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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Does a medical case management / disability management consultant have to collect Texas sales tax on its services to insurance companies?
It depends on what the consultant actually does. Texas taxes "insurance services" — including insurance claims adjustment/claims processing and insurance investigation (evaluating eligibility for cove…
Is a waste collection service that picks up used oil and oil filters taxable, and can the service provider buy the collection containers tax-free?
The waste collection service is taxable until the customer gives the provider certification or other documentation that the waste (such as used oil and oil filters) is excluded from the definition of …
Is Texas sales or use tax due on a microbial enhanced oil recovery (MEOR) process, in which bacteria are injected into a crude oil reservoir to produce organic by-products that improve oil mobility?
No. The Comptroller ruled that the MEOR process is not a taxable service under Rule 3.324 because it does not involve repairing, remodeling, maintaining, or restoring tangible personal property, and i…
Is Texas sales tax due on mud logging services performed at oil and gas wells?
No. Mud logging services — recording information from analyzing formation cuttings and mud circulated out of the well bore, as defined in A Primer of Oil Well Service and Workover — are not taxable un…
Is Texas sales tax due on labor to demolish, repair, and rebuild a shopping center that was partially destroyed by fire?
Yes, in most cases. Charges to rebuild, repair, or remodel the existing structure — including demolition labor — are taxable, whether billed separately or lump-sum, even if the existing slab turns out…
Does a direct sales (multi-level marketing) organization have to collect and remit Texas sales and use tax on the sales its independent distributors make in Texas?
Yes. The Comptroller advised the company that, as a direct sales organization, it is responsible for collecting and remitting Texas sales and use tax on taxable sales its independent distributors make…
Can U.S. citizens claim the same Texas sales and use tax export exemption that Mexican citizens use when exporting purchased goods?
Yes. The Texas export exemption under Tax Code Section 151.307 applies to exported goods regardless of the purchaser's nationality — it is not a special exemption reserved for Mexican citizens, and U.…
Is a deionized-water treatment system installed for a semiconductor (clean-room) manufacturer taxable as an improvement to real property, or exempt as manufacturing equipment?
It depends on installation and use. If the system becomes an improvement to real property (loses its identity as equipment and can't be removed without substantial damage), labor is exempt when instal…
Is Texas sales tax due when a facsimile-service company installs, rents, and maintains fax equipment in hotel rooms so guests can send and receive faxes?
It depends on who actually operates the equipment. If the equipment is transferred to the care, custody, and control of the hotel (or, in turn, the guest) — meaning the customer has the right to move,…
Is Texas sales tax due on mileage or travel charges billed alongside taxable pay-telephone repair, installation, or maintenance services?
Yes. Mileage charges connected to the sale of a taxable item or taxable service are taxable in Texas whether they are billed separately or bundled with the other charges.
Is Texas sales tax due on seal coating and striping a parking lot's asphalt?
It depends on the circumstances. Seal coating and striping done shortly after new asphalt is laid is non-taxable new construction. On an existing lot, doing it for the first time is taxable remodeling…
Is renting film, video, or audio production equipment (cameras, lights, microphones, costumes, fog/wind machines) exempt from Texas sales tax?
Yes, but only the equipment used directly in producing a motion picture, video, or audio recording that will be sold, licensed, distributed, broadcast, or exhibited is exempt, and only if the producer…
Is a direct sales/multi-level marketing company treated as the seller of the products its independent distributors sell, responsible for collecting and remitting Texas sales and use tax?
Yes. The Comptroller confirmed that under Texas Tax Code Section 151.024, a direct sales organization is regarded as the seller (not its independent distributors) and must collect and remit sales and …
Does the manufacturing exemption apply to light bulbs used in a machine that sorts rice kernels before they are ground into flour?
No. The Comptroller ruled that light bulbs used to illuminate a sorting machine that separates and selects broken rice kernels before grinding do not qualify for the manufacturing exemption, because s…
Can a caterer, hotel, or event planner give a resale certificate for tables, chairs, lighting, audio-visual equipment, or a margarita machine provided to a customer as part of a catering service?
No. The Comptroller's office treats these items as used by the caterer to render its catering service, not as sold or rented to the customer, because control and possession of the property never pass …
Is Texas sales tax due on simulcast horse/dog racing services purchased by a racetrack for its patrons to view, and can the racetrack buy those services for resale?
