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.
No Texas rulings match these filters
Try a different search term or clear the filters.
Did converting a Texas corporation to an LLC by filing articles of conversion require final franchise- and sales-tax returns?
No, if the corporation filed articles of conversion. Texas treated the converted LLC as the same legal entity, so no final franchise-tax or sales-tax return was required; the state would update its re…
Is a customized medical literature-search service taxable as an information service, even though each report is tailored to one client and can't literally be resold as-is?
Taxable -- customizing the search and binding results into a client-specific report doesn't make the underlying information 'proprietary' to that client, so the service is a taxable information servic…
Can a 501(c)(3) nonprofit buy remodeling work tax-free for a building it leases out to for-profit tenants?
Yes -- because the rental income from the leased space qualifies as related (tax-exempt) income under IRS guidelines for this organization's exempt purpose, the entire remodeling project can be purcha…
Did a Texas retailer collect limited sales tax on a utility trailer kit, or did the buyer pay motor vehicle tax when registering it?
The retailer did not collect Chapter 151 limited sales tax. The trailer kit was subject to Chapter 152 motor vehicle tax, which the purchaser paid to the county tax assessor-collector when registering…
Did independent agents soliciting Texas orders for publications create nexus for both former franchise-tax components?
They created taxable-capital nexus. Independent agents soliciting Texas orders for tangible publications made the corporation responsible for franchise-tax reports under Rule 3.546(c)(4). The corporat…
Is a television station's doppler weather radar system exempt from Texas sales tax?
Exempt only if used to generate images for broadcast -- if the same system is instead used for weather forecasting or other non-broadcast purposes, that use is taxable. A television station asked abou…
Did an investor-owned electric utility include transformers in taxable capital when GAAP required capitalization as plant assets?
Yes, if GAAP required capitalization. Section 171.109(b) required the corporation to compute surplus, assets, and debts under generally accepted accounting principles. Transformers classified by GAAP …
Did a federal Section 368(a)(1)(F) reincorporation eliminate Texas final and initial reports when state records showed one entity terminated and another was authorized?
No. Although the taxpayer viewed the state-of-incorporation and name change as a federal F reorganization with uninterrupted tax attributes and no short year, Texas records showed the old corporation …
Could one corporation receive another corporation's Texas business-loss carryover through a merger when state records still showed separate certificates of authority?
No. Comptroller records showed one corporation still had an active Texas certificate of authority, the other had received a separate certificate on December 23, 1996, and the agency had no record of t…
When a city owns an airport but a private airline finances/contracts the construction, is that construction exempt from Texas sales tax -- and does it matter whether the space is public or restricted?
Yes for public-access areas -- construction of a people mover, bus stations, terminal relocation, and baggage system is exempt under Sec. 151.311 because it's owned by the City, benefits the public, a…
Is a flat monthly fee for an assigned parking space behind my office building a taxable parking service or a nontaxable real property rental in Texas?
Taxable -- a flat monthly fee for an assigned parking lot space is a taxable motor vehicle parking service, not a nontaxable real property rental. A business paid a flat monthly fee for an assigned pa…
Did delivering products to Texas in vehicles borrowed or assigned from a parent corporation create earned-surplus nexus for both companies?
Yes. Solicitation already created taxable-capital nexus for both foreign corporations. For earned surplus, Corporation A controlled the borrowed, assigned, or leased vehicles and used them to deliver …
Can doctors, dentists, and veterinarians buy prescription pads and other printing tax-free using a resale certificate?
No -- doctors, dentists, and veterinarians perform nontaxable medical services and are not considered to be reselling tangible personal property, so they cannot issue a resale or exemption certificate…
Can a 50/50 joint venture between a 501(c)(3) nonprofit and a for-profit company use a direct payment permit to claim a partial (50%) sales tax exemption?
Yes -- the joint venture may issue direct payment blanket exemption certificates to its vendors, and may then claim a 50% (pro rata) exemption on taxable purchases in keeping with the exempt partner's…
Are pallet rental fees and related delivery/transfer charges taxable for a food manufacturer, given the packaging-supplies exemption for pallets?
Taxable -- the packaging-supplies exemption for pallets doesn't apply here because the pallets are leased on a short-term (daily) basis, not for a period of one year or more. A food manufacturer packe…
How did Texas tax a total-loss vehicle sale, its later resale after repair, and an insurer's receipt of the vehicle after paying a claim?
