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 building owner leases space to a tax-exempt governmental entity and has remodel work done on that space, who is responsible for sales tax — the building owner (lessor) or the government tenant (lessee)?
It depends on who primarily uses and benefits from the improvements. The Comptroller applied a two-prong test: the work is exempt from sales tax only if (1) the lessee qualifies for exempt status unde…
Is an investigation company's services taxable as security services under Texas sales tax, and does the company need a sales tax permit?
Yes. The Comptroller told this investigation company that its services are taxable as security services, meaning sales tax is due on the total charge billed to customers, and enclosed a sales tax perm…
Does Texas motor vehicle tax apply when a parent transfers vehicles to a newly incorporated subsidiary for stock or subject to a lien?
A stock-only transfer to a newly incorporated subsidiary caused no motor vehicle sales tax, but consideration such as assuming a vehicle lien made the transfer taxable. The letter's $10 gift-tax resul…
Is a wilderness travel company's all-inclusive trip package price (transportation, food, lodging, cabin fees, guide fees, air fare) subject to Texas sales tax?
It depends on where the trip happens. For trips within Texas, the bundled per-person package price itself is not taxable, but the individual taxable transactions that occur in Texas within that trip (…
Is Coco Lopez, a coconut-based product used for making tropical drinks and cooking, taxable or exempt as a food product in Texas?
Exempt. The Comptroller ruled that Coco Lopez — a coconut, sugar, and water-based product used to make tropical drinks like Pina Coladas and for cooking — is an exempt food product for Texas sales tax…
If a surplus lines insurer charges a separate engineering inspection fee to an applicant, is that fee subject to Texas sales tax even though the surplus lines premium (which may end up including that fee) is already subject to the 4.85% surplus lines premium tax?
Yes. The Comptroller held the engineering inspection fee is a taxable insurance service subject to the 6.25% Texas state and local sales tax, separately from the 4.85% surplus lines premium tax the St…
Is a lumbo roll and cuff weight with heel strap exempt from Texas sales tax as a therapeutic or orthopedic device?
The lumbo roll and cuff weight with heel strap qualify as therapeutic devices under Rule 3.284(a)(11) and (c)(7), so no tax is due when they are sold to an individual with a prescription from a licens…
Does the Texas manufacturing exemption cover costumes, cameras, and other equipment used directly in producing a motion picture, video, or audio recording that will be sold, licensed, distributed, broadcast, or exhibited?
Yes, as of this 1993 letter. The Comptroller said machinery, equipment, and accessories used directly in producing a motion picture, video, or audio recording — including costumes, cameras, lights, an…
Is transferring tangible personal property from a corporation to a newly-formed partnership, in exchange only for a limited partner interest, a taxable sale for Texas sales tax purposes?
No. The Comptroller ruled that when a corporation contributes tangible personal property to a newly-formed limited partnership solely in exchange for a limited partner interest — with no other conside…
For a limited partnership and its partners, where is the partnership's commercial domicile, and which entities have Texas franchise-tax nexus?
The partnership itself owes no franchise tax because partnerships are not subject to it, even though it has Texas nexus (one partner services its receivables from a Texas branch). Its commercial domic…
In a proposed acquisition using tiered partnerships, which corporate partners are subject to Texas franchise tax and how is their income apportioned?
The corporate general partners are subject, but the corporate limited partners, individuals, and the partnerships themselves are not. In a proposed acquisition using tiered partnerships (ABC, ABC II, …
After the October 1993 change to Sec. 151.311, can contractors accept exemption certificates for materials and consumable supplies used on realty-improvement jobs for exempt entities?
It depends on timing and contract type. As of October 1, 1993, Sec. 151.311 was amended to let contractors buy tax-free, with an exemption certificate, both materials incorporated into realty and cons…
Is a resident-screening company's charge to its clients for credit checks, background checks, and risk analysis taxable as a credit reporting service, or exempt as a non-taxable information service?
Taxable as a credit reporting service. The Comptroller found the essence of the transaction was 'credit reporting' under Tex. Tax Code 151.0034, so the company's total charge to its customers is taxab…
Does a public ambulance authority owe motor vehicle tax on leased ambulances, and can a for-profit ambulance company claim the House Bill 895 emergency-vehicle exemption?
A public agency (Area Metropolitan Ambulance Authority) leasing vehicles titled in its own name will not owe the 6 1/4% motor vehicle tax as long as the vehicles carry exempt tags — if it fails to get…
Did Texas treat a day-to-day open-ended vehicle contract as a rental even when the customer kept the vehicle more than 180 days?
