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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If a company sells 100% of a subsidiary's stock to an unrelated third party, but makes federal tax elections treating the deal as an asset sale followed by a liquidation into another group member, does the subsidiary's Texas franchise tax temporary credit for business loss carryforward stay with the combined group?
No. Selling 100% of a subsidiary's stock to an unrelated third party moves that subsidiary out of the seller's combined group for Texas franchise tax purposes, ending the group's right to use the subs…
Which city's local sales tax rate should an oil well servicing company charge when it takes orders at its equipment yard but performs repairs at customers' well sites elsewhere?
It depends on the type of work. For equipment rentals and repairing/remodeling tangible personal property (like tubing, rods, or pumps), the company must charge the LOCAL tax rate where its equipment …
Is an enrollment marketing company's sale of prospective-student leads to colleges and universities a taxable information service, even when the contract calls the leads 'exclusive'?
Yes, taxable. A company that collects prospective students' personal information through online ad forms and sells matching leads to colleges/universities is providing a TAXABLE information service, e…
Is a foodservice category management company's custom business-analytics reports and strategy consulting for restaurant/distributor clients a taxable information service in Texas?
No. A foodservice category management company's custom business-planning reports, strategic mapping, and consumer/operator insights -- built from third-party industry data plus the company's own analy…
Which of a restaurant mobile-ordering platform's various fees (service fee, credit card fee, offers fee, setup fee, subscription fee) are subject to Texas sales tax?
Split ruling. The Service Fee, Credit Card Fee, Setup Fee, and Platform subscription fee are ALL taxable as data processing services (80% of the charge). The Credit Card Fee doesn't qualify for the 20…
Do a private developer's construction and design/build contracts to build a municipal hotel and convention center for a city's development district qualify as tax-exempt construction contracts?
Yes. Development management and design/build contracts to construct a hotel and convention center for a municipal development district (a special district created by a city under Local Government Code…
Does Texas use tax apply to mobile lodging camp buildings brought in from Canada and set up on leased land to house oil and gas workers?
Yes, use tax applies. Mobile lodging, dining, and recreational modular buildings brought from Canada and set up on leased Texas land to house oil and gas workers remain taxable tangible personal prope…
Does a revenue-sharing agreement between a hospital district and its radiologists create a separate entity subject to Texas franchise (margin) tax?
Yes. The Texas Comptroller ruled that a revenue-sharing agreement between a hospital district and a group of radiologists — under which the parties jointly manage imaging centers, share net revenue, a…
Is a professional association's annual membership fee — bundling access to industry publications, networking events, certifications, and an online library — taxable in Texas?
Yes. Texas ruled that a professional association's $129 lump-sum annual membership fee (plus a $10 application fee) is taxable, because the membership bundles access to an online library of industry p…
Are monthly payments for a leased residential HVAC system and water heater — installed by the provider and removable on default — taxable as a lease of tangible personal property, or exempt as a real property improvement?
Taxable. Texas ruled that monthly payments under an HVAC/water-heater "Advantage Program" — where the provider leases and installs the equipment but retains ownership and a right to repossess on defau…
Is labor to install new pipe onto an existing above-ground pipe rack, or to add new levels to an existing rack, taxable new construction or taxable real property repair and remodeling?
Mixed. Texas ruled that installing brand-new pipe onto an existing above-ground pipe rack, and adding entirely new levels to an existing rack, both qualify as nontaxable new construction to real prope…
For a multistate title-report company, should local sales/use tax on its Texas information services be sourced to the address of the property the report covers, or to the customer's location?
To the customer's location, not the property address. Texas ruled that a title-report company's local sales and use tax should be sourced based on where its Texas customer is located (and where the co…
Are subsidy payments an employer pays a third-party food service company to operate its employee cafeteria subject to Texas sales and use tax?
Yes. Texas ruled that subsidy payments an employer makes to a third-party food service company — covering the gap between the cafeteria's operating costs and its food/drink sales receipts, plus an adm…
When a Texas port authority leases unimproved land to a private stevedoring company that will build a container yard, can the contractor buy construction materials tax-free under the governmental-improvement exemption?
