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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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 charges for faxing advertising materials, like coupons and flyers, to a list of recipients?
Yes. Charges for electronically transmitting fax messages are taxable as telecommunications services. Advertising services themselves are not subject to sales tax, but charges for sending advertising …
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 the Texas motor fuels tax apply to kerosene bought in bulk for use in space heaters, even when it's delivered into storage marked for heating and cooking use only?
Yes. Kerosene is treated as diesel fuel for Texas motor fuels tax purposes, so bulk purchases (deliveries over five gallons) are taxable unless the buyer holds a diesel fuel tax permit or can give the…
Is Texas sales tax due on the food, beverages, and videotaping charges a focus-group coordinator bills to its clients?
Yes. Any separately stated charges for food and beverages and for video tapes (including taping services) are taxable to the customer. If the invoice instead shows only a single lump-sum charge labele…
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…
Is Texas sales tax or motor vehicle tax due on motorcycle accessories, and does it matter whether the accessory is attached to the motorcycle or bought separately?
It depends on whether the accessory is attached at the time of purchase. An accessory attached to a street-legal motorcycle when it's bought (like a luggage rack) is taxed along with the motorcycle un…
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…
Is tree care service taxable as a landscaping/real property service in Texas, even for trees in a commercial fruit or nut orchard?
Tree care services are generally taxable as landscaping (a real property service), but caring for trees in a commercial fruit or nut orchard operated by a person who raises the fruit or nuts for sale …
What did the 1994 internal Comptroller memo say about which machinery, tools, and equipment used to repair or maintain a certificated/licensed carrier's aircraft qualify for the Section 151.328(d) sales tax exemption?
This is NOT a taxpayer-specific letter ruling — it's an internal September 22, 1994 audit memo from Lindey Osborne, Tax Administration, resolving a specific audited airline taxpayer's question about w…
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 capping a hazardous landfill a taxable service under Texas sales tax?
No — capping a hazardous landfill isn't a taxable real-property or landscaping service. But watch the materials: unprocessed dirt/sand/gravel and its transport are tax-free, while PROCESSED quarry mat…
If I demolish part of a building down to the floor joists (or foundation) and rebuild it into one larger non-residential structure combining old and new areas, is the work taxed as new construction or as remodeling?
It depends on how far down each area is demolished. Razing a structure all the way to its foundation (the piers of a pier-and-beam building count as the foundation) and building a new facility on that…
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…
If I sell petroleum products to out-of-state customers with title transferring inside a Texas pipeline, do I owe Texas sales tax, and what proof do I need that the product left the state?
Crude oil is not subject to Texas limited sales, excise, and use tax at all. Processed oil, natural gas, and other petroleum products are taxable unless the customer resells them (resale certificate) …
Is 'third-party installation' a valid reason to claim a Texas sales tax exemption?
No. "Third-party installation" by itself is not a valid exemption certificate reason. True third-party installation labor (by an entity that did not sell the item) is not taxable, but some third-party…
Are parts and labor used to repair or refurbish railroad cars and locomotives exempt from Texas sales tax?
Yes. Locomotives and railcars (complete with the truck) are exempt from Texas sales tax when purchased or sold, and the labor and parts used to repair them are also exempt, with no exemption certifica…
If I supply mobile vendors, do I have to remit tax on sales to vendors who now operate independently of my company instead of exclusively under me?
It depends on whether the mobile vendor is still connected to the supplier. Under Comptroller Rule 3.293, a supplier must remit tax on sales to mobile vendors who still operate under it (e.g., connect…
Are building and environmental inspection services (including Phase I Environmental Inspections) taxable in Texas?
No. The Texas Comptroller ruled that the taxpayer's inspection services -- including building inspections for repair and maintenance needs, report writing, material sample testing, specification prepa…
Is scanning paper documents onto CDs a taxable service in Texas?
Yes — electronic document scanning/imaging is taxable as a data processing service under Rule 3.330; you must collect sales tax on your total charge to the customer.
Is a light-bulb-replacement maintenance service taxable in Texas if I only provide labor, not bulbs?
Yes — lighting maintenance (including bulb replacement) is a taxable real property service under Rule 3.356(a)(7), even if you provide only labor and no materials.
Is selling coupon books or passbooks taxable under Texas sales tax?