Yes. Administrative hearings had treated day-to-day open-ended contracts as rentals regardless of how long the customer actually kept the vehicle. A purchase order specifying more than 180 days was a …
Why do some hospitals lose (or newly qualify for) their Texas sales tax exemption, and does that change anything for businesses that do work for hospitals?
A 1993 legislative change added a new criterion hospitals must meet to qualify for the sales tax exemption: they must provide a certain amount of indigent or charity health care. The Texas Health Depa…
Is a $100 'reinstatement fee' charged to customers renewing an expired computer maintenance agreement taxable, even if it's separately stated on the invoice?
Yes. The Comptroller ruled that the $100 reinstatement fee is taxable, even if separately stated, because it is part of the charge for computer program maintenance on software sold by the same service…
Does a DC-powered siren used to call or gather cattle on a farm or ranch qualify for the farm machinery and equipment sales tax exemption under Rule 3.296(a)(5)(A)?
Yes, based on the facts given. The Comptroller ruled that a siren built to call or gather cattle to be fed or worked, powered by direct current from a vehicle battery (not AC power, so it has no other…
Is an alarm/paging unit attached to an incubator used to hatch emu eggs exempt from Texas sales tax as farm equipment?
Partly. The alarm unit itself, placed in the incubator, qualifies for the farm/ranch agricultural exemption under Tax Code Section 151.316. But the paging device it triggers does not qualify if it can…
Is extracting core samples from new oil/gas well exploration sites taxable in Texas, and does the service provider owe tax on the equipment and materials used?
No, the coring service itself is not taxable. The Comptroller ruled that extracting core samples associated with exploration for new oil/gas well sites is a nontaxable service, but the service provide…
After SB 82 repealed the old 25% sales tax fraud penalty and replaced it with the General Provisions chapter's 50% fraud penalty, which rate applies to audit assessments that were already pending and billed at 25% before the changeover date but not finalized until after it?
This is an internal Comptroller Tax Policy memo, not a response to a taxpayer letter. It resolves an internal question about which fraud penalty rate to apply during the SB 82 transition: assessments …
Is producing a master film, audio, or video recording treated as manufacturing for Texas sales tax purposes, and is duplicating (dubbing) that master taxable?
Yes — producing a motion picture or audio/video recording for sale, license, distribution, broadcast, or exhibition is manufacturing, so producers, production companies, and post-production companies …
Is installing theater chairs in a new theater taxed the same as removing and replacing chairs in an existing theater?
No. Installing theater chairs for the first time in a newly constructed theater is a nontaxable improvement to realty, but removing old chairs and installing new ones in an existing theater is taxable…
Is labor to repair a parking lot damaged by an underground explosion taxable if the repair work was done after October 1, 1993?
Yes. The Comptroller told the taxpayer that because the parking lot repair labor was performed in November 1993 — after the October 1, 1993 effective date of new Tax Code Sec. 151.350 — that repair la…
Is faxing coupon advertisements to a list of recipients a nontaxable advertising service or a taxable telecommunications service in Texas?
It depends on what the customer is paying for. Assembling and distributing a collection of coupons is a nontaxable advertising service, but the fax transmission itself is a taxable telecommunications …
If I buy something from an out-of-state company that delivers it into Texas, who has to pay or collect the use tax — me or the company?
It depends on whether the seller is permitted in Texas. The Comptroller told this individual purchaser that because COMPANY A (the vendor they bought from) is permitted in Texas, COMPANY A is required…
Is sales tax owed on wireline services performed on oil/gas wells to obtain seismic or geological data in Texas?
No. The Comptroller ruled these wireline services are not subject to sales & use tax. Instead, the receipts are subject to the 2.42% well servicing tax under Texas Tax Code 191.081. Sales tax is still…
For a Texas motor vehicle repair, can the repairman charge the customer sales tax on parts at a price lower than what the repairman paid for those parts?
No. In a separated repair contract (materials and labor billed separately), the agreed sales price of parts and consumable supplies that the repairman charges the customer sales tax on cannot be less …
Is a 'lane closure' (barricade) service provided to a highway contractor a taxable service, or is it treated as equipment rental for Texas sales tax purposes?
It is not a taxable service. The Comptroller ruled that the total charge for 'lane closure' (barricade) services is treated as a rental of equipment to the contractor, and is taxable as a rental — jus…
If a 501(c)(3) nonprofit and a for-profit company form a 50/50 joint venture to build affordable housing, can the joint venture buy construction materials free of Texas sales tax?
Only partly. The Comptroller ruled the joint venture may issue an exemption certificate for 50% of the cost of the incorporated building materials and consumable supplies — matching the nonprofit part…
Did the Comptroller change the manufacturing exemption policy for equipment (dies, photoengravings, presses) used by printers and publishers?