Yes. Texas ruled that construction materials, consumables, and taxable services purchased to build both phases of a container-yard project at a Texas port — even though a private stevedoring company w…
Is a lump-sum digital marketing package — bundling website development, social media marketing, SEO, a local-review software plugin, and pay-per-click advertising — taxable as a data processing service in Texas?
Yes. Texas ruled that a company's lump-sum digital marketing package — website design/hosting/maintenance, social media marketing, SEO services, a local-review software plugin, and pay-per-click (PPC)…
How does Texas sales tax apply to a rent-to-own company's agreements — are they taxed as financing leases or operating leases, who's the responsible seller, and what happens when a customer takes the rented item out of state?
Rent-to-own agreements structured like this one are operating leases, not financing leases — so the full rental stream (including any "origination" or "interest"-labeled fees) is taxable, with no excl…
How does Texas tax the different service lines of a national medical-records and health-information-management company: record retrieval and copies, clinical data services sold to insurers vs. life sciences companies, medical coding, EMR scanning/storage, and data abstraction?
It depends on the service line. Medical records released directly to a patient or their authorized representative are NOT taxable, even as photocopies — but the same records processing done for a medi…
Is a subscription fee for accessing freely-licensed, company-branded open-source software (bundled with support services) taxable in Texas, even though the underlying open-source license itself is free?
Yes. Texas ruled that a company's subscription fee — charged to access and download its own branded, machine-readable build of open-source software, bundled with software support services — is fully t…
When a homeowners association collects quarterly assessments from lot owners and passes them through to a separately-owned country club as the price of club access, who owes sales tax — the club, or the homeowners association?
The club, not the homeowners association. Texas ruled that when a subdivision's homeowners association pays quarterly "support assessments" to a separately-owned private country club so lot owners can…
When a charter school finances a new campus through a 25-year build-to-suit lease with private landlords, does the two-prong exempt-contract test let the landlords' contractor buy construction materials tax-free?
Yes. Texas ruled that a 25-year build-to-suit lease under which private landlords finance and construct a new charter school campus, then lease it to the tax-exempt charter school operator, qualifies …
Is frac sand that has been extracted, washed, dried, and screened by grain size (but not cut, crushed, or mixed) subject to Texas sales tax as "processed" tangible personal property?
Not taxable. Texas ruled that sand mined for oil and gas fracking — which is scooped from the ground, washed in attrition scrubbers to remove clay/silt/organics, dried, and screened by grain size — re…
When a city leases a public facility to a private management company that pays for capital improvements and the city reimburses the company, are the improvements exempt from Texas sales tax?
It depends on who signs the contract, not who ultimately pays. Texas ruled that when a private limited partnership (LP) — which has full operational and revenue control of a city-owned convention/even…
Are a company's utilization review, peer review, and independent medical exam services — sold to insurers to evaluate whether an injured patient's treatment is appropriate — taxable insurance services in Texas?
Yes, generally — with one important 2023 carve-out. Texas ruled that utilization review, peer review, and independent medical examination services a company sells to insurance companies to evaluate wh…
Are water transfer services and frac fluid treatment services provided to oil and gas drillers subject to Texas sales tax, or to the state's oil/gas production or oil well service taxes?
Split ruling. Texas ruled that transporting fresh water to a client's frac tanks is not taxable (transportation isn't a listed taxable service), but treating used "frac fluid" afterward — removing hyd…
If goods originally purchased for export are stuck in storage at a Texas freight forwarder after the export deal falls through, and a new buyer is found in Texas instead, does the sale lose its tax-exempt export status?
Yes, the Texas sale is allowed. Texas ruled that two mobile power plants originally purchased for export to Venezuela — but stranded at a Texas freight forwarder after U.S. sanctions blocked the expor…
Does providing a certified operator along with rented bypass-pumping equipment turn a taxable equipment lease into a nontaxable service, and does that depend on who keeps "operational control" of the equipment?
