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 a cellular phone retailer charges a customer a 'deactivation' or 'lost commission' fee for canceling service early, is that fee taxable as part of the phone's sales price?
Yes. The Comptroller ruled that the deactivation/lost-commission fee is part of the phone's selling price, so the retailer must collect sales tax on it, just as it does on the initial discounted phone…
If a contractor completely demolishes a sidewalk and rebuilds a new one on the same site, is that new construction or repair for Texas sales tax purposes?
New construction. The Comptroller ruled that completely demolishing an existing sidewalk and rebuilding a new one on the same site is treated as new construction labor. Only demolishing and rebuilding…
When a cable TV company hires a third party to collect past-due bills and to pick up converter boxes from delinquent accounts, are those third-party services taxable 'debt collection services'?
Yes to both. This internal Comptroller memo concludes that a third party hired by a cable TV company to collect past-due accounts is providing a taxable 'debt collection service' under Tax Code Sectio…
Can an out-of-state seller who leases equipment in Texas get credit against Texas sales/use tax for sales tax it paid to another state on that same equipment?
No. This is an internal Comptroller memo explaining that an out-of-state seller cannot apply for a refund or credit against Texas tax collected on leased equipment for tax it separately paid to anothe…
If I default on a layaway purchase and the store resells the item, do I get taxed twice when I finally pay it off?
No. Texas sales tax applies only when title or possession of the item actually transfers, so a layaway sale that falls through before pickup was never a taxable sale in the first place. When the buyer…
As an independent distributor selling tablets for a direct sales/multi-level marketing company in Texas, do I owe tax on the products I buy from the company to resell?
Yes. The Comptroller ruled that the tablets sold through this direct sales organization are taxable in Texas, and as an independent distributor you must pay tax on your purchase of the product from th…
Could Texas use tax on an out-of-state leased vehicle entering Texas be calculated on depreciated value?
No. The use-tax base was the total consideration paid in the out-of-state sale, defined as the vehicle's cost. The Tax Administration Division said a legislative change would be required to use deprec…
If we sell oil/gas equipment to overseas customers FOB our Texas plant or FOB an export packer, do we owe Texas sales tax, and when do we have to collect it?
Yes, in most cases. Because title to the equipment passes in Texas under "FOB plant" or "FOB export packer" shipping terms, the sale is a taxable Texas sale, and the seller must collect Texas sales ta…
Can a grocery store chain that prints its own newspaper inserts in its own print shop get a refund of the sales tax it paid on the newsprint and ink?
No. The Comptroller ruled that a grocery store chain printing its own newspaper inserts in its own print shop is not entitled to a refund of sales tax paid on the newsprint and ink. The Sec. 151.319(c…
Can a paging company give its phone company a resale certificate for the phone exchange numbers and trunk lines it leases and then passes on to its paging customers?
Yes. The Comptroller confirmed that a paging service provider that purchases or leases phone exchange numbers and trunk lines from the local telephone company, and then assigns those numbers to its ow…
If my business buys promotional giveaway items like calendars, matchbooks, or rain gauges to hand out for advertising, do I owe Texas sales tax on them?
Yes. The Texas Comptroller confirmed that a business buying tangible items such as rain gauges, imprinted calendars, or matchbooks to give away as promotional items must pay sales tax on those purchas…
If a cable company rebuilds and upgrades its existing cable plant (like boosting channel capacity from 36 to 54 channels), is that taxed as new construction or as remodeling of real property?
It's remodeling, not new construction. This internal Comptroller memo concludes that rebuilding or upgrading an existing cable TV plant -- including replacing wire, poles, and house drops, or increasi…
Could a buyer title a vehicle tax-free before planned disability-related modifications were completed?
Yes. The buyer could claim the historical exemption before completion by providing a written statement identifying the modification, when it would occur, and where it would be performed. The work had …
If a software dealer earns a commission on a software vendor's sale and then separately installs and maintains that software for the buyer, is the dealer's installation and maintenance work taxed as part of the software sale?
No. This internal Comptroller memo concludes that a dealer's separate agreement to install and maintain software is treated as a transaction unrelated to the software vendor's sale, and is not taxable…
Does licensing software to Texas customers to access an out-of-state database service create Texas franchise tax nexus, even with no salespeople in the state?