A vehicle declared a total loss lost its motor-vehicle identity for sales tax purposes, so its sale was taxed under Chapter 151. After repair, later sales returned to Chapter 152 motor vehicle tax. An…
For a Texas aircraft engine repair company, which charges are taxable, and does it matter whether the customer is a commercial airline, a repair shop, or a privately/corporately owned aircraft?
It depends heavily on WHO the customer is and HOW the charge is billed (lump-sum vs. separately stated) -- commercial-airline and licensed-carrier work is largely nontaxable, private/corporate aircraf…
Could a Texas state agency grant a license to a corporation that was not in good standing for franchise-tax purposes?
No. The Comptroller confirmed that a state agency could not grant a license to a corporation that was not in good standing with respect to franchise tax. The letter attributed that requirement to Arti…
Does hosting a web page on a server located in Texas create Texas sales tax nexus, and is server space itself a taxable service?
Yes -- an individual or company that owns, leases, or rents a server located in Texas has nexus in the state because of that substantial tangible property, and must collect Texas tax on taxable sales …
Is Texas sales tax due on teleconferencing/bridging fees when the conference is arranged by an out-of-state company but participants call in from Texas?
It depends entirely on how participants connect: standard dial-in (callers pay their own long distance) has no Texas tax on the bridging fee, toll-free dial-in IS taxable to the extent calls originate…
If a Texas printer stores finished brochures/catalogs in its own warehouse before shipping them to the client's out-of-state customers, is the printing taxable?
Yes, taxable -- storing the printed materials in Texas after printing, even before they're ultimately shipped out of state, counts as a taxable use in Texas by the printer's customer. A printing compa…
Could a corporation eliminate transactions between partnerships by applying consolidated-reporting principles under the former Texas franchise tax?
No. The Tax Policy Director said eliminating transactions between the partnerships would effectively allow consolidation contrary to the statute and agency rulings. Partnership receipts were includabl…
Is installing audio/video (home theater/surround sound) wiring and equipment taxable in Texas, and does it matter if it's new construction, residential, or commercial remodeling?
It depends on the type of job: cabling/wiring LABOR is not taxable for new construction (residential or commercial) or for residential repair/remodeling, but IS taxable for nonresidential (commercial)…
Which cardiovascular surgical products (mesh, grafts, blood bags, chest drains, catheters, software) are exempt from Texas sales tax as implanted medical devices?
Only the items actually implanted in the patient's body are exempt -- the mesh and vascular graft qualify, but blood bags, chest drainage units, thoracic catheters, and patient database software are a…
Is a Texas recording studio's charge to musicians taxable as equipment rental, or nontaxable as a manufacturing/production service -- and does it depend on who operates the equipment?
It depends on who operates the equipment: if the studio hands over full operational control to the producer/musician with no studio personnel operating it, that's a taxable equipment rental; if studio…
Was holder-redeemable preferred stock debt when the certificate of incorporation allowed the corporation to refuse redemption under legal, charter, or lender restrictions?
No. Although holders could request redemption at $1,000 per share, the certificate of incorporation allowed the corporation to refuse a request when redemption was prevented by law, the certificate, o…
Which of an armored transport company's many services (ATM cash replenishment, ATM repairs, vault storage, coin wrapping) are taxable in Texas?
Mostly taxable as security services, with two notable exceptions: coin wrapping and true maintenance (as opposed to repair) of real-property ATMs are not taxable if separately billed. An armored trans…
Can a Texas retailer refuse to accept a foreign shopper's export certificate from any customs broker except the one it exclusively works with?
Yes -- Texas law does not require a retailer to accept every licensed customs broker's export certification, and does not prohibit a retailer from having an exclusive arrangement with one particular b…
Are gaming lessons, casino-themed practice time, private casino-night party rentals, and a 'High Roller Club' membership taxable in Texas?
It varies by activity: gaming lessons are not taxable, informal practice time IS taxable as an amusement service, renting the whole facility for a private casino-night party is a nontaxable real prope…
Is a teleconferencing company's bridging fee taxable in Texas when its bridging equipment is located entirely out of state, even though Texas participants call in?
Not taxable -- because the bridging equipment that actually links participants together is located entirely outside Texas, the company's bridging service charges are not subject to Texas sales tax, ev…
Is building, equipping, and repairing an agricultural greenhouse exempt from Texas sales tax, and does an agricultural exemption certificate cover the repair labor too?
New construction of the greenhouse itself is not taxable (labor) and its materials can be bought exempt, but once built, repair LABOR on the greenhouse is always taxable -- only the separately-billed …
Is a telephone company's Universal Service Fund (USF) surcharge passed on to customers subject to Texas sales tax?
