writs is not a taxable service, and researching court records or requesting certified copies is not taxable by itself. But sales tax is…
Does a company that locates and negotiates preferred provider network contracts for health plans owe Texas administrative services tax or sales tax on the contingent commissions it earns?
No. A company that locates and negotiates contracts with preferred provider networks on behalf of health care and occupational injury plans, earning a contingent commission based on savings, owes neit…
When a tax-exempt nonprofit organization hires a for-profit carnival operator to run an event, who owes sales tax on the amusement -- the carnival operator or the exempt entity?
It depends on two things: whether the contract between the exempt entity and the carnival operator is a joint venture (sharing both profits and losses, which makes ticket sales taxable), and if not, w…
Does a front-end loader used to blend materials and support cooling during processing qualify for Texas's manufacturing equipment sales tax exemption?
No. The Comptroller ruled that a front-end loader used to blend seed and product and to support the deaeration and cooling process is treated as intraplant transportation equipment or equipment used i…
Does an engineer hired by an insurance company to investigate a homeowner's damage claim have to charge the insurance company sales tax on the investigation?
Yes. The Comptroller ruled that an engineer's investigation of an insured's claim -- inspecting a dwelling and reporting on damage and its cause -- is a taxable 'insurance service,' so the engineer mu…
Is a machinery moving company's charge to relocate equipment within or between facilities subject to Texas sales and use tax?
No, not by itself. A machinery moving company's charge for simply relocating a machine or piece of equipment within a plant or between facilities is not taxable, but the entire charge becomes taxable …
Is selling stock in a corporation that operates a country club subject to Texas sales tax when stock ownership is required for membership?
Yes, generally -- if owning stock is required to get a special privilege, status, or membership classification in a private club that provides amusement services, the sale of that stock is taxable. Th…
When a direct-sales or multi-level-marketing company gives away free prizes or awards at a home party, who owes the tax -- the company or the person who receives the prize?
The company giving away the prize owes the tax, not the recipient. Pulling an item out of tax-free resale inventory to give away as a prize is a taxable divergent use, so the company (or the distribut…
Does metal-leveling equipment qualify for the Texas manufacturing sales tax exemption when the leveling process changes the metal's tensile and yield strength?
Yes. Because leveling increases the metal's tensile and yield strength to meet the customer's specifications, the Comptroller found the process causes a physical change and qualifies as 'processing,' …
Does a private insurance carrier owe Texas sales and use tax on crop loss adjusting services it buys, even though the underlying crop insurance is federally reinsured?
Yes. Texas sales and use tax applies to crop loss adjusting (claims appraisal) services that a private crop insurance carrier buys from an outside adjusting company, even though the underlying crop in…
If an industrial supply company runs a customer's on-site tool crib and charges a management fee plus product costs, is that management fee taxable?
Yes, in most cases. The Comptroller ruled that if the industrial supply company is a retailer of all the sales made through the tool crib (not acting as the customer's purchasing agent), then its mont…
Is sales tax due on assets transferred into a new corporation or partnership as part of a statutory merger or a tax-free IRC 351 reorganization?
No. Assets transferred as part of a statutory merger, or transferred to a newly formed corporation or partnership for its initial capitalization, are not subject to Texas sales tax, as long as either …
Does a company owe Texas sales or use tax on loose product samples and sample binders or books that it produces or buys to help its sales representatives solicit customers?
Yes. The Comptroller ruled that loose samples and sample binders or books distributed in Texas are taxable, because their only use is to demonstrate the products they represent, not to be sold themsel…
Does a film and video production company owe sales tax on special-effects paint, blank tape stock, and duplicate tapes (dubs) it has made for clients?
It depends on the item. The blue paint used exclusively for blue-screen special effects can be bought tax-free with an exemption certificate (though separately billed painting labor is still taxable),…
Does the manufacturing exemption cover a microwave oven used to cook or heat food for sale?
It depends on who operates the oven. A microwave or convection oven used by a restaurant (or similar business) to cook food that it then sells qualifies for the manufacturing exemption, but a microwav…
Is a 'Maps on Demand' service that delivers maps and proximity information over the internet subject to Texas sales tax?
Yes. The Comptroller ruled that a 'Maps on Demand' service delivering maps and proximity data over a web page is taxable in Texas, and the entire charge -- including the monthly minimum and any per-ac…
Does a university have to charge sales tax on the fee it bills dorm students each semester for network port access to the campus computer system?
