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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Is a service that inspects vehicle body-shop repairs and reports on their quality subject to Texas sales tax?
No, unless the service is performed for an insurance company. Post-repair inspection and reporting is not taxable in general, but the same service becomes a taxable insurance service (requiring collec…
Can a city tax or regulate passengers boarding a 'nowhere' gambling cruise ship, and is a cruise lasting longer than 24 hours a taxable amusement service?
A cruise lasting longer than 24 hours is not a taxable amusement service under the Sales and Use Tax law. Separately, the Comptroller found no statutory provision letting a municipality regulate or ta…
If a business took a sales tax credit believing items were exempt under the manufacturing exemption, and an audit later finds they weren't exempt, does the business owe penalty and interest?
Yes, tax is still owed, but a taxpayer authorized to conduct a managed audit under new Tax Code Sec. 151.0231 (effective October 1, 1999, added by SB 1319) may not be assessed a penalty, and the Compt…
Is an environmental services company's cleanup of an oil spill in a Texas waterway, and its disposal of the spilled oil, subject to Texas sales tax?
No. Cleaning up an oil spill in a waterway is not a taxable service, and disposing of the spilled oil is also not taxable because oil is excluded from the definition of taxable waste removal under Rul…
When did a bank exclude interest from the former earned-surplus receipts factor, and how did Texas source other bank interest before and after January 1, 2000?
Interest excluded from the earned-surplus tax base was also excluded from both Texas and everywhere receipts for that component. Rule 3.555(k), for example, excluded federal-obligation interest from e…
Does an FAA airworthiness certificate or a pilot's license prove an aircraft qualifies for Texas's certificated-carrier sales tax exemption, and is repairing autopilot systems installed in aircraft taxable?
No, an airworthiness certificate or pilot's license does not prove certificated-or-licensed-carrier status — that status requires specific authorization to operate as a common or contract carrier for …
Can a photographer who sells images online buy a computer and scanner tax-free, and does it matter whether the scanner scans a negative or a finished photo?
It depends on the equipment's actual use. A computer used only to enhance/edit unfinished photographs held for sale can be bought tax-free (with tax owed on the fair rental value for any divergent non…
Is a company that arranges and coordinates real property surveys for its clients, using independent licensed surveyors, purchasing survey services for resale and required to collect tax from its own customers?
Yes. Based on the contracts submitted, the coordinator is purchasing surveying services for resale and reselling them to its customers — it may give the surveyor a resale certificate instead of paying…
When two corporations form a Texas limited partnership, who owes Texas franchise tax — the partnership, the general partner, or the limited partner?
The general partner owes the tax; the limited partner generally does not. Under the pre-2008 Texas franchise tax, a limited partnership itself is not subject to the tax, even if it elects to be taxed …
If a contractor is building out a state agency's exempt facility (like the Texas State Preservation Board's history museum theater), which of the contractor's own purchases are tax-exempt, and which stay taxable?
Materials/supplies incorporated into realty for an entity exempt under Sec. 151.309 (government) or 151.310 (religious/charitable/educational/501(c)(3),(4),(8),(10),(19) organizations) are exempt, in …
A CPA asked about three new clients: a coin-operated apartment laundry business, an advertising/marketing firm, and an internet-based construction-tracking software company — what's taxable for each?
Coin-operated laundry revenue itself isn't taxed, but the business owes Texas use tax on the washers/dryers it buys (and must collect sales tax on any vending-machine soap sales). An advertising scrip…
Which bulk-mail fulfillment charges (sorting, folding, collating, stuffing, shipping) are subject to Texas sales tax?
Fulfillment mailing services — sorting, stuffing, metering, folding, labeling, and collating printed matter supplied by the customer, plus set-up fees, storage, packaging, and shipping/freight charges…
How did Texas tax long-term leases and purchases of ready-mix trucks, garbage trucks, and truck-mounted mixer equipment?
The lessor owed motor vehicle sales tax when buying ready-mix or garbage trucks for leases longer than 180 days, while lease receipts were not taxed. A mixer unit might qualify for the Chapter 151 man…
After an audit assessment was paid and later reversed, did Texas pay interest for the period between the taxpayer's payment and refund?
No. The taxpayer was entitled to recover the interest it had paid on the reversed audit assessment, but Texas would not pay additional interest for the time between payment and refund. Senate Bill 132…
Did a corporate partner include its share of each partnership's net profit or gross receipts in its own Texas franchise-tax receipts factor?