It depends on who keeps "operational control." Texas ruled that when a company rents bypass-pumping equipment to a customer without an operator, the customer takes operational control and possession, …
How can a Texas hotel pass tourism public improvement district (TPID) assessment costs on to guests as a separately stated fee without triggering trust-tax liability under Section 111.016 — and is that fee subject to hotel occupancy tax?
A hotel can pass tourism public improvement district (TPID) assessment costs on to guests as a 'tourism public improvement district recovery fee' without triggering trust-tax liability under Section 1…
Are a software company's four SaaS offerings for optometry practices — patient communication automation, online lens ordering, digital marketing sync, and a bundled marketing-consultant package — all taxable as data processing services in Texas?
Yes, all four. Texas ruled that a software company's four Software-as-a-Service offerings for optometry and ophthalmology practices are each taxable as data processing services: patient-relationship-m…
Is the "success fee" an AI-driven online recruiting marketplace charges employers — only when they hire a candidate — a taxable information service in Texas?
Yes. Texas ruled that an online recruiting marketplace's "success fee" — 15% of a new hire's first-year base salary, charged to employers only when they actually hire a candidate through the platform …
Is a yoga and meditation studio's instruction, classes, memberships, and retreats subject to Texas sales tax as taxable amusement services?
Instruction itself is not taxable, but related sales are. Texas ruled that yoga and meditation classes, private sessions, memberships, workshops, and retreats are all nontaxable instructional services…
Is the service fee a mobile lottery-ticket-purchasing app charges users — covering OCR ticket scanning, secure storage, and management of public/private lottery pools — taxable in Texas, and is the licensed retailer's sales commission also taxable?
The app's fee is taxable; the retailer's commission is not. Texas ruled that a mobile app letting users buy Texas Lottery tickets is subject to sales tax on its Service Fee (9% of the funding amount p…
When a non-exempt landlord builds a facility and leases it to a Texas tax-exempt charter school, is the construction contract exempt from sales tax, and how long does the lease term need to be?
Yes. A construction contract between a non-exempt landlord and a Texas tax-exempt charter school is an exempt contract under Section 151.311 if the school qualifies for exempt status AND the lease ter…
When a charter school temporarily co-locating at another campus signs a 25-year build-to-suit lease to finance its permanent campus, does the two-prong exempt-contract test still exempt the construction materials from sales tax?
Yes. Texas ruled that a 25-year build-to-suit lease under which a private landlord finances and constructs a permanent campus for an open-enrollment charter school -- while the school temporarily oper…
Does a small city's luxury hotel-and-convention-center project qualify for a 10-year Chapter 351 tax rebate, are resort fees included, and can the city back more than one such project?
Yes — the project qualifies, and the Comptroller answered all thirteen questions favorably. The city (population under 6,000, meeting the adjacent-county and landmark criteria of Section 351.152(17)) …
Does a city's proposed luxury hotel and convention center project qualify for Texas's 10-year state tax rebate under Tax Code Chapter 351, and what taxes and facilities does the rebate cover?
Yes. A city's proposed hotel and connected convention center qualified as a "qualified hotel project" under Tex. Tax Code Chapter 351, entitling the city to a rebate of state sales tax, state hotel oc…
Does a city's hotel and convention center project, financed through a public facility corporation and a municipal development district, qualify for Texas's Chapter 351 state tax rebate, and how is the rebate obtained?
Yes. A city that met Tax Code § 351.152(27)'s population-and-county criteria, and structured its hotel and convention center project through a public facility corporation (which will own the hotel) an…
Does a city's planned hotel-and-convention-center project qualify for the Chapter 351 'qualified project' program, entitling the city to rebates of state and (with consent) local taxes generated at the project?
