Texas State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Texas, with full citations and the original source on every page.
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When a landlord bills a commercial tenant separately for electricity measured through the tenant's own sub-meter, is that billing a taxable sale of electricity, and can a predominant-use manufacturing study exempt it?
No. The Comptroller ruled that billing a tenant for electricity through a separate sub-meter is not a sale of electricity by the landlord -- it's just part of the rental/lease price of the real estate…
Does a front-end loader used to blend materials and support cooling during processing qualify for Texas's manufacturing equipment sales tax exemption?
No. The Comptroller ruled that a front-end loader used to blend seed and product and to support the deaeration and cooling process is treated as intraplant transportation equipment or equipment used i…
Does metal-leveling equipment qualify for the Texas manufacturing sales tax exemption when the leveling process changes the metal's tensile and yield strength?
Yes. Because leveling increases the metal's tensile and yield strength to meet the customer's specifications, the Comptroller found the process causes a physical change and qualifies as 'processing,' …
Does a company owe Texas sales or use tax on loose product samples and sample binders or books that it produces or buys to help its sales representatives solicit customers?
Yes. The Comptroller ruled that loose samples and sample binders or books distributed in Texas are taxable, because their only use is to demonstrate the products they represent, not to be sold themsel…
Does a film and video production company owe sales tax on special-effects paint, blank tape stock, and duplicate tapes (dubs) it has made for clients?
It depends on the item. The blue paint used exclusively for blue-screen special effects can be bought tax-free with an exemption certificate (though separately billed painting labor is still taxable),…
Does the manufacturing exemption cover a microwave oven used to cook or heat food for sale?
It depends on who operates the oven. A microwave or convection oven used by a restaurant (or similar business) to cook food that it then sells qualifies for the manufacturing exemption, but a microwav…
Is a mandrel used to wind fiberglass filament and resin into pipe and tanks exempt from Texas sales and use tax, and what about the disposable rollers used to apply resin?
Mandrels purchased after January 1, 1995, and used to wind fiberglass filament and resin into pipe and tanks are totally exempt from Texas state and local sales and use tax, and the buyer may give sup…
Is electricity used at a food-processing facility exempt from Texas sales tax as manufacturing use when the facility's own vending machines are what ultimately sell the packaged food?
No, the electricity is taxable. Because the facility is owned by the same entity that owns the vending machines the food is ultimately sold through, the Comptroller treated the electricity as being us…
Is the labor to install new equipment in a refinery or chemical plant taxable, and does an October 1995 capacity-expansion exclusion change the answer?
It depends on the facts: installation labor on qualifying manufacturing equipment that is not an improvement to realty was exempt in 1995 under Sec. 151.3111, but the same labor was taxable in 1994 be…
A manufacturer's equipment lease started in 1993 and was later assigned to a new lessee, with the assignment becoming effective (per lessor approval) after the October 1, 1995 manufacturing exemption qualifying date. Does the assignment create a 'new lease' that has to meet the October 1, 1995 date to qualify for the manufacturing equipment lease exemption?
No. The original lease date (July 29, 1993) controls, not the assignment's effective or approval date. An assignment or assumption of an existing lease is not considered a new lease for purposes of th…
Is a tuxedo-rental business that cleans the tuxedos it rents out entitled to Texas's manufacturing/processing exemption on its laundry equipment and supplies?
Yes. A business that cleans the tuxedos it rents out is a 'processor' for Texas tax purposes and qualifies for the manufacturing exemption: qualifying laundry/dry-cleaning equipment (washers, dryers, …
Does the addition of a flash calciner unit and related equipment and modifications to an alumina and chemical processing plant qualify as exempt 'new construction' under the Increased Capacity Rule because it increases plant production capacity by about 20%?
Yes. The Comptroller confirmed that the alumina and chemical processing plant counts as a chemical processing plant under the Increased Capacity Rule (Rule 3.362), and that the new flash calciner unit…
Does a ready-mix concrete reclaimer — equipment that washes and separates sand and gravel out of waste ready-mix concrete so it can be reused — qualify for Texas's manufacturing equipment sales tax exemption?
Yes, if the equipment is an integrated piece of equipment whose primary purpose is a direct manufacturing process. The Comptroller ruled that washing and separating manufactured aggregate so it can be…
Is a water softener used to condition water for a newspaper printing press exempt from Texas sales/use tax as manufacturing equipment?