No. The Comptroller reviewed the proposed policy change and decided not to change the existing manufacturing exemption policy that had applied to printers and publishers for several years. Because the…
If a 501(c)(3) organization bundles hotel lodging, meals, and tuition into one lump-sum price for an educational seminar, does it owe sales tax on the meals and hotel tax on the lodging?
The meals charge is exempt from sales tax (the organization can issue an exemption certificate for meals whether eaten at the lodge or off-site), but the organization still owes hotel occupancy tax on…
Is a hyperbaric oxygen chamber exempt from Texas sales tax when it is rented to a for-profit hospital?
No. A hyperbaric oxygen chamber is a therapeutic device that is exempt when rented directly to an individual patient under a doctor's prescription, but it is taxable when sold, leased, or rented to a …
If a city installs speed bumps in a neighborhood and bills the private citizens or businesses who requested them, does the city have to collect sales tax on that charge?
No. The Comptroller ruled that installing speed bumps is remodeling of nonresidential realty (a taxable service), but the city does not have to collect sales tax on the charges billed to the citizens,…
Is a tree/plant examination and disease-treatment consultation service (arborist services) taxable under Texas sales tax, and can a referral fee paid to another business reduce the tax base?
Yes. The Comptroller ruled that arborist services — consultation, diagnosis, and treatment of landscape plants — are taxable, and tax must be collected on the entire charge to the customer, including …
How is Texas sales tax applied to selling, renting, installing, or servicing water softeners and reverse osmosis units — and does it matter whether the units are plumbed into a building or whether the customer just pays for a water-conditioning service?
It depends on three variables: whether title to the equipment passes to the customer (sale vs. rental vs. service), whether the unit is plumbed into the building (making it an improvement to realty) o…
Is transferring property to a brand-new, not-yet-capitalized corporation in exchange for 100% of its common and preferred stock a taxable sale under Texas sales tax?
No. The Comptroller confirmed that transferring property to a non-capitalized corporation in exchange for 100% of that corporation's stock — even if the stock is split between common and redeemable pr…
Does producing a motion picture, video, or audio recording for sale, license, distribution, broadcast, or exhibition count as manufacturing for Texas sales tax purposes, and can a producer buy or rent production materials, equipment, and services (like film processing, dubbing, and editing) tax-free?
Yes. The Comptroller ruled that producing a motion picture, video, or audio recording that will be sold, licensed, distributed, broadcast, or exhibited is treated as manufacturing. A producer can use …
If a parent company spins off an equipment subsidiary and that subsidiary then leases the equipment back to the parent or a sister company, is tax due on the lease payments?
Yes. The Comptroller ruled the lease payments Equipment Company A receives from the parent (ABC) or from sister company Company B are taxable, because these are operating leases between related corpor…
Is manufactured brine water (made by pumping fresh water into an underground salt formation) exempt from Texas sales tax the same way plain water and table salt are exempt, and is non-food salt like rock salt or ice cream salt taxable?
No — the Comptroller ruled that brine water made by pumping fresh water into a salt formation to dissolve the salt is 'processed' water, not naturally occurring brine, so the charges for the brine wat…
If an information provider subcontracts the gathering of proprietary information to a third party, does the information stop being 'proprietary' for Texas sales tax purposes?
No. The Comptroller overruled an earlier letter that had taxed these charges, holding that information gathered by a subcontractor for a provider who then sells it to a client still keeps its propriet…
Can a flooring/cabinet manufacturer buy display systems and promotional materials tax-free with a resale certificate when it sells them to its distributors along with its products?
Yes, if the manufacturer is genuinely reselling the displays and promotional materials to distributors (who in turn resell them to retailers), it can issue a resale certificate to its own vendors for …
When a rental company rents out a package that mixes exempt film-production equipment with taxable items, how should sales tax be charged on the package?
If the taxable and exempt items are rented together for one bundled price, the whole charge is taxable. If the rental company separately states the charge for equipment used directly in production (wh…
Were two named Texas Medical Center cooperative associations exempt from motor vehicle sales tax on their purchases?
Yes. The approved verbal response accepted that Texas Health and Safety Code §§ 301.013(a) and 301.042(a) exempted the named hospital laundry and heating-and-cooling cooperatives from tax or assessmen…
Is a self-operated condominium rental pool treated as a taxable property management company, and are repairs to the condo units and common areas taxable as commercial real property?