Yes, taxable -- the USF reimbursement charge is part of the sales price of the telecom service itself and is taxed the same way the underlying service is. A telephone cooperative that owns a cellular …
Did Texas treat troops and branches of the named national youth organizations as exempt from motor vehicle tax?
Yes. The 1998 letter said all troops or branches of the Boy Scouts, Girl Scouts, Camp Fire Girls, Boys Clubs, and Girls Clubs had been determined to be federal-government instrumentalities and were ex…
Did a corporation owe a payment with its 1998 annual-report extension request when its prior initial report showed zero taxable capital and zero taxable earned surplus?
No. The electronic-funds-transfer taxpayer chose the option requiring 100 percent of the tax reported for the previous year. Because its previous report was an initial report showing zero net taxable …
Could a licensed CPA sign a Texas franchise-tax extension as an authorized agent after receiving verbal authorization from a corporate officer?
Potentially, but CPA status and verbal authorization did not make the answer automatic. The letter said an authorized agent was a person legally empowered to act for the corporation, and a CPA was not…
Was a member's transfer of funds to an LLC excluded from stated capital and surplus as debt?
Only if the transfer was debt under Section 171.109: a legally enforceable obligation for a certain amount of money payable within an ascertainable period or on demand. Funds intended as contributed c…
How does a Texas bank treat interest from, and gains and losses on the sale of, U.S. government obligations for franchise tax?
Interest from federal obligations is excluded from the earned-surplus base and gross-receipts factor, but is included in the bank's taxable-capital gross receipts. For a Texas-domiciled bank, interest…
Does Texas's manufacturing exemption for water-reduction/wastewater equipment cover the connecting piping, and are lubricants used to maintain exempt manufacturing equipment also exempt?
Piping only qualifies for the water-use-reduction exemption if it's a genuine component PART of a single piece of exempt equipment (not general intraplant transport piping), and lubricants/chemicals u…
For a company selling check-processing hardware/software to Texas banks and government agencies, which specific charges (hardware, software, installation, training, maintenance, travel) are taxable?
Most charges are taxable, but a few specific ones are not: installation performed by an unrelated third party (for software that party didn't sell), on-site or out-of-state training (if separately sta…
Is a restaurant's ice machine exempt from Texas sales tax if it makes ice served directly to customers in drinks?
Yes, exempt -- but only if the ice machine is used exclusively to produce ice served to customers in their drinks; any other use (like ice for a salad bar or drink coolers) is a divergent use that tri…
Can a company leasing purifier/vaporizer/piping/storage-tank equipment to a semiconductor manufacturer buy it tax-free and lease it tax-free too?
Yes on both ends -- the equipment can be purchased tax-free with a resale certificate, and the monthly facility fee charged to the semiconductor manufacturer can also be exempt if the manufacturer pro…
How did Texas distinguish a purpose-built concrete pump from a pump attached to a conventional truck chassis, especially when supplied with an operator?
A purpose-built, movable specialized concrete-pump unit was taxed under Chapter 151. A conventional cab chassis with a pump attached was a motor vehicle under Chapter 152. Supplying that truck with a …
A corporation overpaid sales tax on manufacturing equipment, then dissolved and contributed that equipment to a new partnership. Can vendors assign their right to a tax refund directly to the successor partnership using the corporation's old assignment forms?
No. To assign a refund, the vendor must have a valid exemption certificate from the actual purchaser — and the dissolved corporation, not the partnership, was the purchaser. The partnership can't issu…
Was a partnership's transfer of vehicles to a titling trust taxable when the trust paid or assumed vehicle debt?
Yes, if the trust satisfied the partnership's debt by making payments or formally assuming it. Texas treated the partnership and trust as separate entities, so that debt relief was consideration and t…
When were a Texas farm trailer, its repair labor, and its repair parts exempt from motor vehicle or limited sales tax?
A trailer could qualify for the Chapter 152 farm exemption if used primarily in qualifying farm or ranch production for sale; farm plates alone did not decide. Motor vehicle repair labor was untaxed. …
A monitoring/surveillance company collected Texas sales tax from Texas customers before it was permitted to collect Texas tax, and remitted that tax in good faith to a different state instead. Since it never got permitted in Texas until later, does it still owe that collected tax to Texas?
Yes, all of it. Under Tax Code Section 111.016(a), anyone who collects a tax or money represented to be a tax holds it in trust for Texas and is liable to Texas for the full amount collected — regardl…
A chemical processing plant is buying a redundant Honeywell computerized control system that runs its manufacturing operations. Is the computerized control system, and the software that runs it, exempt from Texas sales tax as manufacturing equipment?