No. The water softener itself is taxable equipment because it is one step removed from directly manufacturing the newspaper. However, the chemicals previously used to treat the water are exempt as nec…
Does a raw water sand filter system that treats water used to cool machinery and equipment in a manufacturing process qualify for Texas's manufacturing exemption?
No. The raw water sand filter project does not qualify for the manufacturing exemption because the water it treats is not used in processing tangible personal property for sale — it's used to keep the…
Does re-processing a customer's plastic pellets — melting them down in a twin screw extruder, blending in a hardener, flame retardant, or other material, and re-pelletizing — qualify for Texas's manufacturing exemption?
Yes. The Comptroller ruled that melting the customer-owned plastic pellets, adding a hardener, flame retardant, or other material, and forming new pellets is "processing" tangible personal property th…
As an advertising agency, which of our 'nonbillable' expenses (items and services we buy but can't fully bill back to clients) owe Texas sales/use tax, and which don't?
It depends on whether the item was resold to the client or just consumed by the agency. If an agency buys a taxable item or service for a client but ends up not billing (reselling) it -- for example, …
If I buy natural gas in Texas and ship it out of state by pipeline to generate electricity at my out-of-state plant, do I owe Texas sales tax on the gas?
No. The Comptroller ruled that buying natural gas in Texas and shipping it via interstate pipeline to Pennsylvania, where it is consumed to manufacture electricity, is a noncommercial use of natural g…
Does a metal roller-leveling process that flattens coiled metal and changes its hardness count as manufacturing or processing, so the wrapping/packaging and equipment used with it are tax-exempt?
The Comptroller's Tax Policy Director did not agree, on the facts presented, that a metal coil leveler qualifies as exempt manufacturing/processing equipment. He explained that if the leveling-induced…
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…
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…
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…
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…
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…
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 § …
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…
Which cleanroom facilities and related equipment used in semiconductor (microchip) fabrication qualify for the Texas manufacturing exemption — specifically a chemical analysis lab and equipment air lock, chemical/gas dispense and storage rooms with their safety/cleanroom controls, and an electrical distribution room?
The chemical analysis lab and equipment air lock cleanrooms and their associated equipment are exempt under Sec. 151.318(q). For the chemical/gas dispense and storage rooms, the piping, filters, and s…
If a company owns the patents and formulas for its products but has a separate contract manufacturer physically make the product under the company's supervision, is the company itself considered the 'manufacturer' for Texas sales and use tax purposes?
Yes. Because the company developed the formulation process, supplies the manufacturing formulas and instructions, keeps its own manager/scientist on site during manufacturing and testing, and is respo…
Is labor to repair major appliances taxable, and does a laundry/dry cleaner that owns and rents out uniforms, mops, or linens qualify for the manufacturing exemption on its washers, dryers, and repair parts?
It depends on what's being repaired and how the appliance is used. Repair labor on tangible personal property (free-standing, plug-in appliances) is generally taxable, while repair labor on real prope…
When a company does lump-sum interior refurbishing, avionics upgrades, or performance modifications on a customer's private aircraft, is that taxable repair/remodeling labor, or nontaxable processing/manufacturing labor — and does it matter that the work is done on an unfinished ('green') aircraft versus one already in service?
Interior refurbishing and performance-altering modifications performed on an already-completed customer aircraft are repair or remodeling, not processing — and Texas law specifically excludes repair, …
Is the labor to repair refinery/chemical plant processing equipment taxable, and is the labor to repair railroad track taxable, given that the equipment and track were exempt as manufacturing equipment or rolling stock when first purchased?
It depends on whether the item is still personal property or has become part of the realty. If refinery/plant manufacturing equipment still retains its character as tangible personal property, repair …
Is the computer hardware and software a company uses to draw its own blueprints for fabricating food processing equipment exempt from Texas sales tax as manufacturing equipment?
No. Preparing blueprint drawings happens before the first stage of production, so the computers and software used to create those blueprints do not qualify as exempt manufacturing equipment under Rule…
Does producing an animated television commercial using computer graphics qualify for Texas's motion picture exemption, and does the computer/software used to make the master tape qualify for the manufacturing exemption?
Yes to both, with limits. Using computer graphics to produce a master video tape that will be sold, broadcast, or distributed qualifies for the motion picture exemption (Rule 3.350). The computer and …
Does an air compressor used exclusively to power an abrasive blasting system that prepares steel surfaces for coating qualify for the Texas manufacturing sales tax exemption?
