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 I have a contract to improve realty for a tax-exempt entity (like a city), can I buy telecommunications/telephone services for the job site tax-free?
Not automatically. The Comptroller said telecommunications services aren't considered integral to improving realty, but a contractor can still give an exemption certificate for telecom services used a…
Does a trade show exhibit contractor have to charge sales tax on storage, transportation, installation, design/construction, supplies, and refurbishing services for client-owned exhibits and displays?
It depends on the service. Storage, transportation, handling/removal charges, and installation (electrical drop) charges for client-owned exhibits are not taxable unless tied to a sale or lease of the…
Is a contractor's charge for repairing or remodeling a warehouse for a movie production company exempt under Texas's manufacturing exemption?
No. The Comptroller advised that the repair or remodeling of the warehouse is a taxable nonresidential repair and remodeling service. Even though the movie production company that rented the warehouse…
Is a consultant who uses handwriting analysis, body language, statement analysis, and human behavior analysis to evaluate individuals for jury profiling or employment screening providing a taxable service in Texas?
No, generally not. The Comptroller's office told this consultant that using a computer to prepare analysis reports for clients doesn't make the work taxable "data processing services," and the underly…
Was a lessor-paid lease-facilitator fee taxable when the facilitator was neither the vehicle seller nor the seller's agent?
No. The fee was not part of taxable consideration because the purchaser paid it to a facilitator that was neither the seller nor the seller's agent. The result applied whether the worksheet folded the…
Could a lessee-owned vehicle reduce the taxable value of a lessor's vehicle purchase without the dealer physically possessing the trade-in?
Yes, physical possession by the dealer was not required if the trade-in otherwise formed part of the lessor's purchase consideration and the seller's records showed acceptance, credit, and resale to t…
Are charges for assembling or erecting an above-ground swimming pool taxable in Texas, and does it matter whether a third-party installer does the work?
It depends on what the work actually is. Charges for a true third-party 'installation' — placing tangible personal property in position without changing its form — are not taxable (though separately s…
When a contractor makes an improvement that increases production capacity at a Texas refinery or chemical plant, does sales tax apply to the material, the labor, or both?
It depends on how the contract is written. Under the law effective October 1, 1995, labor to improve production capacity at a refinery or chemical plant is a non-taxable improvement to realty either w…
Is cleaning/washing a trailer tank after hauling liquid chemicals a taxable service in Texas, and can the cleaning chemicals and required safety gear be bought tax free?
No, the cleaning itself isn't taxable — the Comptroller said washing out a trailer tank between loads is nontaxable maintenance to a motor vehicle. But the client still can't buy the cleaning chemical…
Is electricity used in a corporate apartment that a company leases to house out-of-town clients and associates (at no charge, for stays typically under a week) subject to Texas sales tax?
Yes, it's taxable. The Comptroller ruled that electricity used in a corporate apartment maintained to house visiting clients and associates is 'commercial use' under Texas Tax Code § 151.317(a), not e…
When a business reorganizes — transferring assets to a new subsidiary, contributing assets between related corporations, or trading stock between commonly-owned subsidiaries — which of those transfers are subject to Texas sales tax, and how are stock-sale receipts allocated for franchise tax?
It depends on the transaction. A transfer of substantially all the assets of an identifiable business segment can still qualify for the occasional sale exemption even if a shared-use asset (like a com…
Does an apartment complex have to perform its own predominant use study before claiming a sales tax exemption on electricity from a master meter that serves only common-area/residential uses?
Not necessarily. The Comptroller's Tax Policy Division told this association that apartment complexes whose master meters serve only onsite management offices and residential common areas (club rooms,…
Do fashion stylists owe Texas sales tax on rentals and services they provide for still-photography shoots versus for motion picture, video, or audio production?
It depends on the type of production. For still photography, taxability has not changed from a 1990 response and generally still applies. But beginning October 1, 1993, producing a motion picture, vid…
When is having tires retreaded (or an alternator, generator, radiator, or transmission repaired) treated as taxable 'repair' of tangible personal property, rather than an exempt repair of a motor vehicle component, under Texas sales tax rules?
If you have more casings retreaded than the number of tires the vehicle is designed to use, the Comptroller presumes you are having taxable tangible personal property repaired, not an exempt motor veh…
Is having tires retreaded, or having alternators, generators, radiators, or transmissions worked on, taxed as a repair of your motor vehicle in Texas?
Usually yes, taxable as repair — but it can be rebutted. The Comptroller's office says that if you have casings retreaded in a number exceeding the tires a vehicle is designed to use, the presumption …
Does a customer owe Texas sales tax on tire retreading (or similarly, on repair of alternators, generators, radiators, and transmissions) when the repaired part goes back on the same vehicle versus into inventory?