Yes, if bought on or after October 1, 1997. House Bill 1855 amended Texas's manufacturing exemption to specifically cover electronic control-room equipment and computerized-control units that power, s…
An out-of-state contractor is building 12 miles of fence on the Texas side of the border under a lump-sum contract with the U.S. Section of the International Boundary and Water Commission (IBWC). Is the contractor exempt from Texas sales tax on the materials and services for this job?
Yes, for materials — because the contract is with the United States Section of the IBWC, which counts as a federal government agency under Rule 3.322(c)(1)(C), the contractor can use a Tax Code Sectio…
Is telecommunications service sold between related corporate affiliates exempt from Texas sales tax under the intercorporate services exemption?
No. Sales tax is due on telecommunications service charges even between related corporate affiliates. Texas started taxing telecommunications services in 1985, and Tax Code Section 151.346(c) specific…
A company runs credit and criminal background checks on prospective apartment tenants for property managers, faxing back the results for a fee. Is that service subject to Texas sales tax?
At least partly, yes, as of 1998. Furnishing credit information on a prospective tenant for a fee is taxable as a credit reporting service under Tax Code Section 151.0034. Whether the criminal-backgro…
How did Texas tax the Harris County/Houston Sports Authority charge, recovery fees, and airport franchise fee on a short-term rental?
The 5% Harris County/Houston Sports Authority tax was not included in the state rental-tax base. But line-item recovery of property tax, title, and registration expenses—and the 10% airport franchise …
For former earned-surplus apportionment, was a federal capital-loss carryforward used in the year applied or the year the loss actually occurred?
The actual-loss year controlled. Rule 3.557(e)(4) required excess capital losses carried back or forward for federal purposes to be used in computing receipts in the year the loss occurred, not the ye…
Did Texas tax vehicle transfers to a new subsidiary for stock and then to a new limited partnership for partnership interests?
No tax was due if the new subsidiary and partnership gave no consideration other than their stock or partnership interests. Assumed debt was consideration and would change the result. The limited part…
A planned Internet business will sell sports and horse-race betting selections to account holders for a fee, refunding a bonus amount if the pick loses. Can the business structure its fees so most of the charge counts as nontaxable consulting rather than a taxable information service?
No. Consultation services centered on the consultant's own expert or professional opinion are not taxable if unrelated to sales of taxable items, but consultation services that are really in the natur…
A permitted retailer is selling a used tug it had been using for its own hauling (not income-producing) to a company that plans to claim a ship/vessel sales tax exemption. Is the sale of the tug itself exempt?
No. The occasional-sale exemption (Tax Code Section 151.304, Rule 3.316) doesn't apply because the seller is a permitted retailer. And the ships-and-ship-equipment exemption for vessels in foreign or …
Did a Texas corporation's gain from selling an interest in a Texas LLC to a Delaware-formed LLC produce Texas gross receipts?
No, to the extent the gain was recognized as federal revenue. The Comptroller treated the 87.5% LLC membership interest as an intangible asset. Because the acquiring payor was legally formed in Delawa…
The FCC assesses telecommunications carriers for the Federal Universal Service Fund (USF), similar to the state's Telecommunications Infrastructure Fund (TIF) assessment. When a carrier bills this USF charge through to its customers as a reimbursement, is it subject to Texas sales tax?
Yes. The USF assessment is made against the telecommunications carrier, not directly against the customer — whether it counts as a 'tax' or 'surcharge' is a question for the FCC, not the Comptroller. …
Did a corporation have Texas nexus when its only Texas activity was employees developing software rather than soliciting business?
Yes. The corporation had no other Texas operations, but Texas employees wrote software code for products sold to real-estate-industry customers. Even though those employees did not solicit business, t…
A company bought a tetrafluoroethane reclaimer machine to recapture refrigerant from truck air conditioners during repairs, instead of letting it vent into the atmosphere. Is the machine exempt from Texas sales and use tax because it protects the environment?
No. The purchase of the tetrafluoroethane reclaimer machine is subject to Texas sales tax. The Tax Code contains no exemption for equipment purchased to repair air conditioning systems, even though th…
A retail-building developer had its lot cleared and several large liveoak trees removed, then replanted the trees elsewhere on the same lot to meet City of Austin environmental guidelines. Is the tree removal/replanting taxable as a landscaping service, and can it be billed separately from the (nontaxable) land-clearing work?
Removing trees for the purpose of replanting them is a taxable arborist service (arborist services are landscaping services, which are taxable), even though clearing land for construction purposes is …
Browse Texas rulings by topic
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.