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 our medical practice charges patients, insurers, or attorneys for copies of medical records, do we owe Texas sales tax on that charge?
No -- when a medical service provider charges for copies of medical records as part of its professional service (to a patient, an agent, a party in litigation, or an insurance carrier), that charge is…
My client makes and installs custom stone/marble tabletops and wood, vinyl, and stone flooring in homes -- when do I charge sales tax on the materials versus the labor, and can I buy materials tax-free for resale?
Installing tile, marble, stone, hardwood, or wall-to-wall vinyl flooring into a home is treated as an improvement to real property, so residential installation labor is not taxable, but the contractor…
We run an electronic clearinghouse that scans, converts, and transmits medical insurance claims between healthcare providers and payors -- which of our fees (claims conversion, transaction, clearinghouse, archival) owe Texas sales tax, and do we owe use tax on the software and equipment we give customers?
Yes -- nearly all of the clearinghouse's fees are taxable. The Comptroller treated the claims-conversion, one-way transaction, clearinghouse, and archival fees as taxable data processing services (or,…
If I remitted sales tax by 'backing it out' of my total ticket receipts instead of adding it on top, can I get a refund of that tax directly?
No, not directly to the seller in most cases. The Comptroller explains that if a seller calculated tax by dividing total receipts by 1.0825 and treating the difference as tax ('backing it out'), the s…
Do I have to charge sales tax on manual drafting services, or only on computer-aided (CAD) drafting?
Sales tax is due on drawings and blueprints produced by a draftsman regardless of whether they're drawn by hand (pen and pencil) or with Computer Aided Design (CAD) software. The Comptroller corrected…
Are breast prostheses and the special bras that hold them exempt from Texas sales tax?
Yes. The Comptroller ruled that silicone breast prostheses, breast forms, and breast pads that replace a missing breast are exempt from Texas sales tax as prosthetic devices under Rule 3.284(a)(10). B…
Is a Cell Tech 'Super Sun Smoothie' blue-green algae drink mix exempt from Texas sales tax as a food product if it's used as a meal replacement?
Yes, in this case. The Comptroller had previously told this seller that the Cell Tech Super 'Sun' Smoothie product was taxable, but after receiving additional information showing the product can be us…
Is renting a university recording studio, including a technician's time, subject to Texas sales tax, and what about the tapes used during the session?
No, the hourly charge for using the university's recording studio is not taxable, and the charge for the technician's time is not taxable either. However, the charge for the materials provided during …
If our company manages a jail or prison under contract with a government agency, can we buy materials and utilities tax-free using a resale certificate?
Yes, but only if set up correctly. A private company (ABC) managing prison facilities for exempt governmental entities can issue resale certificates to its vendors for materials that will pass to the …
Is a vehicle tracking/personal security monitoring service, sales of the tracking device itself, and 'extra' per-minute services (like remote unlock or directions) subject to Texas sales tax?
Yes, in part. Installing and monitoring a personal security/vehicle tracking device requires a private investigator/security license, so those monitoring charges are taxable as a Security Service unde…
If a tax-exempt agency like a Private Industry Council or the Texas Rehabilitation Commission pays for a sponsored student's books, tools, and meal tickets at our college bookstore, should we charge sales tax?
It depends on who is actually billed as the purchaser. If the exempt or governmental agency (like a PIC or the Texas Rehabilitation Commission) is invoiced directly and pays the college or bookstore i…
Five scenarios about bands playing at a club for door fees, tip-jar money, or free drinks instead of straight cash pay: which payments are taxable, and who -- the band or the club -- owes the tax?
PARTIALLY SUPERSEDED as to Scenario 1 (see note below). Five 1996 scenarios: (1) [SUPERSEDED] a band collecting and keeping its own door entry fee, with the club having no knowledge of the amount, was…
Does a state university have to collect sales tax on parking permit fees charged to its faculty, staff, and students?
No -- per this 1996 letter, a state university does not have to collect sales tax on parking permit fees charged to its own faculty, staff, and students, extending a previously issued policy that cove…
Does a nonprofit club that operates concession stands under a license from a school district have to collect sales tax on its concession sales?
Yes. Even though the club is an exempt organization, sales of taxable items it makes -- like concession stand food and drinks -- are still subject to sales tax. Per Rule 3.322(g)(1), the club can buy …
Is sales tax owed on cleaning, polishing, and restoring granite, marble, and terrazzo floors, walls, vanities, and tabletops?
It depends on what kind of work is done and on what type of property. Cleaning, polishing, waxing, and sealing natural stone surfaces (residential or nonresidential, or on furniture) is always a taxab…
Are specialized therapeutic beds and mattress overlays that a company rents out exempt from Texas sales tax as hospital beds?