It depends on what happens to the part. If a customer's tire casings (or similar motor vehicle components like alternators, generators, radiators, or transmissions) are repaired and go right back onto…
Can a company that overhauls and repairs jet turbine engines buy consumables like cleaning solvents and plasma tax-free, and does the machinery/equipment exemption apply even if some customers aren't certificated airlines?
Yes to both. The Comptroller told this engine-overhaul company that consumables such as cleaning solvents and plasma that are used up or transferred to the customer during overhauling, retrofitting, o…
Does a retailer have to collect sales tax on the service charge (bad-check fee) paid by the writer of a dishonored check?
It depends on who collects the fee. If the retailer itself collects the processing fee directly from the person who wrote the bad check, no tax is due on that fee. But if the retailer hires a debt col…
Is a soil/groundwater remediation system (like an Air Sparge/Soil Vapor Extraction System) required by the Texas Natural Resource Conservation Commission exempt from Texas sales and use tax as pollution-control equipment?
No. The Comptroller ruled there is no sales tax exemption for the construction and installation of a Remediation System used to clean up contaminated soil and groundwater around an underground storage…
If a company pulls the rods, tubing, and other downhole equipment from a well to prepare it for plugging, but a different company plugs the well on a later day, is the equipment-pulling service taxable?
No. The Comptroller ruled that Rule 3.324 does not tax labor or services directly related to plugging and abandoning a well, and pulling the downhole equipment beforehand counts as directly related ev…
Is a cancellation fee charged when a customer ends a service agreement early subject to Texas sales tax?
It depends on the underlying service. If the service being cancelled is a taxable service, the cancellation fee is part of the taxable 'sales price' of that service under Tex. Tax Code § 151.007(a)(2)…
Can a Texas home builder or developer buy landscaping, lawn care, pest control, surveying, building and grounds cleaning, or waste removal services tax-free during construction of a new home, and does that exclusion cover model homes?
Mostly yes for new construction, but no for model homes. Under changes to Tax Code Section 151.0048 effective October 1, 1995, home builders and developers can buy landscaping, lawn care, pest control…
Does a Texas Internet service provider owe sales tax on domain name registration fees or on a handling fee charged for helping a customer obtain a domain name?
No. The Comptroller told this Internet services provider that the domain name registration fee itself is imposed on the customer (not the provider), so a separately stated fee for that licensing is no…
Is Resolut Regenerative Material, a product used to treat periodontal disease and bone defects in the oral cavity, exempt from Texas sales tax?
Yes. The Comptroller's office ruled that Resolut Regenerative Material — a product placed in the oral cavity to help regenerate the supporting structures of teeth lost to periodontal disease, which st…
Are kidney dialysis machines and the accessory equipment used alongside them (recliner, scale, blood pressure device, calibration equipment, water treatment system, reuse machine) exempt from Texas sales tax?
Only some of it. The Comptroller said kidney dialysis machines and related supplies are exempt from Texas sales tax when specifically designed and used during dialysis treatment, and that a water trea…
Under Texas Tax Code Section 151.0048, can a contractor or homebuilder buy landscaping and other real property services tax free when building a new home, and does that exemption also cover model homes or subdivision common areas?
Yes for new residential construction, but no for model homes or subdivision common areas. A contractor building a new residential structure can buy landscaping (and other real property services covere…
When a catering/event company provides entertainment (mariachis, armadillo races, hay rides) at a party, does it owe Texas sales tax on the entertainment charges?
It depends on whether the company is acting as a provider of a taxable 'amusement service.' A straight performance fee paid to musicians (like the mariachis in this letter) isn't a taxable admission. …
Under this internal Texas Comptroller staff memo, is buying, installing, repairing, or renting Christmas decorations for a customer taxable?
Mostly yes, with one key distinction: when the seller buys the Christmas decorations and sells/installs them for the customer (whether billed as one price, itemized, or with a separate 'reimbursement'…
If an apartment resident operates a store or business out of their unit, is the electricity or gas used there still exempt as a residential utility in Texas?
Not automatically. The Comptroller told the requester that a Texas Apartment Association publication was wrong to say residential utilities are simply exempt. If a unit has a separate meter and the re…
Is sales tax due on food, meals, soft drinks, and candy sold to inmates in federal prisons in Texas?
Yes, as of October 1, 1995. The Comptroller told this requester that House Bill 462 added Subsection (g) to Tax Code Section 151.314, making sales of food products, meals, soft drinks, and candy to in…
Do Air Force personnel and other authorized purchasers who buy amusement or entertainment park tickets through a Department of Defense Nonappropriated Fund Instrumentality's 'Ticket and Tour' operation owe Texas sales tax on those tickets?
