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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When two exempt political subdivisions jointly finance and own a new office building through a loan, cotenancy, or joint venture, do construction materials stay sales-tax exempt regardless of the ownership structure, who buys them, or a modest amount of private tenant use?
Yes to all three questions. Purchases of construction materials for the office building are sales-tax exempt no matter which financing/ownership structure the two exempt entities choose (a loan betwee…
When one company charges a lump-sum guide-service fee for an adventure race and a related company separately rents out kayaks and gear, who owes sales tax on what?
Split treatment. A guide service's single charge to a race participant for the guide service itself (orienteering, hiking, trekking, running, team challenges, etc.) is not taxable. The related gear co…
Does a private company operating a city-owned prison under a management contract owe sales tax on its own purchases to run the facility, just because its customer is a tax-exempt city government?
Taxable, on these facts. A private company operating a city-owned prison under a management contract owes Texas sales tax on its own purchases to run the facility -- the city's tax-exempt status does …
If manufacturing software qualifies for Texas's manufacturing exemption, does that exemption also cover the software's installation, training, and maintenance/technical-support charges?
Mostly favorable, with one nuance on why training isn't taxed. Software used directly and exclusively by a manufacturer to produce or test tangible personal property for sale qualifies for the manufac…
Is materials/labor for building or modifying a jet engine prototype exempt as manufacturing or resale, since the prototype itself won't be sold?
As of this 2001 letter: fully taxable. A prototype is an original model or sample used as the pattern that other, later production items will copy -- it's generally not itself offered for sale, so mat…
Is a student loan origination company's fee taxable as data processing, given that its contracts include some loan-management, some debt-collection, and some data-compiling activities?
Generally nontaxable, with two specific exceptions. Guaranteed student loan origination services (approving applications, handling inquiries, disbursing proceeds, updating accounts, reporting to lende…
For a sports collectibles/memorabilia show, is general admission taxable, are vendor booth rentals taxable, and is a separate charge for celebrity autographs taxable?
Mixed, by charge type. General admission to a sports collectibles and memorabilia show is taxable, as an amusement service. Booth rental charges to outside vendors exhibiting at the show are NOT taxab…
If a company assembles a septic tank system and sets it into a pre-dug hole on a vacant lot, but someone else later connects it to the home's sewer and electrical lines, is that a tax-exempt real-property-improvement contract or a taxable sale and installation of tangible personal property?
Taxable sale and installation of tangible personal property, not an exempt realty improvement. A subdivision developer's subcontractor assembled septic tank systems and set them into pre-dug holes on …
A private partnership leases university land, built and operates a student dormitory there for the university's benefit under a tightly restricted ground lease, and title to the building already belongs to the university's governing board -- is mold-remediation and repair work on the dormitory exempt from Texas sales tax?
Exempt. Repair, remodeling, and mold-remediation work on a university dormitory qualifies for the Sec. 151.311 exemption for improvements to realty performed for the direct benefit of an exempt entity…
If most members join a collectibles club mainly for the intangible right to buy exclusive pieces later, is the membership fee still taxable because a low-value welcome kit and newsletter come with it?
Taxable, rejecting a "true object" argument. The company argued that surveys showed new members primarily wanted the intangible benefit of exclusive club status and future purchase rights, not the low…
Are dietary/nutritional supplements like Coenzyme Q10, glucosamine, spirulina, amino acids, and various herbal and vitamin products exempt from Texas sales tax?
Exempt. The Comptroller confirmed a lengthy, specific list of vitamin, herbal, and nutritional supplement products -- Coenzyme Q10; MSM; glucosamine sulfate; various combination herb/vitamin/mineral p…
A contractor paid tax in full on a lump-sum new-construction contract to install a manufacturing process line -- can it now claim a manufacturing exemption refund on the qualifying equipment, even though the contract was lump sum?
No refund available for new construction, but repair/remodel work is different. The manufacturing exemption is categorically NOT available for equipment installed under a lump-sum contract for NEW con…
For a barge bare-rental business run through one entity and a related towing-services business run through a separate entity, which charges -- surveys, inspections, repairs, cleaning, brokered personnel, cargo contracts, and boat supplies -- are taxable, and does splitting billing between the two entities create tax problems?
A detailed, multi-part answer. Barge damage surveys are taxable to the customer when passed through as part of the bare barge rental price (Sec. 151.007(b)), regardless of whether they're specifically…
Is a direct sales/multi-level-marketing company responsible for collecting and remitting Texas sales tax on its independent distributors' sales, and how should it account for varying local tax rates?
