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 artwork design and printing for a manufacturer's shipping containers exempt from Texas sales tax, including when the container doubles as an in-store display?
Split answer. A manufacturer can use a manufacturer's exemption certificate to buy, tax-free, artwork design and printing for a shipping container -- even if that same container later doubles as a pro…
Is copying seismic data onto tape taxable, even when it's outsourced to a related company or billed directly to the end client?
No exemption in any of the three billing arrangements tested. A seismic-data company's tape-copying charges are taxable whether (1) the data owner invoices the client and pays a related tape-copying c…
After a corporate merger, can the surviving company take a sales-tax credit for taxes the non-surviving predecessor paid in error before the merger?
Yes. Where a Texas corporation was merged into a Delaware corporation (a tax-free reorganization under IRC § 368(a)(1)(F), keeping the same federal ID), the surviving corporation -- as the entity now …
Which parts of a bulk mailing/fulfillment business's services (data processing, collating, printing, postage, labels, set-up fees) are subject to Texas sales tax?
It depends item-by-item on what's actually done, per the Comptroller's category-by-category breakdown: data services (database design, de-duplication, CASS certification) are nontaxable when they rela…
Are digital certificates (Digital IDs) sold and delivered over the Internet subject to Texas sales tax as software, data processing, information services, or telecommunications services?
Not taxable under any of four theories tested. A company that sells Digital IDs (digital certificates used to authenticate identity for secure online commerce) delivered electronically over the Intern…
Does a chiropractor collect sales tax from patients for therapeutic devices used in treatment, and can a practitioner buy prescribed dietary supplements/vitamins tax-free?
A licensed practitioner of the healing arts (like a chiropractor) pays sales tax itself on the purchase price of therapeutic appliances or devices used in treating patients, but does NOT collect sales…
Can a Texas sales tax filer report on a 4-4-5 (or similar) fiscal accounting calendar instead of a strict calendar-month basis?
Yes, with mechanical limits. Texas requires sales tax reports on a calendar basis by default, but permits filing based on a business's own fiscal calendar (such as a 4-4-5 or 5-4-4 accounting system) …
When a company with multiple Texas offices rents and erects scaffolding at a customer site in a different city, which city/district's local sales tax applies -- the office that took the order, or the site where the scaffolding is used?
The seller's ORDER-TAKING place of business controls, not the job site. A scaffolding company with multiple Texas offices owes city sales tax and crime control district sales tax based on which office…
Is a furniture trade-in taxed on the full new-item price, or only on the trade-up difference?
It depends on the direction of the trade. An even trade of like items has no sales tax due at all. If a customer trades up (gets a more valuable item and pays the difference), tax is due only on that …
Does an out-of-state company create Texas nexus just by hiring a former employee, now living in Texas, as an independent contractor to do customer support?
Yes, nexus is created -- twice over. An out-of-state company whose only link to Texas is a single independent contractor (a former employee who relocated to Texas and now answers customer-support e-ma…
Is the 'finish-out' work completing an unfinished ('green') aircraft -- installing interior, avionics, and paint -- exempt manufacturing, or taxable repair/remodeling labor?
Exempt manufacturing, not taxable repair. When a seller's original sales contract obligates it to complete an unfinished ('green') aircraft's 'finish-out' -- custom interior, painting, avionics, commu…
Is mowing, clearing brush, or cutting undergrowth on ranch or timberland a taxable real property service in Texas?
ALERT (see note below): mowing, cleaning, clearing, or brush-cutting to maintain and clear ranch land or timberland of undergrowth -- performed by independent contractors for a land manager -- is NOT …
Is a time-based fee for playing networked computer games (not coin-operated, charged by the hour rather than per game) a taxable amusement service in Texas?
Yes, taxable in both business models the taxpayer proposed. Charging customers by time (e.g., $1 per 15 minutes per computer) to play games on networked computers -- even though it's not coin-operated…
Can a reseller of telephone service buy telecommunications service tax-free using a resale certificate, and who pays the old Telecommunications Infrastructure Fund (TIF) assessment?
PARTIALLY SUPERSEDED (see note below). As of 1999, a reseller of local and long-distance telephone services could issue a resale certificate to its telecommunications provider instead of paying sales …
Is an hourly charge for on-premise use of computers, memory typewriters, or printers -- for tasks like data entry, retrieval, or business accounting -- a taxable data processing service?
Yes. Charging customers for on-premise use of computers, memory typewriters, and printers -- for data entry, data retrieval, data search, information compilation, payroll and business accounting, data…
Does the manufacturing or video/audio production sales tax exemption cover motor vehicles rented to transport movie production equipment?
No. Motor vehicles are taxed under a completely separate statute, Tax Code Chapter 152 (Motor Vehicle Sales and Use Tax), not Chapter 151 -- so the manufacturing exemption (§ 151.318) and the video/au…
Is it legal for Texas to charge sales tax on cigarettes when the price already includes federal and state cigarette excise taxes?