Yes. The Comptroller ruled that licensing software to Texas customers so they can access an out-of-state gateway/database service creates substantial nexus with Texas for franchise tax purposes, even …
How did Texas's internal memo treat vehicle transfers and refunds involving a living trust with the same owner name?
No tax was due when an individual transferred a vehicle to a living trust bearing that same person's name because the memo found no sale or ownership change. A trust could also claim the historical di…
Does the Texas Workers' Compensation Insurance Facility owe sales tax on the debt collection services it buys to recover unpaid premiums?
Yes. The Comptroller ruled on January 26, 1993 that the Facility's purchases of debt collection services used to collect delinquent premiums are taxable. The Facility's statutory exemption (Texas Insu…
Is sales tax due on cleaning products and supplies used to raise emus on a farm?
It depends on the product. The Comptroller ruled that dishwashing crystals, laundry detergent, and two multi-purpose cleaners used exclusively on the farm to sterilize drinking containers, wash beddin…
Can a customs broker's exportation certificate list extra items on the back of the form or on an attached addendum sheet, and will a cash register receipt work as export documentation?
A cash register receipt is not enough by itself — under Comptroller Rule 3.323(d)(4), export documentation must include a detailed, specific description of the items purchased so an auditor can tie it…
A Texas investigation firm did a traffic-accident investigation in Mexico for a California client (and separately does investigations for maquilas in Juarez) — is Texas sales tax due on the investigation service?
No Texas tax is due on an investigation service if both the purchaser and the subject of the investigation are outside Texas, the final report is delivered outside Texas, and the firm obtains an exemp…
Can a contractor building a day-care center on an Indian reservation use the tribe's sales-tax exemption to buy construction materials tax-free?
No. The Comptroller ruled that a contractor building an on-reservation day-care center for a Texas Indian tribe cannot claim the tribe's own tax exemption when buying materials. Instead, if the constr…
Can a general contractor allocate a lump-sum contract between new construction and nonresidential remodeling based on square footage, and what records are needed to back that up?
Yes, but only for labor. A Texas general contractor may use square footage to allocate the labor portion of a contract between taxable nonresidential remodeling and (largely nontaxable) new constructi…
Is a forensic engineer's accident-investigation work for insurance companies and attorneys taxable as an 'insurance service' under Texas sales tax law, even though attorney legal fees themselves are not taxable?
Yes. Under Rule 3.355, a professional engineer's work investigating accidents to help determine whether an insurance claim should be paid is a taxable 'insurance service,' regardless of the engineer's…
Do I have to charge Texas sales tax for boarding or training dogs at my kennel?
No. The Texas Comptroller ruled that boarding dogs and training dogs are both nontaxable services, so a kennel does not charge its customers sales tax on those charges. However, the kennel owner must …
Can a seller accept a faxed or photocopied Mexican pedimento de importacion as proof of export before issuing a Texas sales tax refund?
Yes. The Comptroller confirmed that a seller may accept a legible fax or photocopy of a pedimento de importacion, rather than requiring the original, as proof that goods were exported to Mexico. A ped…
Is a petroleum additives package sold with a vehicle warranty taxable in Texas, and is the warranty repair labor taxed?
Yes — the sale of the petroleum additives package is taxable as tangible personal property. Whether the warranty repair labor is later taxed depends on billing: a lump-sum labor-and-parts charge is no…
Does a Texas business have to charge sales tax for pumping out grease traps/septic tanks or clearing stoppages in sewer lines?
It depends on what exactly is done and for whom. Removing waste from a septic tank or grease trap that is part of a sewer system is a non-taxable service, but cleaning out a sewer line for a non-resid…
Can a contractor rent equipment tax-free to improve real property on a federal construction project like the Superconducting Super Collider?
No. Since October 2, 1984, when the Texas Legislature repealed the prior exemption, a contractor's rental of equipment used to improve real property on a federal government job is taxable. In this cas…
Does a Texas resume-writing and career counseling service have to charge sales tax on preparing a client's resume?
No, generally not. If you interview a client and write an original resume from that consultation, the charge for consultation and preparing the resume is not taxable, even if produced on a computer or…
Can a creditor or client who hires an automobile repossession company issue a resale certificate instead of paying sales tax on the repossession service?
No. The Comptroller ruled that a client (such as a lender) who hires a company to repossess an automobile cannot issue a resale certificate to avoid sales tax on that repossession service. The service…
If my advertising agency's invoice lumps taxable and nontaxable charges together, can I still use my direct payment permit to self-accrue the tax?