Mostly yes: the Comptroller found that most of the specialized beds and pressure-relieving mattress/flotation systems the company rents out qualify for Texas's hospital bed exemption under Tax Code § …
Is a pay-per-view order-verification and database service that a company runs for cable operators taxable as a Texas 'data processing service'?
Yes. The Comptroller ruled that a company operating a National Transaction Center to verify and route cable pay-per-view orders -- identifying callers via ANI, checking eligibility, compiling transact…
Is a university's alumni newsletter subscription fee, its $50 alumni placement-office registration fee, and its $100 lump-sum career-fair fee to companies subject to Texas sales tax?
Mixed answer for a university with three separate fees. (1) Charges for alumni/general-public newsletters -- whether sold by single copy or by subscription -- are taxable. (2) The $50 fee alumni pay t…
Is a BiPAP breathing machine (face mask, head strap, and air-compressing pump) exempt from Texas sales tax as a prosthetic device?
No -- the Comptroller ruled that a BiPAP STD breathing unit (a face mask with a head strap connected by hose to an air-compressing pump) does not qualify for Texas sales tax exemption as a prosthetic …
If my company moves, disassembles, and reassembles office furniture, and also sells, delivers, or repairs furniture, which of these charges are taxable in Texas?
A pure moving service -- relocating a customer's modular furniture, even if you must disassemble and reassemble it to do so -- is not taxable in Texas. But if you are selling, renting, repairing, or r…
If I store business forms I sold to a customer in my warehouse and later ship them out one box at a time, do I owe sales tax on the freight and handling charges billed separately later?
Yes. Because the seller stored the pre-purchased business forms in its own Texas warehouse rather than shipping them directly to the customer under the sales contract, the sale was already taxable in …
If a Texas remodeling contractor isn't registered to collect sales tax and doesn't collect it on a lump-sum job, can the customer be assessed the tax instead?
Yes. Once Texas began taxing remodeling services directly, the old rule that only the contractor owed tax on a lump-sum job (based on its material costs) no longer applied. Remodeling services are now…
Is labor to replace a failed electrical ballast in a light fixture taxable in Texas, and does it matter whether the building is a residence or a commercial building?
Labor to replace a failed or failing electrical ballast in a commercial building is taxable as real property repair, because ballast replacement normally requires a licensed electrician. The same labo…
My form-work company buys plywood that's used up on jobsites for exempt organizations -- can I buy those materials tax free or get a refund of the tax I paid?
No. The Comptroller ruled that a company doing form work (erecting and removing concrete forms and centering materials without incorporating any tangible personal property into the realty) is a nontax…
Do I owe Texas sales tax on sports cards sold through vending machines, including the chance cards redeemable for an autograph?
Yes -- receipts from sports card vending machines are subject to Texas sales tax because the cards are tangible personal property, not an amusement activity. These machines are not treated as skill-or…
Does Texas sales tax apply to charges for computer consulting, hardware setup, software installation, training, and computer repair/maintenance?
It depends on the specific service. Business/computer consulting, evaluating a client's computer setup, installing software or peripherals you didn't sell, and training employees are NOT taxable. But …
Can a city that has adopted a Municipal Crime Control District sales tax repeal the Section 323.208 exemption for telecommunications services and tax them under that local tax?
A qualified yes. A city that has adopted a Municipal Crime Control District sales tax may repeal the Section 323.208 Tax Code exemption for telecommunications services and tax those services under the…
Do we have to charge sales tax on commercial wastewater treatment services, and on the hauling charges when we pick up the water ourselves?
No -- treating a customer's wastewater to remove oil and contaminants before it's discharged to a municipal sewer system is not a taxable service, because water itself is exempt from Texas sales tax a…
If a Texas seller with Texas nexus sells to an out-of-state buyer who has no Texas nexus, and the buyer resells to a third party, does the Texas seller need to collect Texas tax, and what documentation does it need from the buyer?
A Texas seller does not have to collect Texas tax on a sale to an out-of-state buyer if the buyer gives the seller a valid Texas resale certificate showing the buyer is a bona fide retailer reselling …
If I'm a developer building streets, roads, or sewer/water lines in a subdivision that I plan to donate to the county, can my contractor buy materials tax-free?
Yes, but only if the dedication and government acceptance happen before construction starts. A developer donating subdivision infrastructure (streets, roads, sewer/water lines, etc.) to a governmental…
If our pharmaceutical company gives free prescription and nonprescription drug samples to physicians and hospitals in Texas, do we owe sales or use tax on them?