Yes. The Comptroller ruled that the air compressor qualifies for the manufacturing exemption because it is used exclusively to propel the blast media that prepares steel surfaces for coating — equipme…
Is a Texas manufacturer's sale of etchant — a chemical used to etch unwanted copper off printed circuit boards — subject to sales tax, given that none of the etchant ends up in the finished circuit board and the spent etchant is bought back by the seller for recycling?
The sale of the etchant is a taxable sale of tangible personal property, but the purchaser (a circuit-board manufacturer) can buy it tax-free with a resale/exemption certificate, because the etchant i…
Is the construction of a special, secured room inside an existing building — built to protect a customer's inventory and equipment during manufacturing — exempt from Texas sales tax as either a manufacturing exemption or new construction?
No. The Comptroller ruled that building a special security room within an existing building — even though it was a specific contract condition needed to protect a customer's manufacturing inventory an…
Does a clean room used to make the protective garments worn in semiconductor fabrication qualify for Texas's semiconductor fabrication clean room sales tax exemption?
No. The Comptroller held that the 'semiconductor fabrication clean room' exemption (created by Senate Bill 640) only covers clean rooms used to manufacture an actual semiconductor product — a clean ro…
Are water trucks used to control lime dust at a limestone processing facility, as mandated by the State of Texas, exempt from tax because they're used for pollution control?
No exemption. The Comptroller ruled that if the water trucks are designed to transport persons or property on the highway, they are motor vehicles subject to motor vehicle tax (not sales tax), so sale…
Does a manufacturer owe sales tax when it sells hydrogen embrittlement test bars to plating companies, who use the bars to certify the quality of their plating tanks?
No exemption. The Comptroller ruled that hydrogen embrittlement test bars sold to plating companies for use in certifying the quality of their plating tanks do not qualify for the Rule 3.300 manufactu…
Is equipment used in mining or quarrying (like screening equipment, shaker screens, front end loaders, sand screws, and gravel water pumps) exempt from Texas sales tax under the manufacturing exemption?
It depends on when the equipment is used relative to when processing (crushing/grinding) begins. Screening equipment, shaker screens, and sand screws are taxable if used before crushing or grinding st…
Do refrigerated sandwich/pizza prep units and refrigerated worktop/undercounter units used in a restaurant qualify for Texas's manufacturing machinery and equipment sales tax exemption?
No. The Comptroller ruled that refrigerated sandwich/pizza preparation units and refrigerated worktop/undercounter units do not qualify as exempt manufacturing machinery and equipment. These units are…
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…
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…
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…
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…
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…
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…
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 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 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 vibrating shaker screens used at a sand, gravel, and aggregate processing plant exempt from Texas sales tax as manufacturing equipment?
It depends on where in the process the shaker screens are used. Shaker screens used before the aggregate material undergoes any physical or chemical change (such as crushing) are not part of manufactu…
Is the labor to repair and maintain manufacturing machinery and equipment, like owned printing presses or leased photocopy machines, exempt from Texas sales and use tax?
Yes, but only once the equipment itself qualifies for the manufacturing exemption. As of January 1, 1995, when the phased-in manufacturing equipment exemption became fully effective, maintenance on qu…
Is electricity used to run coolers and cooling rooms that flower shops use to extend the life of cut flowers an exempt manufacturing/processing use, or a taxable use?
Mostly taxable. Electricity used to lower cut flowers to their target (precooling) temperature counts as processing, but that only takes 30 minutes to an hour. Once flowers reach the target temperatur…
If a beverage distributor buys pre-mix or post-mix carbonated drink machines and loans them to restaurant customers as a marketing incentive (in exchange for the customer agreeing to buy that distributor's soft drink products), can the machines be purchased tax-free as manufacturing equipment?
No. Even though pre-mix and post-mix drink machines otherwise qualify as manufacturing equipment under Rule 3.300, loaning them to customers is itself a taxable "use" of the equipment by the distribut…
If a company designs tools, dies, jigs, and fixtures on a computer for manufacturers, is the sale of those designs subject to Texas sales tax?
Yes. The Texas Comptroller ruled that selling a computer-generated design is taxable as the sale of a pattern for use in manufacturing. Selling a design modification for an existing production-line ma…
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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.