Yes, it's legal. A consumer asked whether it's proper for Texas to assess sales tax on cigarettes when the price already reflects federal and state cigarette excise taxes baked in. The Comptroller con…
For a new Christmas tree farm, are fencing materials, a farm-use ATV, private road construction, and the eventual tree sales subject to Texas sales tax?
ALERT (see note below): a new Christmas tree farmer can buy fencing materials tax-free with an exemption certificate under the agricultural exemption (Tex. Tax Code § 151.316, Rule 3.296) -- covering …
Is bulldozer work for landowners, ranchers, and oil/gas seismic companies (clearing right-of-ways, repairing damaged roads, clearing brush, building or repairing a ranch tank) a taxable real property service?
It splits cleanly along a new-work-vs-repair line across five scenarios. NONTAXABLE: using a bulldozer to cut/clear/stack/burn/disk right-of-ways for a seismic or oil/gas company (with the landowner's…
Can a bakery buy proofing cabinets (which provide the heat and humidity that makes bread dough rise) tax-free under the manufacturing exemption?
Yes. Proofing cabinets -- which provide the uniform heat and humidity needed to cause bread dough to rise -- qualify for Texas's manufacturing exemption when purchased by a business in the business of…
Is installing propane piping and equipment for a meat smoker and water heater in a food-processing plant taxable, and does a water heater used for both smoker humidification and equipment wash-down qualify for the manufacturing exemption?
Split answer across two work orders. For the smoker installation: the propane piping, regulators, flex connector, and other materials are taxable, but the LABOR to install this equipment is new constr…
Is the sale, lease, or rental of a hearing aid subject to Texas sales tax?
No. The sale, lease, or rental of a hearing aid is exempt from Texas sales tax, under Tex. Tax Code § 151.313(a)(4) and Comptroller Rule 3.284(a)(5).
Does a custom pump manufacturer's test-lab equipment (electric motors, discharge heads, overhead cranes) used to test sub-assemblies and finished pumps qualify for the manufacturing exemption?
Splits three ways based on WHEN and WHAT the equipment does. Test lab equipment used to test semi-finished or fully assembled pumps AFTER the manufacturing process has started and BEFORE the product i…
Is artwork and packaging material sold to manufacturers (for their packaging, containers, labels, and displays) exempt from Texas sales tax, and how can a client get a refund for tax already paid?
Split by category, with a refund path. Sellers should accept an exemption certificate in lieu of tax when selling wrapping/packaging materials to manufacturers. A manufacturer that creates its own wra…
Are repair, refurbishing, and rebuilding services performed in Texas on equipment owned by a company with both Texas and Mexican maquiladora operations subject to Texas sales tax?
Depends on the equipment's own exemption status and where it's used, not on where the repair happens. A company with a Texas manufacturing/warehouse location and Mexican maquiladora operations (holdin…
Are purchases made by federal employees using government-issued charge cards (like GSA SmartPay/IMPAC or a Department of Interior MasterCard) exempt from Texas sales and use tax?
Yes, exempt, under a three-part test. This combined record includes a short November 1998 letter confirming that an earlier April 2, 1998 ruling extends to a new Department of the Interior MasterCard,…
A company lets customers come to its office to hold video conferences using its own equipment and phone lines, billing them for facility use plus re-billed long-distance charges. Is this equipment rental plus a telecom pass-through, or something else entirely for tax purposes -- and can the company buy its own phone service tax-free?
The company isn't renting equipment and separately re-billing phone charges -- it's providing a single taxable TELECOMMUNICATIONS SERVICE, and the ENTIRE charge to customers (facility/equipment use pl…
For a company that leases PCs and other equipment routed through Texas for tagging and staging before final delivery to offices in and out of Texas, is Texas sales tax due on equipment ultimately installed and used at out-of-state offices?
No Texas tax on the out-of-state-installed equipment -- correctly handled. A Texas-headquartered company leases computer equipment (including PCs) from an out-of-state lessor permitted to collect Texa…
Is a Texas travel group's lump-sum charge (event ticket plus hospitality access) for an out-of-state amusement event, like the Ryder Cup, subject to Texas sales tax?
No Texas sales tax is due. A group organized to attend the following year's Ryder Cup golf tournament in Massachusetts charged each member a lump-sum fee covering an event ticket and access to hospita…
For a software company that labels its programmers' department 'Research and Development,' does the computer equipment those programmers use to write mass-market software for sale qualify for the Texas manufacturing exemption?
Yes, exempt -- the department label doesn't control. A software company organizes development into marketing, research & development, and production departments, with the 'R&D' department's programmer…
Is a table whose sole purpose is to support an electric rotisserie or mixer exempt from Texas sales tax as manufacturing equipment?