Yes, automatically -- no special agreement needed. A direct sales organization (including a multi-level-marketing company) is responsible under a longstanding Comptroller rule (Rule 3.286, backed by T…
A company monitors customers' Wide Area Networks (WAN) from Texas for a flat monthly fee per monitored device, occasionally performing remote repairs itself (about 10% of the time) at no extra charge, with other repairs referred to third-party carriers or equipment vendors who bill the customer separately. Is the monthly monitoring charge taxable, does it matter that the customer isn't charged extra when a repair happens, and how does location (Texas vs. out-of-state customers) affect the answer?
It depends on where the repair happens, not on billing structure. Monitoring related to a repair of a customer's LAN or WAN is subject to Texas state and local sales tax if the repair is performed IN …
Was a Texas highway sweeper taxed as a motor vehicle or as moveable specialized equipment?
It depended on construction. Sweeper equipment mounted on a cab chassis was a motor vehicle. A sweeper manufactured from beginning to end was moveable specialized equipment subject to limited sales an…
If a contractor doing repair or remodeling work on commercial property fails to charge or remit sales tax, can the Comptroller come after the customer (property owner) for the unpaid tax instead of or in addition to the contractor?
Yes. Sales and use tax is ultimately the purchaser's liability, so if a contractor fails to collect and remit tax on a nonresidential repair or remodeling job, the Comptroller can pursue the property …
Is collagen that a dermatologist purchases and injects into a patient's body during an office procedure subject to Texas sales tax?
No. Collagen purchased for the purpose of implanting into the human body qualifies as an exempt prosthetic device under Texas Tax Code § 151.313(a)(4) and Rule 3.284(a)(10)(C), so the dermatologist ow…
Are toothbrushes, floss, and toothpaste that a dentist buys for practice use or to give away to patients subject to Texas sales tax?
Mostly yes. Toothbrushes, floss, and non-fluoride toothpaste are taxable when sold to a dentist for practice use or to give away to patients. Fluoride toothpaste, however, may be sold to dentists tax-…
Is an Eagle Sand Classifier — a machine that washes and sizes sand — exempt manufacturing/processing equipment under Texas sales tax law?
No. Simply sizing, screening, sorting, washing, or drying sand does not count as "processing" under Rule 3.300, because it doesn't modify or change the characteristics of the sand. So a sand classifie…
How does Texas sales tax apply to an arborist's oak-wilt treatment — both the taxable chemical injection/spraying and a concrete root-barrier trench built to stop the disease from spreading?
It's split. Chemical treatment/injection to fight oak wilt disease is a taxable real property service under Rule 3.356 and must be billed and taxed separately. A permanent concrete barrier trenched to…
When a software company sells a development-tool product AND separately hires out consultants to help clients build their own applications with that tool, which charges are taxable — the tool itself, the consulting/training, or the applications the consultants help build?
Split ruling. The sale of the SOFTWARE development-tool product itself is taxable. Separately stated charges to train clients on using the tool are not taxable, and charges to help a client build an a…
Which items sold to physical therapy patients — crutches, braces, straps, resistive bands, cold packs, taping supplies, heel lifts — are exempt from Texas sales tax, and does each one need a doctor's prescription?
It varies by item, and mainly turns on whether a doctor's prescription is required. Crutches, tennis elbow straps, patellar straps, and lumbar supports are exempt as prosthetic devices or braces with …
If a for-profit business (like a bank) hires and pays for valet parking at a fundraising social it hosts for a 501(c)(3) exempt organization, does the exempt organization's status make the valet parking service tax-exempt?
No. Valet parking services purchased by a for-profit entity hosting a social event for a sales-tax-exempt 501(c)(3) organization are taxable. The exemption belongs to the entity that holds the exempti…
Does a pagination system — the computer hardware and software a newspaper publisher uses to design and lay out pages before printing — qualify for Texas's manufacturing exemption from sales and use tax?
Yes. A pagination system — the combined computer hardware and software used to design, edit, and assemble newspaper page layouts before the negatives and plates are made — qualifies as exempt manufact…
If a business stops keeping copies of individual invoices (relying instead on a purchase card and a monthly summary sales tax report generated by software), is that summary report enough to satisfy Texas's sales tax recordkeeping requirements for an audit?
No, not as described. A monthly summary tax report that doesn't describe each item purchased, state the tax rate, identify the taxing state/local jurisdictions, or show the taxable amount does not sat…
Are over-the-counter hair regrowth products like Rogaine (minoxidil) exempt from Texas sales tax under the OTC drug and medicine exemption?