Simulcast services sold to a racetrack are classified as cable television services and are subject to Texas sales tax under Tax Code Section 151.0101(a)(2). However, the racetrack can purchase the sim…
Is Texas sales tax due on information services sold to a newspaper?
No. Under Tax Code Section 151.0038, sales of information services to a newspaper are excluded from Texas sales tax regardless of how the newspaper uses the information, and the seller does not need a…
Can a racetrack buy simulcast horse/dog racing signals tax-free with a resale certificate, or does it owe sales/use tax on the simulcasting fee?
It depends on whether the receiving track charges admission. If the receiving track charges an admission fee to see the live or simulcast races, the simulcast signal is being resold as part of a taxab…
Can a direct pay permit holder resell repair parts or supplies to another company without losing its direct pay permit, if it didn't know at the time of purchase that the items would be resold?
Yes. A direct pay permit holder does not lose its permit by occasionally reselling items to another business, as long as it did not know at the time it purchased those items under the permit that they…
Can a racetrack buy simulcast horse/dog racing signal services tax-free using a resale certificate?
Yes, but only if the receiving track charges an admission fee to see the live races and/or the simulcast. Because the simulcast is being resold as part of a taxable amusement service in that case, the…
Can subsidiaries of financial institutions owned by the FDIC or RTC buy taxable items tax-free using an exemption certificate?
Yes. The Comptroller concluded that 100%-owned subsidiaries of the RTC (Resolution Trust Corporation) may purchase taxable items under an exemption certificate for use in operating the subsidiary busi…
Does a direct sales (multi-level marketing) organization, rather than its independent Texas distributors, have to collect and remit Texas sales and use tax on sales made through those distributors?
Yes. The Comptroller told this direct sales organization that it, not its independent distributors, is responsible for collecting and remitting Texas sales and use tax on taxable sales its distributor…
Is Texas sales tax due on the installation of permanent accent lighting in residential and commercial landscapes, and how does the contract type affect the tax?
Labor to install permanently attached exterior lighting is not taxable because it's an improvement to real property. Tax on the lighting and wiring materials depends on the contract type: under a lump…
Is labor to install window and door screens taxable under Texas sales tax, and does it matter whether the job is new construction or repair/remodeling of residential versus nonresidential property?
It depends on the type of job. Installing window and door screens is treated as improving real property, and labor is NOT taxable when the screens are installed in new construction, unfinished structu…
Does a company that rebuilds customers' ink rollers for the printing industry owe Texas sales tax on materials and equipment, or can it claim a manufacturing exemption?
The company may buy rebuilding materials tax-free with a resale certificate, but must charge its customers tax on the full charge to rebuild each roller. Equipment used solely to rebuild customers' ro…
Should a manufacturer give its supplier a resale certificate or an exemption certificate when buying component parts or ingredients that will become part of an item manufactured for sale?
Either one. The Comptroller confirmed that a supplier may accept either a resale certificate or an exemption certificate in lieu of tax when a manufacturer purchases component parts or ingredients of …
Does the Texas manufacturing exemption apply to equipment, materials, and services purchased by a television broadcaster?
Partially. Because broadcasters produce programs for consideration, they qualify for the Section 151.318 manufacturing exemption on materials and equipment used directly in production (with a phase-in…
Is Texas sales tax due on motorized braces and orthotics sold or rented to patients on a doctor's prescription?
No. The motorized braces and orthotics described qualify as orthopedic appliances under Rule 3.284, and the sale, lease, or rental of a corrective lens, hearing aid, orthopedic appliance, prosthetic d…
Is the electricity used by a florist to power coolers or cooling rooms that keep cut flowers from opening too quickly exempt from Texas sales tax as used in processing?
No. The Comptroller ruled that refrigeration used to slow the natural opening (deterioration) of flowers is storage, not processing, so the electricity used to power florist coolers and cooling rooms …
Does a company that only delivers, assembles, and installs greenhouses (bought separately from the manufacturer) have to collect Texas sales tax on its charges?
It depends on whether the greenhouse becomes part of the real property once installed. If the greenhouse becomes an improvement to realty, the installer's delivery/assembly/installation charges are tr…
Are knives used by meat processors exempt from Texas sales and use tax as manufacturing equipment?
No. Hand-operated knives used by meat processing members are "hand tools," and hand tools are specifically excluded from the Texas manufacturing exemption by Tex. Tax Code Sec. 151.318(c), so they rem…
Is Texas sales tax due on high-pressure washing services for motor vehicles, sidewalks, parking lots, and graffiti removal?