It depends on who receives the sample and whether it's prescription or nonprescription. Prescription and nonprescription drug samples given free to physicians (to be dispensed to patients) are exempt …
If my appliance repair customer pays only for an estimate and decides not to go ahead with the repair, do I have to charge sales tax on that estimate/service call fee?
No -- if a customer only pays for a service call or estimating fee and decides not to have the appliance repaired, that fee is not taxable because no repair (a taxable service) actually took place. Bu…
Do I have to charge sales tax on sodium bentonite clay that I sell for different uses — animal feed, cat litter, well-plugging, pond/landfill sealant — and on delivery charges for it?
Sodium bentonite clay is taxable when sold to an end user no matter how it's used -- as animal feed additive, cat litter, well-plugging material, or a pond/tank/landfill sealant. The seller only needs…
Is an air compressor that powers pneumatic tools exempt from Texas sales tax under the manufacturing exemption?
Yes, conditionally: the Comptroller ruled that an air compressor used to power pneumatic tools qualifies for Texas's manufacturing exemption, but only if the pneumatic tools themselves are used for as…
Is my company's charge for online continuing-education courses and certification testing subject to Texas sales tax?
No -- charges for providing continuing education courses and testing over the Internet are not subject to Texas sales tax. However, if the company pays its Internet Service Provider separately for mai…
Is a service that compiles and reports weekly underground natural gas storage capacity data from multiple subscribers a taxable information service, or does it qualify as a nontaxable proprietary compilation or geophysical survey?
No exemption applies -- the Comptroller ruled that a company's weekly reports on underground natural gas storage capacity, compiled from data submitted by storage operators and sold to industry subscr…
Does a cotton mote fiber processing operation qualify for the same sales tax exemption on electricity (without needing a predominant use study) that Texas already grants to cotton ginning operations?
Yes. The Comptroller found that the process and equipment used to condition, clean, and package cotton mote fiber (a waste byproduct of cotton ginning) are substantially the same as those used in cott…
Is an elevator or wheelchair lift installed in my home exempt from Texas sales tax if my doctor prescribes it?
Yes -- an elevator or wheelchair lift installed in a home can be exempt from Texas sales tax as a therapeutic device, but only if the doctor provides a written prescription and a signed statement of m…
Can a contractor rent equipment tax-free using a resale certificate if the equipment is used to improve real property or perform a taxable service?
No. Contractors who improve new real property, repair or remodel residential real property, or provide taxable services like nonresidential repair/remodeling must pay sales tax when they purchase, ren…
If I offer customers a discount for paying early (or charge a fee for paying late or not ordering electronically), how does that affect the sales tax I have to collect?
A true cash discount for paying early reduces the taxable selling price -- tax applies to the discounted amount actually paid, not the original invoice amount. A separately stated charge purely for la…
I'm a sole proprietor disputing a sales tax audit. If I ask Texas to settle my liability because paying it would make me insolvent, can the Comptroller count my spouse's wages and our community property, not just my business assets?
Yes. In this Comptroller's Decision on Rehearing (Hearing No. 29,794), the Administrative Law Judge held that when a sole proprietor asks the Comptroller to settle a tax assessment under Tex. Tax Code…
If I test or stage computer hardware/software in Texas before exporting it out of state, does that testing count as a taxable 'use' of the property in Texas, even if I hold a direct payment permit?
Yes -- testing or 'staging' tangible personal property (including computer hardware and software) in Texas before exporting it out of state is a taxable 'use' of that property in Texas. This applies r…
Are replacement parts for shaker screens and sand screws, and a concrete reclaimer, exempt from Texas sales tax as manufacturing equipment at a sand/gravel processing plant?
It depends on timing and equipment type. Replacement parts for sand screws (which sort, separate, grind, crush, and clean materials) are exempt from tax, and a concrete reclaimer that separates water,…
For a Texas tire retreader, how is sales tax applied differently to 'stock retreads' (tires/casings the retreader owns and holds for sale) versus 'customer property retreads' (casings the customer already owns), and when do machinery, electricity, and natural gas used in retreading qualify for a manufacturing exemption?
It depends on who owns the casing. Retreading a 'stock casing' that the retreader owns and sells as a retread is a sale of tangible personal property — taxable on the full charge, but the retreader is…
Was a vehicle sale-leaseback subject to Texas motor vehicle sales tax when it was really a financing arrangement?
No, if the sale-leaseback was genuinely a financing arrangement and the lessee retained the listed ownership characteristics before and after the transaction. Those facts included possession, responsi…
When did Texas require a seller-financing dealer to pay all remaining motor vehicle tax after transferring payment rights?