Yes. The semester fee a university charges dorm students for network port access to the campus computer system is taxable as a sale of information services, and the university must collect sales tax o…
Is a mandrel used to wind fiberglass filament and resin into pipe and tanks exempt from Texas sales and use tax, and what about the disposable rollers used to apply resin?
Mandrels purchased after January 1, 1995, and used to wind fiberglass filament and resin into pipe and tanks are totally exempt from Texas state and local sales and use tax, and the buyer may give sup…
Does a wholesaler that only makes exempt resale of natural gas during pipeline transportation need a Texas sales tax permit, and can it use a resale certificate without a permit number?
No. A wholesaler that only makes exempt sales of natural gas resold during pipeline transportation does not need a Texas sales tax permit solely to report those exempt sales, but must still issue a re…
Is electricity used at a food-processing facility exempt from Texas sales tax as manufacturing use when the facility's own vending machines are what ultimately sell the packaged food?
No, the electricity is taxable. Because the facility is owned by the same entity that owns the vending machines the food is ultimately sold through, the Comptroller treated the electricity as being us…
Does a multi-level marketing or direct sales company have to collect and remit Texas sales and use tax on sales made by its independent distributors?
Yes. Under Rule 3.286(a)(3) a direct sales/multi-level marketing company is treated as the retailer, its independent distributors are its agents for nexus purposes, and the company -- not the distribu…
Is an optional escrow fee charged so customers can claim a software's source code if the seller goes out of business subject to Texas sales tax?
Yes. The Comptroller ruled that the escrow fee is part of the total sales price of the taxable software, so it is subject to Texas sales/use tax both when first charged and each year it is renewed.
Is the labor to install new equipment in a refinery or chemical plant taxable, and does an October 1995 capacity-expansion exclusion change the answer?
It depends on the facts: installation labor on qualifying manufacturing equipment that is not an improvement to realty was exempt in 1995 under Sec. 151.3111, but the same labor was taxable in 1994 be…
Is a consultant's fee for auditing EDP controls, helping a client pick new computer hardware/software, or writing a software vendor's white paper subject to Texas sales tax?
No, none of the three described services is taxable on its own. Reviewing a client's EDP controls and writing a confidential audit report is not taxable, and neither is a needs-assessment/vendor-selec…
Does Texas sales tax apply to charges for staking (surveying) an oil or gas well before it is drilled?
Mostly yes. The boundary surveying and acreage/unit-designation work used to stake an oil or gas well are taxable surveying services, but the narrower charge for determining the actual placement of th…
Which parts of a phone-based information, advertising, and voice-mailbox service are taxable telecommunications services in Texas, and which parts are not?
Charges for playing recorded advertisements or messages to callers who dial in are not subject to Texas sales tax, but charges for computerized telephone polling, call transfer/routing, and electronic…
Is telephone or on-site technical support for software and hardware subject to Texas sales tax, and does it matter whether the same company sold the property?
Yes, if the property being supported is located in Texas. Telephone technical support for tangible personal property (hardware or software) is taxable when the property is in Texas, and exempt under T…
Is cleaning a petroleum storage tank subject to Texas sales tax, and does it matter whether the tank is above ground, below ground, or over 500 barrels in capacity?
It depends on whether the tank counts as an improvement to real property. Cleaning a below-ground tank, or an above-ground tank holding more than 500 barrels, is treated as nontaxable real property re…
Is a charge for 'on hold' tapes with marketing messages played to callers waiting to be connected, plus related equipment, subject to Texas sales tax?
Yes. Charges for 'on hold' tapes containing marketing messages played to callers while they wait to be connected, and for the related equipment, are subject to Texas sales tax. A single charge coverin…
Does electricity used in a vacant apartment unit count as residential use that is exempt from Texas sales tax?
Yes, effective October 1, 1995, when Section 151.317 of the Tax Code was amended, the Comptroller began treating electricity used in vacant apartments as residential use exempt from sales tax -- excep…
Is electricity used to power the pumps at a saltwater disposal well exempt from Texas sales tax as electricity used to transport a material extracted from the earth?
Electricity used to power the pumps at a saltwater disposal well is exempt from Texas sales tax only if the saltwater being transported is naturally occurring produced saltwater. Once that saltwater i…
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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.