Taxable. A business asked whether a table whose sole purpose is to support an electric rotisserie or mixer would be exempt as manufacturing equipment. The Comptroller said the table is taxable, citing…
Does a 'Vapor Scrubber' that controls pollution while a finished product is in storage (after manufacturing is complete) qualify for the Texas manufacturing pollution-control exemption?
No, not exempt (as of this 1998 letter, but see the currency alert below). Pollution control equipment located within the actual manufacturing process area still qualifies for the Tex. Tax Code Sec. 1…
Is a school choir's sale of 'Music Cards' -- which give the buyer a discount on future CD/audio tape purchases -- subject to Texas sales tax?
Not taxable -- the card itself is an intangible. A school choir contracted with a company to sell 'Music Cards' as a fundraiser: buyers pay a set price per card, the choir keeps a portion, and the car…
If a manufacturer generates its own electricity on-site using natural gas engine generators, does the natural gas used to make that electricity qualify for the same manufacturing sales tax exemption as purchased electricity?
Yes, exempt. A plastic injection molding company already had a sales tax exemption on purchased electricity (backed by an engineering study showing 95% use in the molding process) and planned to start…
For a fine-art and antiques handling company, which of its services (airport supervision, packaging/crating, moving, installation, and storage) are subject to Texas sales tax?
Mixed, service by service. A company that handles and stores fine art and antiques asked the Comptroller to confirm the taxability of five services. Airport supervision of art transfers is TAXABLE as …
Does a funeral home or cemetery need to charge sales tax on an outer-burial container sold as part of a preneed or at-need funeral contract?
Depends on whether services come with it. A funeral home or cemetery should NOT charge sales tax on an outer-burial container -- whether sold preneed or at-need -- if it also provides services like th…
Can a city split its taxable Solid Waste fee into a separate, untaxed 'Environmental Fee' covering community cleanup and environmental services?
No -- the whole fee stays taxable. A city proposed splitting its taxed Solid Waste fee into two components: a Waste Fee and a separate Solid Waste Environmental Fee (funding cleanup days, illegal-dump…
Is rebuilding the tee boxes on an existing golf course taxable remodeling, or nontaxable new construction, for Texas sales tax purposes?
Taxable remodeling, not new construction. A country club completely demolished and rebuilt the tee boxes on its golf course and asked whether that counted as nontaxable new construction since the tees…
Is a vacuum-truck company's charge for hauling and disposing of drilling mud and saltwater from oil and gas production wells subject to Texas sales tax?
No, not taxable. Hauling and disposal charges for waste are generally taxable real property services in Texas, but Rule 3.356(a)(3)(B) carves out materials resulting from oil, gas, or geothermal explo…
A Texas company plans to resell satellite phone service (from a Netherlands provider, with ground stations in South America) to customers mostly based in Texas. What Texas taxes apply?
Sourced by where the call originates, not by billing address alone. A company planned to resell satellite phone service -- purchased from a Netherlands-based provider using ground stations in Venezuel…
If an aircraft parts repair company does 90%+ of its work for licensed carriers but also repairs some pre-sale manufacturer components and used/military aircraft equipment, is the machinery and equipment it uses for ALL that repair work exempt from Texas sales and use tax?
Taxable -- the exemption requires EXCLUSIVE qualifying use, and this client doesn't have it. An aircraft parts repair company holding a Texas Direct Pay Permit does about 90% of its work repairing com…
Is an FDA-registered, prescription-only Vacuum Erection Technology (V.E.T.) system used to treat male impotence exempt from Texas sales tax when sold under a physician's prescription?
Exempt, when sold under a prescription. The V.E.T. (Vacuum Erection Technology) System is FDA-registered and sold only by prescription to treat male impotence. The Comptroller confirmed it qualifies a…
When a Texas company buys software hosted on an out-of-state server, with modification services performed partly in Texas and partly out of state, how is the license price and modification labor taxed based on where the licenses are used?
A layered answer that splits by delivery point, license location, and where labor happens. A Texas company (Company A) plans to buy software from an out-of-state vendor, installed on the vendor's serv…
Can a direct-sales company reduce the sales tax it collects on prepaid discount vouchers to reflect that only about 1% of the vouchers are ever actually redeemed?
No. A direct-sales/multi-level-marketing company sells 'Discount Redemption Vouchers' to independent distributors, who resell them (often at a steep discount) to purchasers who can later redeem a vouc…
Is equipment or machinery that a contractor rents or leases to perform a realty-improvement job for a tax-exempt government or nonprofit entity itself exempt from Texas sales tax?