Yes. Although each partnership was a separate legal entity, the corporate partner had an intangible right to its share of partnership profit and had to recognize its share of each partnership's net pr…
Can an architecture firm use its tax-exempt school client's exemption certificate to buy blueprint copies tax-free from a copy shop, even though the copies are for the school's project?
No, not just because the client is exempt. An architect's or engineer's professional services are themselves nontaxable, so the firm — as the provider of a nontaxable service — must pay sales tax on t…
Does a company that promotes and sells bleacher-seat tickets to a public outdoor festival need to collect Texas sales tax on admission charges?
Yes. An outdoor festival qualifies as an amusement service, and sales tax is due on the admission charge. The seller of the amusement service (here, the ticket promoter/handler) must collect and remit…
Is asbestos abatement (collection, encapsulation, removal, disposal) taxable in Texas, and what about the repair work done to restore the building afterward?
The asbestos abatement service itself (collection, encapsulation, removal, disposal) is not taxable. But replacing insulation, siding, ceiling tiles, paint, and other realty improvements done in conne…
If a sports facility operator rents its facility long-term to instructors who use it only to teach students (no tournaments, leagues, or open play), is the facility rental taxable even though the instructors' own teaching services are tax-exempt?
Yes, the facility rental to the instructors is still a separately taxable amusement-service transaction, even though the instructors' downstream charge to their students for sports instruction is a di…
At a gas processing plant, is repairing equipment incorporated into realty taxable, are H2S monitors exempt as pollution-control equipment, and is new underground gas-line construction taxable?
It depends on the specific item. Repair labor on gas-plant equipment that's been incorporated into realty (which most is) is taxable real property repair, though separately stated repair parts are exe…
Can a retailer keep filing Texas sales tax returns on a 4-5-4 fiscal accounting schedule instead of strict calendar months for the year 2000?
Yes. A 4-5-4 fiscal accounting schedule is an acceptable basis for filing Sales and Use Tax Returns, with due dates set by where the accounting period falls in the month: if the period ends on the 1st…
Did a remote Internet seller create Texas franchise-tax nexus by having a Texas corporation drop-ship hardware and software to customers nationwide?
No, on the assumptions stated. A remote seller used an out-of-state server to sell hardware and software, while a Texas corporation shipped products from its inventory by common carrier. If there was …
A contractor's earlier ruling exempted consumable supplies (sandpaper, saw blades, rags, tape, cleaning products) used in remodeling work for tax-exempt entities — does the same exemption apply when the contractor does identical remodeling work for a commercial business like a retail store or restaurant instead?
No. The § 151.311 exemption for consumable supplies used in remodeling only applies when the work improves realty belonging to a tax-exempt entity. The same supplies used in an otherwise-identical tax…
Is a referral fee paid by a nursing home or retirement community to a locator service (that helps senior citizens find a home, at no charge to the senior) subject to Texas sales tax?
No. The referral fee paid by the nursing home or retirement community for the locator service is not subject to Texas sales tax, when the senior citizen being referred is not charged.
Is installing a new sign on top of an existing pole-mounted sign, under a lump-sum contract, considered new construction (potentially nontaxable) or remodeling (taxable)?
It's remodeling of real property, not new construction, so the lump-sum charge for adding the new sign is subject to sales tax. *Note: the scraped subject heading references "painting," but the letter…
At an iron-casting foundry, is the hoist/trolley system moving castings into a blast-cleaning machine taxable, and are hoists used to manipulate castings during grinding exempt?
The hoist/trolley system moving castings into the blast machine is taxable intraplant transportation equipment under Sec. 151.318(c)(1), which specifically excludes such equipment (including piping an…
Is pre-press equipment (mag etching, rubber plates, film master, velox print, photopolymer-to-engraving conversion) that a manufacturer buys to print its own packaging artwork exempt from Texas sales tax?
Yes. Under the newly added Sec. 151.318(t) (House Bill 3211, 1999), pre-press machinery, equipment, and supplies necessary/essential to the printing process — including the items listed (etching plate…
If a Texas repair/calibration company sends its own inspection equipment out of state for repair, does it still owe Texas use tax when the equipment comes back?
Yes. A repairman must pay tax on its own machinery and equipment used to perform repair services, and repair services performed on that equipment are also taxable. If the equipment is sent out of stat…
Is equipment a contractor rents (not buys) for use on a tax-exempt entity's job covered by the same exemption that applies to purchases of a taxable service for that job?
No. A contractor's rental of equipment/machinery for a job on exempt realty is legally a "sale"/"purchase" of tangible personal property under Sec. 151.005 (which defines rental the same as a sale), n…
Which manufacturing-related equipment and supplies — cleaning chemicals, cleaning equipment, safety apparel, quality-control gear, prepress equipment — qualify for Texas's manufacturing exemption under new 1999 law HB 3211, and are the changes retroactive?