No. The Comptroller's office confirmed that sellers of amusement and entertainment park tickets are not required to collect tax on sales to Department of Defense Nonappropriated Funds Instrumentalitie…
Are court reporting services — transcripts, videotapes, or audiotapes of depositions and testimony — taxable when sold to participants in a lawsuit in Texas?
No. The Comptroller's office told this court reporter that selling a court reporting service (transcripts, computer-readable formats, audio tapes, video tapes, or films of a deposition, testimony, dis…
Can a company that sells crowd-management/security services to a sporting-event or concert promoter buy those security services tax-free under the sale-for-resale exemption, on the theory that security is an integral part of the promoter's taxable amusement service?
No. The Comptroller ruled that crowd-management/security services for concerts and sporting events are not an 'integral part' of a taxable amusement service, because people can still attend and watch …
If a restaurant charges customers a mandatory $1 'donation' to get a discounted meal and then passes that dollar to a charity, does the restaurant owe sales tax on it?
Yes, generally. The Comptroller's office said that when a 'donation' is mandatory and the value of what the customer receives (the meal) is worth more than the donation, the dollar is consideration fo…
Does a photographer owe Texas sales tax on a fee charged for licensing the use of a copyrighted photograph, versus on photographs delivered to a Texas advertising agency for an ad?
It depends on what is being sold. A fee charged for licensing or for the right to use a copyrighted photographic image, illustration, or transparency for publication is not subject to Texas sales tax.…
Do inmates have to pay Texas sales tax on food, candy, and soft drinks bought at a jail or prison commissary?
Yes, as of October 1, 1995. The Comptroller told this correctional-facility commissary that sales tax became due on food ready for immediate consumption, soft drinks, and candy sold to inmates, ending…
Does a mail-order company that has no property or payroll in Texas, but uses an independent contractor in Texas to handle customer calls and sometimes take orders, have nexus for Texas sales and franchise tax?
Yes. The Comptroller ruled the company has nexus for Texas sales tax under Tex. Tax Code § 151.107(a)(1), (2) and (7) because it uses the Texas-based independent contractor to carry out its everyday b…
Does the Texas Comptroller issue sales tax exemption certificates or letters directly to foreign diplomats stationed in Texas?
No. The Comptroller's office does not issue exemption certificates or letters of exemption to foreign diplomats. Instead, diplomats are told to get a Tax Exemption Card from the U.S. Department of Sta…
For the new manufacturing-equipment lease exemption starting October 1, 1995, what makes an operating lease qualify, and can an existing lease be renegotiated to qualify?
To qualify for Texas's manufacturing-equipment lease exemption, a lease must be a single operating lease contract with a term of at least one year (365 days) that starts on or after October 1, 1995, a…
Is feed purchased for dogs held for breeding purposes (whose puppies are sold in the regular course of business) exempt from Texas sales tax?
Yes. Feed purchased for dogs held for breeding purposes, when the offspring are held for sale in the regular course of business, may be bought tax free by giving the seller an exemption certificate, u…
Starting October 1, 1995, does Texas sales tax apply to food, meals, soft drinks, and candy sold to inmates confined in a jail, prison, or other correctional facility?
Yes. Effective October 1, 1995, House Bill 462 added subsection (g) to Texas Tax Code Section 151.314, which removes food, meals, soft drinks, and candy sold to a person confined in a correctional fac…
For a new-home landscaping contract that spans the October 1, 1995 law change, is labor taxed based on when the work was actually performed or based on the billing/acceptance date?
Based on when the labor was actually performed, not the billing or acceptance date. Effective October 1, 1995, Senate Bill 640 amended Section 151.0048 so that landscaping purchased by a contractor as…
Do clean rooms and equipment used to manufacture mobile telephones qualify for Texas's semiconductor-fabrication cleanroom exemption?
No. The Comptroller told this mobile-telephone manufacturer that the cleanroom exemption added to Section 151.318, effective October 1, 1995, only covers property used to manufacture, process, or fabr…
Is a credit/debt counseling service, where the provider advises clients on repairing credit, building a budget, and negotiating with creditors, taxable in Texas?
No. The Comptroller's office told this credit counseling provider that the service is not taxable. If tax was already collected and remitted on the service, the provider may amend its sales tax return…
Are aircraft maintenance manuals that contain the procedures and instructions mechanics must follow exempt from Texas sales and use tax?
Yes, at least for the manual described in this letter. The Comptroller told the requester that a manual containing the maintenance procedures and instructions an aircraft mechanic must follow qualifie…
Is electricity used in a separately metered manager's office at an apartment complex taxable, or does it count as residential (exempt) use?