No. Under Rule 3.288(h), a direct payment permit holder can only issue a valid direct payment exemption certificate to a vendor that separately states its taxable and nontaxable charges. If an adverti…
Is converting a plugged oil or gas well into a water well taxable as remodeling under Texas sales tax rules, and how does sales tax apply to water well drilling, equipment, and repairs?
Yes — the Comptroller ruled that converting a plugged oil well into a water well is remodeling, as is plugging an existing water well; cleaning out an existing well is a repair, not remodeling. Whethe…
In this January 1993 Texas ruling, an Arkansas printer bought manufacturing equipment in Louisiana tax-free and later brought it into Texas — did Texas use tax apply?
It depends on how long the equipment was used outside Texas first. If the equipment was used in Arkansas for one year or more before being moved to Texas, no Texas use tax is due. If it was used outsi…
Is a custom-designed communication board (like a FACTS board) for someone who cannot speak exempt from Texas sales tax?
No. The Comptroller found no statutory exemption for a communication board (a FACTS board) designed for someone who cannot communicate verbally. Texas law exempts certain items used by the deaf and le…
Is the labor to dig out and haul away contaminated soil taxable in Texas?
It depends on whether the soil leaves the property. Labor to excavate (dig out) contaminated soil is not taxable if the service provider leaves the soil on the customer's premises. But if that provide…
Does a Texas business have to charge sales tax on data recovery services, like retrieving deleted computer files?
Yes. The Texas Comptroller ruled that charges for labor or services performed to recover or retrieve deleted computer data are taxable as data processing services under Rule 3.330. The provider must c…
Does Texas charge sales or use tax when a company licenses its programming-language source code and specifications to other developers?
No, not automatically. Texas taxes the sale or license of a 'completed computer program,' but licensing raw source code and specifications so a licensee can build its own derived program is not taxabl…
Does a licensed customhouse broker corporation with several offices need to file a separate Texas Customs Broker's Export License application for each office?
No. A licensed customhouse broker corporation with multiple offices should file a single Texas Customs Broker's Export License application listing each location, rather than a separate application per…
In a limited partnership, is the corporate general partner subject to franchise tax, is a corporate limited partner subject, and how is an affiliate's administrative fee added back to earned surplus?
The corporate general partner is subject to the franchise tax, because the limited partnership is doing business in Texas. A corporation whose only Texas connection is being a limited partner is not s…
If a customer gives a seller a resale certificate on a rental, but never actually re-rents the item, is the seller liable for the uncollected tax?
Not necessarily. In this December 1992 letter, the Comptroller's Tax Administration Director tells a trade association that on audit, the agency will review a seller's documentation on a case-by-case …
Does an airline owe Texas sales or use tax on peanuts, donuts, and disposable cups, stir sticks, and napkins given to passengers?
No tax is owed on the peanuts and donuts because the airline buys them in bulk, and bulk food purchases aren't taxable. The disposable cups, stir sticks, and napkins used for non-complimentary (paid) …
If a customer's credit card payment turns out to be unauthorized or fraudulent and the credit card company charges the sale back to the business, can the business claim a bad debt deduction for sales/use tax purposes?
Yes. This internal Comptroller memo concludes that a charge-back for an unauthorized or fraudulent credit card payment is treated the same as a bad debt from a bad check, and it qualifies for a bad de…
If I dig up caliche and haul it to a customer's job site, do I have to charge Texas sales tax on the hauling/delivery charge?
It depends on whether the caliche is processed. If you simply dig caliche out of the ground and haul it to the customer's site, neither the caliche nor the transportation charge is taxable. But if the…
Can a retailer use SKU codes on cash register tapes (instead of a written item description) to support a Texas sales tax export refund claim?
Yes. The Comptroller's office confirmed that a cash register tape showing only a SKU code, with no separate written description of the merchandise, does not by itself prevent a retailer from getting a…
Does a Texas business that repairs and maintains aircraft for licensed/certificated carriers have to charge sales tax on parts, labor, or the equipment it buys to do the work?
No. In this December 11, 1992 letter, the Comptroller told the requester that repair and maintenance services on aircraft belonging to licensed and certificated carriers are not taxable — no tax on pa…
If I sell equipment to a leasing company and lease it back under an operating lease, is that a nontaxable financing arrangement or a taxable sale?