No — the Texas Comptroller ruled that selling a book of discount coupons (a 'passbook') is considered the sale of an intangible, not tangible personal property, so Texas sales tax does not apply to th…
Texas Letter Ruling 9409L1316G12: Racetracks — Leased By Exempt Organization To Hold Event — Taxability Of Ticket Sales And Rental Fee/Proceeds Received By Nonexempt Lessor
The rental fee a racetrack owner receives from a nonprofit that leases the track (a percentage of net sales) is not subject to sales tax, and the nonprofit's ticket sales to the event are also exempt …
Our company runs a state agency's electronic benefits transfer (EBT) system under contract — is that a taxable data processing service, do we owe sales tax on our fee to the exempt state agency, and can we buy supplies, cards, and outside services tax-free using resale certificates?
Yes — running a state agency's electronic benefits transfer (EBT) system is a taxable 'data processing service' under Texas law, but because the purchasing agency (TDHS) is tax-exempt, the contractor …
Does making floral arrangements count as "processing" for Texas utility sales tax exemption purposes?
Yes. The Comptroller's letter states that the activity of making a floral arrangement is considered processing. The taxpayer had asked about the taxability of natural gas and electricity (utilities) u…
Does vibration-monitoring equipment bought by petroleum processors or electricity generators to protect manufacturing machinery from damage qualify for the Texas manufacturing sales tax exemption?
No. The Comptroller ruled that vibration-monitoring equipment used to detect excessive vibration and trigger safety shutdowns does not qualify for the Texas manufacturing exemption. It is not an 'acce…
Is telemarketing taxable in Texas?
It depends on what the telemarketing calls actually do. (1) Using an automated computer system to call people and deliver standardized messages is a taxable telecommunications service. (2) Making call…
Is cleaning, painting, and sealing residential air vents/ducts taxable in Texas?
No, not when paint and sealing are involved. The Comptroller reconsidered an earlier ruling that soot-cleaning of vents/ducts was taxable janitorial work, and concluded that when the service also incl…
How does Texas decide whether a bed-and-breakfast pays residential or commercial (nonresidential) tax on its gas and electricity?
Texas applies a 'predominant use' test. If 50% or more of a bed-and-breakfast's square footage is rented out (or the rooms are offered for rent 50% or more of the year), the property is treated as non…
Is drafting, marine surveying, marine appraisal, or marine architecture/engineering/consulting work taxable under Texas sales tax?
It depends on who develops the design and why the survey is done. Drafting is taxed as the sale of graphic art only when the customer supplies all the schematics and specifications and the drafter mer…
If a registered/professional engineer performs forensic investigations of accidents, fires, or structural damage in connection with an insurance claim, does Texas sales tax apply to that service?
Yes. The Comptroller ruled that nothing in the Texas Engineering Practice Act (Article 3271a) or Chapter 151 of the Tax Code exempts a registered/professional engineer from charging and collecting sal…
Can a non-Texas retailer use a multi-jurisdictional resale certificate instead of a Texas Resale Certificate when buying from Texas vendors?
Probably not safely. A multi-jurisdictional resale/exemption certificate (even paired with an affidavit) is likely incomplete under Texas law and probably would not protect a Texas vendor from tax lia…
Does tri-ethylene glycol (TEG) used in natural gas processing qualify for the Texas manufacturing sales tax exemption?
It depends on how the chemical is used. Tri-ethylene glycol (TEG) used like anti-freeze in a pipeline that transports natural gas to an end marketer does NOT qualify for the manufacturing exemption, b…
Is a separately-stated property tax reimbursement on an equipment rental invoice taxable in Texas?
It depends on what the reimbursement covers. A property tax reimbursement is excluded from the taxable sales price of an equipment rental only when it is (1) separately stated and clearly identified o…
If my company makes and installs fireplace facings or mantles for home builders, is the whole charge (materials, labor, overhead, markup) taxable as a sale of tangible personal property, or is it a nontaxable real property improvement?
It depends on the contract with the home builder. If the facing/mantle is simply sold, or installed without becoming a permanent improvement to the home, the company is a manufacturer selling taxable …
Could a Texas vehicle rental or leasing business split one retired vehicle's fair market value deduction between two replacement vehicles?
No. Section 152.002(c) allowed the retired vehicle's fair market value to reduce the taxable value of one replacement vehicle only. The deduction could not be split between two purchases, and any unus…
When a contractor issues a change order on a nonresidential repair or remodeling contract, is the change order taxed the same way as the original contract, and when does the contractor become liable to collect the sales tax?
Yes, change orders are taxable in the same manner as the original nonresidential repair or remodeling contract. A change order that does not alter the sales price causes no change in tax owed, but a c…
Do clean-room air handling systems and floor panels qualify for Texas's manufacturing exemption in semiconductor fabrication?