No -- machinery and equipment purchased, leased, or rented by a contractor is NEVER exempt, even on a job for a tax-exempt entity. A contractor was incorrectly told by another Comptroller staffer, cit…
Does the Texas sales tax definition of 'licensed practitioner of the healing arts' (the professional whose prescription can trigger a medical exemption) include nurses or licensed therapists?
No -- nurses and licensed therapists are excluded. A taxpayer asked the Comptroller for a clearer definition of 'licensed practitioner of the healing arts,' the category of professional whose prescrip…
Is a gas well foamer product ('soapsticks' or 'acidsticks') purchased by a well operator and injected downhole to stimulate gas flow subject to Texas sales tax?
Taxable. A well operator purchases a gas well foamer product (also called soapsticks or acidsticks) and injects it downhole to turn water blocking a low-pressure gas well into suds/bubbles, lowering w…
Are parts and labor for a restaurant's fire suppression unit (attached to fryers and grills) exempt from Texas sales tax as manufacturing equipment?
It depends on exactly what the fire suppression unit is attached to. A restaurant was being billed for parts and labor on a fire suppression unit -- some units needed full replacement (not up to code)…
Is a garage or covered parking space that comes bundled into an apartment lease (with no separate parking charge) taxable as a 'motor vehicle parking and storage service'?
Yes, taxable -- and the Comptroller's position is reinforced by the legislative acceptance doctrine. An apartment owner argued that garages and covered parking bundled into a unit's lease (with no sep…
For a company with both Texas and California offices sharing software licenses across state lines (via servers in either state, or a single floating license), how is each scenario taxed by Texas?
Three separate scenarios, each turning on where the software was purchased and where it's actually used. SITUATION 1 (software delivered to and purchased in Texas, later a California license added): t…
Is sales tax due on merchandise (like employee-discounted logo shirts, or safety training videos/workbooks sold to dealers) even when it's sold below the seller's actual cost?
Yes, taxable on the actual price charged, regardless of the seller's cost. A company asked two questions: (1) whether it needs to charge tax when it sells company-logo golf shirts to employees at 15% …
Is sandblasting sand (or similar raw materials like rock, gravel, dirt) taxable when purchased, and does it matter whether the sand has been sorted, washed, or crushed?
Depends on whether the material is 'processed' -- and specifically, crushing or mixing is what triggers tax, not sorting or cleaning. This is a CORRECTED letter (the Comptroller's original August 7, 1…
Is a third-party restaurant delivery service's own delivery fee taxable, when the service isn't the seller of the food itself?
Not taxable -- because the delivery company isn't the seller of the food. This is a CORRECTED letter (the Comptroller withdrew an earlier August 11, 1998 response on the same question). A restaurant d…
Is drug testing/screening (pre-employment, random, or post-accident) subject to Texas sales tax?
Depends entirely on the PURPOSE of the screening, not the type. Drug screening is NOT taxable unless it's performed for insurance-related purposes. Pre-employment and random drug screenings are NOT ta…
Is a Texas-executed aircraft lease exempt from Texas sales tax when the lessee will fly the aircraft straight to Canada and operate it there as a commercial carrier, paying Canadian sales tax on entry?
Potentially exempt two different ways, but airworthiness/pilot paperwork alone doesn't prove it. An aircraft lease is executed in Texas; the lessee will fly the aircraft straight to Canada and operate…
Is a reclining chair with built-in massage and heating pads exempt from Texas sales tax when purchased with a doctor's prescription?
Exempt, but only with a proper prescription -- a standard recliner never qualifies. A reclining chair with built-in massage and heat pads qualifies as a therapeutic device and can be purchased tax-fre…
Can a cable/telecom subcontractor buy the cable and hardware it permanently installs inside customers' buildings (schools, apartments, offices) tax-free for resale, when the cable is billed as part of a taxable telecommunications/cable service rather than sold separately?
Depends on whether care, custody, and control of the cable transfers to the actual service customer -- a fact-specific, location-by-location test. A cable/telecom subcontractor installs fiber/coax cab…
Are materials used to repair and repave private streets owned by a homeowners association (built to city specs but never dedicated to the city) subject to Texas sales tax?
Materials are taxable; labor is not. A contractor repairs streets in a gated residential community that were built to city specifications and inspected/approved by the city, but were never actually de…
Are litigation-support services -- process serving, obtaining records via deposition on written questions, courthouse research, filing motions, taking witness statements, and appearing in court on an attorney's behalf -- subject to Texas sales tax?
Not taxable. A litigation-support company described seven categories of services it provides to attorneys and others: (1) obtaining and serving subpoenas/deposition subpoenas; (2) preparing and servin…
Is a 'Fastbreak Bar' meal-replacement snack bar exempt from Texas sales tax as a food product?
Exempt. A company's product (referred to as a Fastbreak Bar) is marketed and labeled as a meal replacement. Because of that marketing and labeling, the Comptroller confirmed the product is a nontaxabl…
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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.