It depends on whether the leaseback is a true financing lease or an operating lease. In this December 1992 ruling, the Comptroller held that a sale-leaseback where the equipment reverted to the lessor…
Can a Texas motor vehicle rental company show property tax, title fees, and registration fees as separate reimbursement line items on customer invoices?
Yes, but only as a cost reimbursement, not as a collected tax. The Comptroller told a motor vehicle rental company that it cannot collect county property tax directly from customers as a tax (only cou…
Is a scholarship-matching or financial-aid database search service taxable in Texas?
Yes. A service that matches students to scholarships using a database is a taxable information service under Texas Rule 3.342. The provider owes tax on materials, supplies, and equipment used to deliv…
If a fraternity or sorority charges students one combined fee for room and meals, does it owe sales tax on the meal portion even though meals aren't billed separately?
Yes. Even if a fraternity or sorority bills students one lump-sum charge for room and board without breaking out the cost of meals, Texas sales tax must still be collected and reported on the portion …
Is an electric mobility cart (three-wheel scooter) used in place of a wheelchair exempt from Texas sales tax?
Yes. The Texas Comptroller ruled that electric powered carts (three-wheel scooters) used in lieu of a wheelchair qualify for exemption from sales tax, and no prescription is required. Repair parts and…
Does Texas tax a corporation's contribution of operating assets and vehicles to a newly formed partnership for a partnership interest?
A vehicle contribution to a newly formed partnership caused no motor vehicle tax when the partnership paid no consideration beyond the ownership interest, while consideration such as an assumed lien w…
Is the electricity my sand-mining client uses to dredge, wash, sort, and convey sand exempt from Texas sales tax?
It depends on what the electricity powers. Electricity used to convey or pump sand to, through, and away from the plant is exempt as transporting a material extracted from the earth, regardless of whe…
If the Comptroller's office told us a resale certificate was OK on a mid-lease sublease, but that policy later changed, do we still owe sales tax on the sublease we already signed?
Yes, but only for the sublease already in place. The Comptroller's office honored a resale certificate a lessee issued to its lessor for a mid-lease-term sublease because the lessee had relied on verb…
Is waste and garbage collection service provided to an ocean-going vessel operating under a foreign flag exempt from Texas sales tax?
No. The Comptroller ruled that waste collection and disposal services performed for ocean-going vessels in Texas are not exempt from sales tax. The Tax Code's exemptions for a vessel's component parts…
Is infrared inspection of industrial furnace linings taxable, and is refractory brick sold to repair a kiln exempt from Texas sales tax?
The Comptroller ruled that infrared inspection service to check the condition of refractory (heat-resistant) linings inside boilers, furnaces, and kilns is a nontaxable service. Separately, refractory…
If a vending-machine or amusement-device company gets a monthly credit memo from its distributor for old machines it turns in, and that credit is applied against its account and later offset against new machine purchases, does that count as a tax-free trade-in?
No. This internal Comptroller memo concludes that turning in a used cigarette or video game machine to a distributor for an account credit, later offset against a separate purchase, does not qualify a…
Does a rehabilitation, drug/alcohol treatment, or psychiatric center qualify for Texas's residential exemption on natural gas and electricity sales tax?
No. The Comptroller held that a rehabilitation center (Rio Vista Rehabilitation Center) is not "residential" for purposes of the Texas natural gas and electricity sales tax exemption, because it is a …
If we perform real property services at a bank building the bank partly uses itself and partly rents out, are we a 'property management company' under Texas Rule 3.356?
Not for that property. Under Rule 3.356(a)(6), a person performing taxable services at a property held by the owner for a purpose other than rental — such as a bank using its own building for its own …
If I rent out roll-off garbage containers and charge a $50 setup fee, is the whole charge taxable, and which city's local sales tax applies?
Yes, the entire charge is taxable, including the $50 setup fee to place the roll-off container. If the container comes with garbage collection service, local sales tax is based on where the garbage is…
How did Texas determine the rental-tax rate for fixed-term, open-ended, and renewed vehicle contracts?
A single contract specifying more than 30 days received the historical longer-term rate. A 1-to-30-day contract received the short-term rate. If the contract stated no term, it was treated as day-to-d…
Browse Texas rulings by topic
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.