Yes — the Comptroller confirmed that air handling equipment, ceiling vents, and waffle floor panels used in semiconductor (microchip) fabrication clean rooms qualify as equipment used in manufacturing…
If I bundle a cellular phone's price with the cost of service, does that affect my use tax liability on the phone?
No — a cellular phone service provider that gives a phone to a customer as part of its taxable telecommunications service may buy that phone for resale, regardless of what price it places on the phone…
Did a dealer-lessor and a second lessor each owe Texas vehicle tax when the leased vehicle and contract were sold days after lease inception?
Yes. Entering the operating lease was taxable use, making the dealer-lessor's acquisition taxable. Its later sale of the leased vehicle to a second lessor was another taxable sale. The lessee's vehicl…
Do dedicated telecom lines used to transmit news content to a printing plant qualify for Texas's manufacturing exemption?
No — the Comptroller ruled the telecommunication service is taxable because it is not performed directly on the newspaper being manufactured; merely facilitating the manufacturing process is not enoug…
Is providing a portable surgical laser with an operating technician a taxable equipment rental in Texas?
Yes — the entire charge is taxable as a rental of tangible personal property, even though a technician sets up, tunes, and operates the laser while the physician performs the actual procedure. An exem…
Does processing a neighbor's agricultural products alongside my own destroy my Texas manufacturing-exemption for my processing equipment?
Not entirely, under the policy this letter recommends. The Comptroller's task force proposed replacing the old all-or-nothing rule (which required that 100% of the products processed, packed, or marke…
Is a software modification delivered out-of-state and brought into Texas on diskette taxable?
It depends on who made the modification. If the same company that sold the original computer program also created the modification, the modification is taxable when brought into Texas on diskette only…
Are environmental testing, waste analysis, and disposal services for underground storage tank (UST) remediation taxable in Texas?
Mostly nontaxable, with two important exceptions. Invoice-by-invoice, the Comptroller found that environmental sampling, lab analysis, waste-stream review, and disposal-approval services related to un…
Can a bank charge sales tax on a returned/insufficient-funds check fee?
No — a bank cannot charge sales tax on a fee for a returned (insufficient-funds) check. The Comptroller ruled the charge isn't for a service performed for the customer; it's just a nontaxable overdraf…
Can a business store its tax records only on CD-ROM and destroy the paper originals?
Not entirely. The Comptroller will accept electronic (e.g., CD-ROM) storage of purchase orders, invoices, and similar business records only for partial retention — the records must remain examinable b…
Which services that an outside contractor performs for a public pay-phone company in Texas — rate-table downloads and installation testing, coin-collection polling review, long-distance record transfers, software updates and file backups, coin collection, and repairs — are subject to Texas sales tax?
It depends on the specific service. Texas taxes a pay-phone system contractor's charges for downloading a new rate table and field-testing a newly installed phone (remodeling of tangible property), tr…
Does the prior-contract exemption cover casualty-damage repair labor after the October 1993 law change?
No. There is no prior-contract exemption for casualty-repair labor performed on or after October 1, 1993. Effective that date, the Comptroller's old, broader administrative rule exempting labor to rep…
Is land surveying performed on a farm or ranch exempt from Texas sales tax as an agricultural service?
No. Surveying that determines or confirms real property boundaries or the location of structures relative to those boundaries is a taxable real property service in Texas, and performing it on agricult…
Does a certified copy of a Texas Comptroller document need to be notarized to be valid?
No — a properly certified copy of a document maintained by the Texas Comptroller's office (such as a Certificate of Account Status) does not need to be notarized. A document signed and sealed by the C…
Do I need a Texas sales tax permit to sell pet-registration-database sign-ups?
No — this is not a taxable service, so a distributor signing customers up for a national pet-registration database does not need a Texas sales tax permit.
When a Texas retailer sells goods to a foreign customer who takes them out of the country, how soon must the goods be exported and what documents prove the export for purposes of getting the sales tax refunded or not charged?
It depends on the proof, but generally a customer-signed air waybill alone is NOT enough. Goods exported within 30 days of purchase are presumed not to have been used in Texas, but exports after 30 da…
Are replacement air filters for a prescribed air purification system exempt from Texas sales tax?
Yes — the Comptroller ruled that air filters for a physician-prescribed air purification system are treated like related supplies for a therapeutic device (similar to lancets and test strips for a blo…
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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.