Yes. Effective April 1, 2000, sales of over-the-counter drugs and medicines are exempt in Texas, and a medicated product used to promote new hair growth qualifies as a drug or medicine under that exem…
A company plans to build a free web-site directory for educators, paid for by local businesses that sponsor it in exchange for advertising space. Is the sponsor's fee for building, hosting, and maintaining the directory subject to Texas sales tax — and how does Texas generally tax internet-related services?
Yes, taxable. Charging advertisers/sponsors for creating (via HTML), hosting, and maintaining the educator directory website is a taxable data processing service under Tax Code § 151.0035, because it …
A company buys fly ash and bottom ash — leftover residue from a utility burning coal to generate electricity — and spreads it on drilling sites for stability. The utility told the buyer these purchases aren't taxable if used as-is without further processing. Is that right?
No, the utility's advice was wrong. Purchases of fly ash and bottom ash are taxable. Coal itself is exempt only because of how the utility uses it (to produce electricity for sale) — that use-based ex…
When a rental customer returns damaged equipment and gets billed for the repair labor and parts, is that repair charge taxable — and does it matter if the renter is a tax-exempt organization?
Generally taxable. A charge to a lessee for labor and parts to repair rental equipment the lessee damaged is a taxable service under Rule 3.294 — but if the entity that rented the equipment provided a…
A Texas resident ordered software from an out-of-state (Colorado) company that charged sales tax but is no longer permitted to collect Texas sales tax. Does the buyer still owe Texas tax on the software, and if so, to which state — Texas or Colorado?
Texas use tax is owed. Texas sales or use tax is due on software delivered to a customer for use in Texas, regardless of where the seller is located. Here, the seller was no longer permitted (as of 12…
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…
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 …
A company operates private phone systems in office buildings and hotels, buying telecom service wholesale and reselling it to tenants/guests -- plus charging separately for wiring, phone jacks, moving/installing phones, and equipment maintenance. Which of these charges are taxable, which can be bought tax-free for resale, and does bundling vs itemizing change anything?
A multi-part breakdown for a private telephone system operator reselling telecom service to tenants/guests. The operator must collect sales tax on its ENTIRE charge to tenants/guests for telecommunica…
What property could reduce the Texas sales-tax base or motor vehicle tax base as a trade-in?
A dealer could allow a trade-in credit for a motor vehicle or customer-dismantled vehicle parts against a sale of tangible personal property. But when the dealer sold a motor vehicle, only another mot…
Are chemical sanitizers used to clean food-processing equipment and processing-area floors/walls exempt from Texas sales tax?
Yes. Chemical sanitizers that state or federal law requires a food-processing facility to use, applied to processing equipment or used within the actual manufacturing/processing area (including proces…
When a building job mixes new construction, residential remodeling, and nonresidential remodeling, how is Texas sales tax calculated on the combined contract?
It depends on category and billing method: new construction and residential repair/remodeling are both taxed the same way (materials taxable, labor exempt; lump-sum billing makes the CONTRACTOR the ta…
Are conveyors, piping, and water-treatment equipment in a rock-crushing plant exempt from Texas sales tax as manufacturing equipment?
Split ruling: the shakers, log washers, sand screws, and high-pressure water machine in a rock-crushing operation qualify for the manufacturing exemption because they each make a chemical or physical …
Are thermometers and timers used in food processing exempt from Texas sales tax as manufacturing/quality-control equipment?
Yes, for quality-control uses: hand-held probe thermometers used to check food temperature during processing, shelf-type oven thermometers used to monitor cooking temperature, and timers used in food …
When a Texas-permitted seller drop-ships to a Texas customer on behalf of an out-of-state retailer, can it accept the out-of-state retailer's resale certificate instead of collecting sales tax?
Yes. A seller holding a Texas sales tax permit that drop-ships items to a Texas 'ship to' address on behalf of an out-of-state retailer may accept a properly completed resale certificate from that out…
Is an advertising company's electronic transmission of a recorded phone message to a radio station's listeners a taxable telecommunications service?
Yes, taxable -- and the taxpayer's own prior informal advice (that it would be exempt telemarketing) was corrected in writing. A charge for electronically transmitting a recorded message via telephone…
Is propane (LP gas) sold for residential or commercial use subject to Texas sales tax?
ALERT (see note below): propane (LP gas) is exempt from both state and local sales and use tax under Tex. Tax Code § 151.308(a)(3) and § 321.003, regardless of whether it's used residentially or comme…
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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.