Taxable. The Comptroller told the utility and the apartment complex that electricity supplied to a separately metered office not occupied as a residence by an on-site manager is a taxable commercial u…
Does a Texas Youth Commission facility's canteen have to charge sales tax on food, soft drinks, and candy sold to the children living there, and what about sales to staff or fundraiser sales?
No tax on sales to the children in the facility. The Comptroller ruled that a new law taxing food, soft drinks, and candy sold to inmates of 'correctional facilities' (effective October 1, 1995) does …
A seller ships forms into Texas for a customer who will export them to Mexico. The customer's exemption certificate isn't enough to cover the purchase — what are the options for handling the transaction without charging Texas tax?
The certificate the customer sent wasn't sufficient by itself, but the Comptroller described several ways to avoid Texas tax on goods purchased for export to Mexico: the customer can give an exemption…
Does the Texas exemption for services performed on certain exempted tangible personal property (Tex. Tax Code Sec. 151.3111) apply once that property becomes a fixture or improvement to real property, such as a steam boiler installed in an electric generating plant?
No. The Comptroller's office told the taxpayer that the Sec. 151.3111 exemption for services on certain exempted tangible personal property does not extend to property once it becomes a fixture or imp…
Is a company that provides workplace safety and loss control consulting services to insurance-related and non-insurance clients providing a taxable service in Texas?
Yes, generally. The Comptroller's office told this safety and loss control consulting company that its services are taxable 'insurance services' under Rule 3.355 both when paid for by an insurance car…
Is equipment that a company builds and uses to remediate (clean up) contaminated soil at natural gas pipeline metering sites subject to Texas sales/use tax?
The soil remediation service itself is not taxable, but the Comptroller concluded that the equipment purchased or fabricated to perform that service is taxable, because on the facts presented the equi…
Does a publisher that packages its own books together with purchased videotapes into kits owe sales tax on the wrapping and packaging supplies used?
No. The Comptroller ruled that tax is not due on the packaging supplies used to make the kits, even though the publisher did not produce the videotapes included in the kits, because Rule 3.314(e) lets…
If a construction contract to expand a chemical or petrochemical plant's capacity was signed before October 1, 1995 (when Senate Bill 640 took effect), is the labor taxed under the old law or the new law?
It depends on when the labor was actually performed, not when the contract was signed or when title/acceptance happens. Labor performed before October 1, 1995 is taxable, even if billed later or accep…
Does a paper machine made of interconnected, bolted-down manufacturing equipment count as real property (an improvement to realty), or does it stay tangible personal property for Texas tax purposes?
It stays tangible personal property. The Comptroller's Tax Policy Division toured a paper manufacturing facility and agreed that the 'paper machine' — actually a series of interconnected machines that…
Is a computerized psychological-testing and scoring service for psychological professionals a taxable data processing service in Texas?
No. The Comptroller's office told the taxpayer that scoring and interpreting psychological tests and personality inventories for psychological professionals — even though a computer is used to speed u…
Do utilities used in apartment complex manager's offices, recreation rooms, laundry rooms, outside lighting, and swimming pools qualify for a Texas sales tax exemption, and are utility studies always required when a meter serves both taxable and exempt uses?
It depends on the meter setup. Since 1979, the Comptroller has treated utilities for recreation rooms, laundry rooms, outside lighting, and swimming pools as part of the exempt residential units. A ma…
If a ready-mix concrete company buys a mixer drum and a truck chassis, does it owe motor vehicle tax or sales tax, and does invoicing them separately make the drum exempt?
It depends on the transaction, not the invoice. If the customer buys a complete concrete truck with the mixer drum already attached, the whole thing is treated as the sale of a motor vehicle, even if …
Does the Texas manufacturing exemption cover communication headgear/headsets that machinery operators wear because the plant equipment is too loud to hear over?
No. The Comptroller's office told this taxpayer that communication headgear worn by machinery operators, even though it's necessary because the machinery is too loud to allow normal communication and …
Are culverts or drain pipes used on a farm or ranch exempt from Texas sales tax, and does it matter whether they're part of an irrigation system, a drainage system, or a road?
It depends on what the culverts or drain pipes become part of. Culverts or drain pipes (metal, clay, or other material) are exempt when they're installed as components of an underground irrigation sys…
Is a video photographer's videotaping of depositions, testimony, and court proceedings exempt from Texas sales tax?
Starting October 1, 1995, yes — when the video (or audio) taping of depositions, testimony, or other court records is sold to a party participating in the lawsuit (such as a plaintiff, defendant, or a…
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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.