The manufacturing-exemption changes in HB 3211 (amending Tax Code § 151.318) are treated as clarifications and applied retroactively to October 1, 1997. Under that framework: required health/safety cl…
Is a flat fee for helping someone collect on a small claims court judgment, without the helper ever handling the money, a taxable debt collection service?
Yes. Charging a flat, one-time fee to act as a third-party intervention service helping a judgment-holder collect on a small claims court judgment is a taxable debt collection service under Rule 3.354…
In a three-party sale-leaseback chain (Company A sells to Company B, which sells to Company C, which leases the equipment back to Company B), who owes Texas sales tax and at which step?
Only one step in the chain is taxable. If Company B and Company C each issue a properly completed resale certificate on their respective purchases, Company A doesn't collect sales tax on the sale to C…
Is a medical transcription service subject to Texas sales tax as a data processing service, and can past tax already collected be refunded?
No. Following a 1996 court decision the Comptroller chose not to appeal, medical transcription (including oral/taped dictation transcribed into patient records and letters) is not a taxable data proce…
Did Texas new-resident motor vehicle tax treatment apply when a company leased the vehicle out of state and a newly resident employee drove it in Texas?
No. The new-resident provision required the new resident to be the person who leased the vehicle. Here the company was the lessee and was not a new resident, so the letter applied the ordinary 6.25% t…
Which of a third-party IT consultant's on-site network services — server maintenance, hardware repair, software support, network administration — are taxable in Texas?
It splits item by item. Separately stated charges for designing/testing network architecture, general network administration not tied to a taxable item sale, installing/configuring software you didn't…
Does a bar have to charge sales tax on its beer sales, or does the alcohol gross receipts tax cover it instead?
It depends on whether the bar has a TABC mixed beverage permit. Without one, the bar must collect and report sales tax on beer sales (and on items like chips and candy) and can buy those goods tax-fre…
Is a company's separate contract to provide a physician with secretarial, bookkeeping, and drug-study-contract administrative support taxable as insurance claims processing or data processing services, even though the same company also does taxable medical billing for other clients?
No. Secretarial duties, bookkeeping for the physician's outside CPA, reviewing pharmaceutical drug study contracts for fee schedules, and reconciling reimbursement checks against contract terms are no…
What interest did Texas pay on franchise-tax audit refunds before and after Senate Bill 1321's January 1, 2000 effective line?
Texas had paid no interest on refunds since December 14, 1985. Senate Bill 1321 authorized variable interest only for erroneous payments associated with report periods due on or after January 1, 2000;…
Does the sale, rental, or lease of a power washer used exclusively to clean exempt farm/ranch equipment qualify for Texas's agricultural sales tax exemption?
Yes. A power sprayer/washer leased or sold for use exclusively to clean exempt farm equipment (to prevent fire hazards from dust/oil buildup or corrosion) qualifies for the agricultural exemption unde…
Were sales of tangible personal property Texas receipts when an affiliated distributor took possession at an out-of-state warehouse before shipment to customers?
No. The taxpayer retained title while an affiliate finished and stored the products outside Texas, then sold them to a distributor. The affiliate selected, packaged, and delivered the products to carr…
Did a New Jersey corporation create Texas franchise-tax nexus when independent contractors solicited consumers and merchants for its promotional program?
Yes. The independent contractors owned their territories, worked without supervision, could hire employees and represent other companies, and earned commissions from merchant billings. Even so, their …
How did Texas determine the legal domicile of grantor trusts holding leased aircraft or buildings, and what amount did the corporate beneficiary apportion?
A trust's legal domicile was its principal place of business—the location of day-to-day operations—or, if operations were fairly even across states, its commercial domicile. The letter lacked enough a…
Is photo processing equipment used by a pharmacy's photo department — cameras, enlargers, darkroom equipment, film, chemicals — exempt from Texas sales tax as manufacturing equipment?
Yes, largely. A photo processor is considered to be printing or imprinting tangible personal property for sale and qualifies as a manufacturer under Sec. 151.318. Prepress machinery, equipment, and su…
Are vent hoods over restaurant fryers and broilers exempt from Texas sales tax as manufacturing equipment?
Only in two specific situations: if the vent hood becomes a component part or accessory of a qualifying piece of manufacturing equipment, or if it's tangible personal property used in actual manufactu…
If a contract programmer bids on a job to enhance a custom software program it did not originally sell, are its charges to modify that program taxable?