Yes — the project qualifies, and the Comptroller answered all eleven questions favorably. The city (population 70,000–90,000, located in two counties — one over four million, one under 50,000) is an e…
Does a convention center that a developer conveys to a city's local government corporation only in a reversible 'determinable fee' qualify as municipally owned, so the project earns Texas 'qualified hotel project' tax rebates?
No. To be a 'qualified hotel project' eligible for state tax rebates under Section 151.429(h), the convention center must be owned by the municipality (here, a city of 1,500,000+) as defined in Govern…
Does a convention center count as "owned by a municipality" for Texas's qualified-hotel-project tax rebate if the city's ownership interest is a reversionary "determinable fee" instead of outright fee simple?
No. A convention center conveyed to a city-affiliated local government corporation in "determinable fee" — meaning title could revert back to the private developer after a set period — does not satisf…
Is a permanently implanted spinal cord stimulator exempt from Texas sales tax as a prosthetic device, and does the same exemption cover the temporary trial stimulator used to test the implant beforehand?
It depends on permanence. The permanently implanted spinal cord stimulator system — including its wireless remote and charger — is an exempt prosthetic device under Tex. Tax Code § 151.313(a)(5). But …
If a Texas printing company splits its printing and fulfillment (storage/shipping) operations into two separate related companies, how does each company charge Texas sales tax, and does the out-of-state shipment exemption still apply?
The print company must charge tax on all in-house printing and related charges (design, technology, transportation/"kitting," account management) that are part of the sale, including printed material …
When a Texas hotel pays money into its loyalty-rewards fund for issuing points to guests, are those 'Marketing Promotions' contributions administrative charges or charges for issuing reward points?
They are charges for issuing reward points, not administrative charges. A hotel's 'Marketing Promotions' contributions to its frequent-stay rewards fund are paid in conjunction with issuing points to …
Can a city split ownership of a qualified hotel project — city owns the convention center, a local government corporation owns the hotel — and still qualify for the Chapter 351 tax rebate, and what exactly does a city need to submit to actually collect the rebate?
Yes. A city's convention center hotel project qualified for the Chapter 351 tax rebate even though the new convention center is owned directly by the city while the adjoining hotel is owned by a city-…
Does a mid-size city's downtown hotel-and-convention-center project qualify for the Chapter 351 'qualified project' rebate program, and how do ownership, financing, leasing, and the 10-year entitlement work?
Yes — the Comptroller answered nineteen questions and confirmed the project qualifies. A city of 110,000–135,000 spread across two counties each under 135,000 is an eligible municipality under Section…
Are a smart-farming company's irrigation control components — pump controls, flow meters, soil probes, weather stations, network equipment, and software — taxable tangible personal property, exempt agricultural equipment, or realty improvements when sold to Texas farmers?
It depends entirely on how each component is physically installed. Parts that stay removable without substantial damage (pump controls, flow meters, most probes/stations) remain tangible personal prop…
Can a Texas fleet lessor retitle retired out-of-state vehicles as 'Title Only' and use their value to reduce tax on replacement vehicles?
Retitling the retired vehicles as Texas 'Title Only' caused no use tax because they would not use Texas highways. But their value could not reduce tax on new fleet vehicles because the retired vehicle…
Can a certified Texas large-data-center operator extend its sales tax exemption to new "expansion buildings" by using a sale/leaseback structure to become their formal owner, when the transaction is disregarded for accounting and federal income tax purposes?
No. The Comptroller ruled that a proposed sale/leaseback — under which the data center operator would become the recorded owner of new "expansion buildings" while the seller kept them as owner for fed…
Is digital music temporarily downloaded to a coin-operated jukebox subject to Texas sales tax, and who — the music service, the jukebox operator, or the bar/restaurant hosting the jukebox — owes it?
Yes, the sale of digital music downloaded to a coin-operated jukebox is taxable tangible personal property even though it exists on the jukebox only for the length of the song — but who owes the tax d…
Do solar farm racking, support posts, AC collection systems, cables, and inverter-transformers qualify for Texas's manufacturing sales tax exemption as equipment used to generate electricity for sale?