No tax on washing motor vehicles — power washing a motor vehicle is not taxable. But graffiti removal, sidewalk washing, and parking lot washing are taxable, either as restoration/maintenance of tangi…
Is Texas sales tax due on the various oilfield lease-site services a contractor performs for farmers, ranchers, or oil companies — mowing, oil spill clean-up, site clean-off, saltwater disposal land work, dikes, road patching, new well locations, pit digging/filling, flow line repair, and truck pulling?
It depends on the specific job. Mowing/cutting at lease sites is not taxed (it's not a residential or commercial yard/lawn), but mowing a farmer's or rancher's own yard is taxed. Cleaning up oil spill…
Is Texas sales tax due on bulldozer and trackhoe work to clear land or dig ponds, and does it matter whether the bulldozer-and-operator charge is billed as one lump sum or broken out into separate labor and equipment charges?
It depends on the job and the billing method. Labor to clear land (including digging a new pond) as part of new construction is not taxable, but clearing underbrush for landscaping is taxable, and dre…
Is Texas sales tax due on billing and collection services that local exchange telephone companies provide to interexchange carriers, including the recording and rating components?
Yes, but only the recording and rating portion. Recording and rating are taxable data processing services because a computer is used to gather information and apply the carrier's rate schedule to each…
Does a company that sorts, processes, and mails customer mail (rather than manufacturing a product) qualify for Texas's manufacturing exemption on its equipment and supplies?
No. The Comptroller ruled that a mailing services company performing mail sorting, metering, and bar-code labeling is providing a nontaxable mail-handling service, not manufacturing, processing, or fa…
Can a taxpayer get a predominant use study and utility tax refund on a previous business location's natural gas/electric account after closing that account and moving to a new location?
No. The Comptroller will not allow a predominant use study on a closed utility account. Even though the taxpayer's engineer believed an accurate study could still be performed on the old location, the…
Can a landlord who buys gas and electricity, sub-meters it, and bills each tenant claim a manufacturing/processing exemption because most tenants are manufacturers who use the utilities predominantly in processing?
No. The Texas Comptroller ruled that a landlord who purchases gas and electricity for an industrial park and bills tenants for their sub-metered usage is making its own taxable commercial use of those…
Is electricity used to cool natural gas, run compressors, and pump water (including salt water) at an underground natural gas storage facility exempt from Texas sales tax?
It depends on what the electricity is used for. Electricity used to run compressors that change gas pressure for transportation is taxable, not exempt as processing. Electricity used to transport natu…
When a business relocates, which city's local sales tax rate applies to an existing fixed-term equipment lease — the old location's rate or the new one's?
The old location's rate continues to apply. For a fixed-term (e.g., 12-month or 3-year) operating lease or rental that was consummated from the original place of business, the Comptroller taxes it at …
Is Texas sales tax due on fees charged in the mortgage brokering business, such as loan origination fees, brokerage fees, servicing fees, late charges, title policy charges, attorneys' fees, or real property surveying charges?
Mostly not taxable. The Comptroller advised that loan origination fees, equity origination fees, brokerage fees, late charges, prepayment fees, title policy charges, and attorneys' fees are not taxabl…
Is the charge for 'notching' sample pipe to calibrate quality-control equipment taxable under Texas sales and use tax?
Yes. The Comptroller ruled that 'notching' sample pipe to calibrate a lab's quality-control equipment is taxable as remodeling. The manufacturing exemption does not apply because the notching is not q…
Does a Texas company owe use tax when it transfers goods between its own divisions, including goods shipped from a Mexico City headquarters or from an out-of-state office?
Yes, generally. The Comptroller ruled that a Houston division owes Texas use tax, based on the original purchase price, when it receives goods (no money changing hands) from a company division in Mexi…
Is a company that monitors horse races at racetracks with its own personnel and equipment performing a taxable equipment rental or a nontaxable service?
It's a nontaxable service, not a taxable equipment rental. The Comptroller ruled that a company providing race monitoring services to racetracks — using its own personnel and equipment (cameras, monit…
If a direct pay permit holder buys items and has them shipped straight through a central receiving point to plants in other cities without storing them, which city's local use tax is due?
City use tax is due to the city where the items are actually used or consumed after transportation, not the city where they passed through a central receiving point. **If items are purchased and recei…
Is the compensation a receiving racetrack pays a sending racetrack for simulcasting a horse or dog race, for wagering purposes, subject to Texas sales or use tax?