No. Under Rule 3.308(b)(4), charges to modify an existing program that was not sold by the person doing the modification are not taxable. A programmer bidding on a contract to enhance and improve a co…
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?
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 excluded from the definition of garbage/solid was…
Is a custom machine that prints an airline ticket and stuffs it into a mailing envelope exempt from Texas sales tax as manufacturing equipment?
No. Because the machine is used to support a nontaxable service (fulfilling ticket-by-mail orders) rather than to manufacture, process, or fabricate tangible personal property for ultimate sale, it do…
Are membership dues a gated-community homeowners association charges for amenities like a golf course, swimming pool, and tennis courts taxable as amusement services?
It depends on the association's corporate structure. Dues charged by a 501(c)(7) social club for amusement amenities are taxable, but dues charged by an IRC Section 528 nonprofit homeowners associatio…
Does a federally tax-exempt nonprofit have to file and pay Texas franchise tax, and does its unrelated business income get taxed?
Yes, at least until it gets a Texas exemption. Texas has no income tax, but its franchise tax reaches nonprofit corporations doing business in the state. A federally exempt nonprofit corporation must …
Does a federally tax-exempt nonprofit have to file and pay Texas franchise tax, and how is its unrelated business income handled?
Yes, until it obtains a Texas exemption. Texas has no income tax, but its franchise tax reaches nonprofit corporations doing business in the state. A federally exempt nonprofit corporation must file a…
Is repair work on oil-and-gas-field compressors taxable, and does it matter whether the compressor is used for gas processing versus moving gas through a pipeline to the plant?
It depends on the compressor's function. Compressors used with field dehydrators, heater treaters, separators, and scrubbers, or to compress processed gas to sales-line pressure, qualify as processing…
Starting a small farm to raise and breed burros for sale, can I buy fencing and other materials tax-free while I'm still building fences, clearing land, and constructing barns/sheds?
Partially. Materials to build fences that confine breeding/sale animals qualify for the agricultural exemption under Rule 3.296(a)(5) and (g)(8)-(9), but fenceposts, gates, and cattleguards enclosing …
Are prepaid paging cards and bundled pager/prepaid-service packages sold through retail stores taxable as tangible personal property or as telecommunications services, and who has to collect the tax?
Both are taxed as telecommunications services, not as TPP. Separately stated prepaid paging card charges are taxable as prepaid telecommunications services when purchased at the retail store, and the …
If I run a small sole-proprietorship selling software over the internet from Texas, do I need a Texas sales tax permit, and do I owe tax on sales to out-of-state customers?
Yes to the permit — Texas taxes the sale, lease, or license of software as tangible personal property under Rule 3.308, so a Texas-based seller soliciting taxable sales must get a sales tax permit and…
Is installing a new sewage system, adding capacity to one, or repairing an existing one taxable in Texas, and does it matter whether billing is lump-sum or separated, or whether the property is residential?
Installing a new sewage system is new construction: under a lump-sum contract the installer owes tax on materials as consumer (the charge to the customer isn't taxable), but under separated billing th…
Are repair labor and repair/maintenance parts (lubricants, filters, oil) for farm and ranch equipment exempt from Texas sales tax?
Yes, if the equipment being repaired is itself exempt agricultural machinery. Tax Code § 151.316 exempts machinery/equipment used exclusively on a farm or ranch to build/maintain roads or water facili…
Can a retailer use a Monday-to-Sunday 4-5-4 fiscal calendar (instead of the traditional Sunday-to-Saturday version) to report Texas sales tax for the year 2000, and what due dates apply?
Yes. A modified 4-5-4 accounting calendar, even one running Monday-to-Sunday instead of the traditional Sunday-to-Saturday format, is an acceptable method for reporting Texas sales tax, as long as the…
If a roofing contractor rents equipment to perform installation work under a contract with a Texas school district, is that equipment rental exempt from sales/use tax?
No. Machinery and equipment used by a contractor on a contract with a school district (an exempt entity) is not exempted. The contractor owes tax on the purchase, lease, or rental of machinery, equipm…
How did Texas tax an intermediary's services and the vehicle purchases, leases, rentals, and resales in a leasing company's exchange structure?
The intermediary's limited receipt, management, and distribution of purchase and sale funds was not taxable. Retail vehicle sales were taxable, dealer-resale sales were not taxable with a resale certi…
Did a leased vehicle brought into Texas before September 1, 1999 qualify for the new-resident tax rule that took effect on that date?
No. The taxable moment occurred when the vehicle first entered and was operated in Texas. Because that happened before September 1, 1999, the earlier rule applied and required the leased vehicle to ha…
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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.