It's split by function. The solar panels/modules themselves are exempt manufacturing equipment, but the fixed racking, tracker racking, and support posts that merely hold and position multiple panels …
Is a breast tissue expander and its dosage controller — used temporarily after a mastectomy before a permanent implant — exempt from Texas sales tax as a prosthetic or therapeutic device?
No, neither is exempt. A tissue expander and its companion dosage controller — a temporary, single-use system used to stretch skin before a permanent breast implant following a mastectomy — don't qual…
Can an LNG exporter use its own loading documents (Master's Receipt, Certificate of Quantity, Certificate of Quality) instead of a traditional bill of lading to prove the export exemption from Texas sales tax?
Yes. A set of "Loading Documents" — a Master's Receipt, Certificate of Quantity, and Certificate of Quality, signed by the LNG vessel's master or agent and showing the carrier's issuance, the seller a…
For local sales tax purposes, where is an online marketplace sale "consummated" when the order is placed through out-of-state servers but fulfilled from a Texas warehouse that isn't open to the public?
Generally, at the delivery address, not the warehouse. When an online order is placed through a website/app and processed on out-of-state servers, and fulfilled from a Texas fulfillment center that is…
Is reactivating spent (used-up) industrial activated carbon by burning off its absorbed impurities "manufacturing" or "processing" for Texas sales tax purposes, or is it just a taxable repair service?
It's a repair service, not manufacturing or processing. A company that reactivates customers' spent activated carbon by dewatering it and burning off absorbed impurities is restoring someone else's de…
Which taxes can a multistate vehicle rental company credit against Texas minimum tax liability, and can deductions be added later?
Legally paid sales, use or rental tax from another state could reduce the Texas minimum tax liability, but Texas local venue taxes could not. A trade-in could not be added after titling; a missed fair…
Does an internal show committee of a tax-exempt nonprofit society count as its own "bona fide chapter" — entitled to its own separate two-one-day tax-free sale allowance — when the committee's event profits are transferred back to fund the parent organization's own operating expenses?
No. A show committee of a Section 501(c)(3) exempt organization is not a "bona fide chapter" entitled to its own separate two-one-day tax-free sale allowance, because its leaders are appointed (not el…
Is a pedal-powered party bike trolley rental (with a driver/"captain," a route, and BYO food/drink) a taxable amusement service or a nontaxable transportation service in Texas?
It's a taxable amusement service, not nontaxable transportation. A pedal-powered bike trolley — rented by the hour with a captain, marketed for parties, pub crawls, and social outings, and following a…
Are the "close-end" needles used with a portable nitrous-oxide nerve-pain-block device exempt from Texas sales tax as hypodermic needles, when sold to hospitals and clinics rather than directly to patients?
No, they're taxable. The "close-end" needles used with an FDA-approved portable nitrous-oxide nerve-block pain device don't qualify as exempt hypodermic needles under Section 151.313(a)(4), because th…
Is a single-use surgical staple fixation kit — where only the implanted staples, not the disposable delivery device that comes with them, stay permanently in the body — exempt from Texas sales tax as an orthopedic device?
Yes. A single-use surgical staple fixation system for foot surgery — comprising a drill bit, delivery device, drill guide, alignment pins, and staple tamp, only the staples of which are permanently im…
Are a digital marketing agency's software sublicense fees, SEO service, Google AdWords consulting (SEM), and Facebook inventory integration (FIM) service each taxable in Texas, and if so, as what kind of taxable item?
It varies by service. Sublicensing the social-media-posting app is a taxable sale of a computer program. SEO (editing a client's website with keywords/meta tags to boost search ranking) is a taxable d…
How does a Texas city with special-population hotel-project authority qualify, measure the 1,000-foot ancillary-facility radius, and pledge project taxes — and which facilities count as ancillary?
This replacement ruling answers nine questions for a city authorized to run a hotel project by a special population/geography category (96,000+ residents in the county containing the San Gabriel River…
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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.