When the investor obtained the right to receive the retail purchaser's payments. The internal memo said that funding 60% of the financed amount and acquiring payment rights met § 152.047(g), even with…
Is an ultra pure water system and its associated piping, used to produce and distribute ultra pure water needed in semiconductor fabrication, exempt from Texas sales and use tax?
Yes. The Comptroller confirmed that the ultra pure water system and its associated equipment/piping — used to produce and distribute the ultra pure water required in the semiconductor fabrication proc…
Which of the specific services a paralegal/legal-assistance company provides (research, word processing, witness location, trial preparation, document organization) are taxable, and how should billing work if only some services are taxable?
Most of the services are taxable: research/record review in the public domain is a taxable information service (Rule 3.342); word processing of medical-record/deposition summaries, trial-preparation w…
Does a monitor a photographer uses to let customers preview and crop a photographic image before it's printed qualify for the Texas manufacturing sales-tax exemption?
No. The Comptroller ruled the monitors don't qualify for the manufacturing exemption because they're used primarily as a marketing tool to show customers the image before the final print — Tax Code § …
Are the risk management, claims administration, and safety/loss control services a third-party administrator provides to Texas employers subject to sales tax?
It depends on who the client is. These services count as taxable "insurance services" under Rule 3.355 when performed for an employer that carries a regular insurance policy (including one with a high…
Does a studio's equipment used to transfer raw film footage onto a video master tape qualify for the manufacturing exemption, and is the studio's transfer service or the sale of the resulting video master/duplicates subject to Texas sales tax?
Yes, the studio's computer equipment used to convert processed negative film into a video master tape qualifies for the manufacturing exemption under Texas Tax Code Sec. 151.318. The sale of the video…
A company that wants to sell a concentrated garlic-juice product to cotton farmers as an insect repellent/pesticide asked whether those sales are exempt from Texas sales tax and what it needs to do to comply.
Yes — selling the garlic-juice product to cotton farmers as a pesticide is exempt from Texas sales tax under the agricultural exemption (Rule 3.296), but the seller still needs its own sales and use t…
Are a temporary help service's charges for supplying skilled workers (e.g., plumbers) to help a construction business complete jobs taxable as sales tax, or exempt as 'services by employees' under Sec. 151.057?
Exempt from sales tax, but only if all four conditions in Sec. 151.057 are met: (1) the temporary workers supplement the client's existing workforce on a temporary basis, (2) the work they do is norma…
How is sales tax computed and who must collect and remit it on photographs sold from coin-operated photographic booths installed in shopping malls and amusement centers?
The total charge for the pictures is taxable, and if the price already includes tax, a 'price includes sales tax' notice should be posted on the booth (tax can then be backed out of the total by divid…
When a contractor installs a polyurethane pipe liner in a brand-new pipeline being laid alongside an existing one, does it charge sales tax on materials only, or on materials and labor both?
It depends on timing: if the liner is applied to the new pipe after the pipe is attached to realty, the contractor is doing new construction of real property — labor is not taxable, but sales tax must…
Does a piece of exercise/fitness equipment sold by a manufacturer qualify for a Texas sales tax exemption as a therapeutic or orthopedic device?
Partly. The product qualifies for exemption as a therapeutic device, but only when it is sold to an individual under a doctor's prescription (Rule 3.284(a)(11) and (c)(8)). It does NOT qualify as an e…
When a grocery store customer redeems a discount coupon (either a store coupon or a manufacturer's coupon), how is sales tax calculated on the purchase?
Either way — store coupon or manufacturer's coupon — the coupon reduces the taxable sales price of the item, so sales tax is due only on the discounted price, not the original price. If the register f…
Did a government entity need an exempt license plate for its vehicle purchase or lease to qualify for Texas motor vehicle tax exemption?
Yes. The letter said a public agency's vehicle purchase or lease was exempt only when the vehicle carried the required exempt license plate. A government-owned or government-leased vehicle without an …
Does a little league baseball association have to collect sales tax on concession stand sales of food, candy, and soft drinks?
No. Associations that support athletics for children under 19 are exempt from paying and collecting sales tax on food, candy, and soft drink sales, as long as all the proceeds are used for the organiz…
Is the bill-paying portion of a freight-bill auditing company's services taxable as a data processing service if that bill-paying feature is offered to all customers at no extra charge?
No — under the revised contract, the bill-payment portion of the company's freight-bill auditing service is not taxable as a data processing service, as long as customers who don't use the bill-paymen…
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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.