Yes. The compensation (fees or commission) a receiving racetrack pays a sending racetrack for simulcasting a race — the live audio/video transmission of a race from a sending track to a receiving loca…
Is natural gas used to fuel boilers at a towel rental (industrial laundry) business exempt from Texas sales and use tax as gas used in processing?
No. The Comptroller ruled the natural gas used to fuel the boilers at a towel rental company was not exempt, because the boilers themselves are not equipment directly used in processing the rental tow…
Does a subcontractor owe Texas sales tax on labor charges for cutting, sawing, coring, or drilling concrete?
It depends on the job. Cutting, sawing, coring, or drilling concrete tangible personal property not yet installed, or existing nonresidential real property, is a taxable service, so the subcontractor …
Does a beauty salon or aesthetician owe Texas sales tax on shampoo, tonics, and conditioners it buys and uses on customers?
Yes, in part. A beauty salon or aesthetician owes Texas use tax on supplies (like shampoo, tonics, and conditioners) it uses to perform nontaxable services such as facials, and must also collect and r…
Does a property management company owe sales tax on an 'overtime air conditioning' fee it charges tenants?
No. The Comptroller ruled the overtime air conditioning charge is not taxable, because the property management company already paid sales tax to the electric or gas utility and is using the utility se…
Are multi-part 'bill of lading' shipping forms, sold to a manufacturer's client, exempt from Texas sales/use tax as packaging supplies?
Corrected answer (April 12, 1993): a manufacturer-client may issue an exemption certificate for the bill-of-lading forms, but must then self-assess use tax on the cost of any part(s) of the form that …
Does a repairman owe Texas sales/use tax on warranty forms and cards bought from an out-of-state retailer, or can the repairman use an exemption certificate instead?
Yes, tax is owed. A repairman must pay sales or use tax on warranty forms and cards because they are consumable supplies used to perform the repair, not parts transferred to the customer, and a repair…
Does Texas sales tax apply to the sale of a prescription drug discount card?
No. The Comptroller ruled that selling a 20% prescription discount card is the sale of an intangible and is not taxable in Texas. The seller instead owes Texas sales or use tax on its own cost of the …
An out-of-state retailer ships goods into Texas that the purchaser will later export and use only outside Texas. Is Texas tax due on that shipment?
Use tax (not sales tax) is normally due when an out-of-state retailer ships an item into Texas, but the purchaser can give the retailer an exemption certificate claiming a temporary-storage exclusion …
ABC CO. imports equipment from out-of-state vendors to its Austin facility, tests or modifies it (sometimes loading software), and then re-exports it within 30 days to a foreign subsidiary — does that testing or modification count as a taxable 'use' in Texas that defeats the export exemption?
Yes. The Comptroller ruled that testing and/or modifying the equipment in Texas before export — even briefly, even within 30 days, and even where title later passes to a resale subsidiary before expor…
COMPANY B bought testing equipment from COMPANY A in Oregon, shipped it to Austin, and tested it for 4-5 days before exporting it to Singapore. Was that Texas testing a taxable 'use' even though the equipment was headed out of state?
Yes. The Comptroller ruled that COMPANY B's purchase from COMPANY A was taxable, because testing the equipment in Austin for 4-5 days to confirm it worked before exporting it to Singapore counted as a…
Does an out-of-state manufacturer owe Texas use tax on free sample tobacco products delivered to Texas distributors?
It depends on whether the manufacturer is 'engaged in business' in Texas under Rule 3.286. If so, use tax is due on the manufacturer's cost of the taxable components (not labor) that go into the free …
Does Texas use tax apply to circuit-board prototypes an out-of-state semiconductor manufacturer ships into Texas for a customer to test, and are the customer's separate design-facility and design-library charges taxable too?
Yes for the prototypes: shipping ASIC prototype chips into Texas for a customer to test and approve is a taxable "use" of tangible personal property, and the full contract price (including the manufac…
When a Texas manufacturer diverts self-made goods to its own use, is the cost of raw materials that were wasted or damaged during production included in the use-tax base?
It depends on whether the manufacturer can identify actual costs. If the manufacturer can track the actual cost of the raw materials that went into the specific items diverted to its own use, then was…
Does a monument/cemetery contractor owe Texas sales tax on curbing, marble, and concrete work at gravesites, and does it matter whether the work is new construction or repair of an existing site?
It depends on whether the work is new construction or repair of an existing gravesite. Setting curbing and marble right after the vault is installed is new construction, which is untaxed labor; the co…
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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.