Yes to both. The Comptroller ruled that a self-operated rental pool serving 72% of a condominium regime's owners is treated as a property management company for sales tax purposes, so the exemption fo…
Is the separate, optional amount a racetrack charges for reserved seating at tables/counters taxable, given that general admission is charged separately?
Yes. The Comptroller's Tax Policy Division concluded the separate optional charge for seating at tables/counters is taxable, comparing it to paying extra for a box seat at an amusement event. Charging…
Is vacuuming up industrial waste (including EPA-hazardous flue dust) from a steel manufacturing plant a taxable 'building or grounds cleaning' service, or nontaxable waste 'collection'?
Nontaxable. The Comptroller reversed its earlier position and ruled that vacuum-truck removal of mill scale, flue dust (EPA-hazardous), lime dust, and sludge from a steel manufacturer's plant is 'coll…
Is providing and servicing air freshener/deodorizer dispensers installed in a customer's building a taxable service in Texas, and can the dispenser, batteries, and liquid be bought tax-free for resale?
Yes. The Comptroller ruled that Company A's air freshener/deodorizer service — installing a dispenser it owns in a customer's restrooms and servicing it by replacing the battery and refilling the liqu…
Are limited partnerships, a trust, and the holders of the trust interests subject to Texas franchise tax?
None of them owed the tax. The Comptroller advised that two limited partnerships (ABC and EFG) and a Trust were not subject to the pre-2008 Texas franchise tax because they were not corporations, and …
If casualty-loss repair labor was performed and finished before October 1, 1993, but most of the payment isn't collected until October 1993, is that labor taxed under the new law that took effect October 1, 1993?
No. The Comptroller ruled that for casualty-loss repairs, the taxability of the labor depends only on the date the labor was performed — not the date of the casualty/disaster and not the date payment …
Is adding bulk heading to a natural lake, or paving over a worn dirt cart path, new construction or remodeling for Texas tax purposes at an existing golf course?
Both are new construction. The Comptroller ruled that adding concrete bulk heading (gabions) around part of a completely natural lake is new construction, and that paving a naturally worn dirt cart pa…
If I provide answering services (human or automated) to Texas customers from a location in Arkansas, do I owe Texas tax, and do I have to collect it from my customers?
Either human or automated answering service would be subject to Texas tax if the provider were located in Texas. Because the provider is in Arkansas, it must collect Texas Use Tax from its Texas custo…
Did the October 1, 1993 tax law change move mobile office trailers and rental bunkhouses from motor vehicle tax to sales tax?
Only office trailers changed. House trailers designed as an office, sales outlet, or other workplace moved from Motor Vehicle Tax Code Chapter 152 to Limited Sales Tax Code Chapter 151 as of October 1…
Does a company that performs pre-employment psychological testing, drug testing, and background-check services still have to collect Texas sales tax on those services?
It depends on the specific service. As of August 30, 1993, pre-employment psychological/attitude/honesty testing no longer requires a Private Investigators and Private Security Agencies Board license …
Are hollow point needles used with a hypodermic syringe exempt from Texas sales tax?
Yes. The Comptroller ruled that hollow point needles adapted for use with a hypodermic syringe — including anesthesiology, thin wall tuohy, arterial, biopsy, and blood collection needles that are holl…
If a business catches up on years of unfiled sales tax reports, does not having had a valid sales tax permit increase its liability, and is there a limit on how far back the state can go?
Not having a valid sales tax permit does not itself increase the tax liability, but filing more than 30 days late triggers a 10% penalty (or a 50% penalty if the state finds intent to evade tax or com…
How does Texas distinguish nontaxable employee/temporary-help labor from taxable 'contract labor'?
There is no separate definition of 'contract labor' in the Tax Code or Rules. Instead, labor is nontaxable if it qualifies either as an employee's service under Tax Code Section 151.057 (or the parall…
Can each school-sponsored student organization within a school district hold its own two one-day tax-free sales or auctions each year?
Yes. The Comptroller confirmed that the school district, each school in the district, and each school-sponsored student organization within each school (examples given: FFA, Spanish Club, Drama Club, …
Is a country club's 'Non-Resident' membership class — for members who live more than 100 miles from the club, some of them out of state — subject to Texas sales tax on dues and fees?
Yes. The Comptroller ruled that because the country club itself is located in Texas, sales tax applies to all membership dues, initiation fees, and other assessments charged for the Non-Resident membe…
When a customer returns merchandise, gives a late resale/exemption certificate, or was billed tax in error, how does a seller get back the sales tax it already remitted to Texas?
The seller can get a refund or credit from the Comptroller two ways: file amended sales/use tax returns for the periods the tax was remitted, or take a credit on its next return. Either way, the selle…
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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.