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 motel's hotel occupancy tax reporting (showing how many room-nights were long-term stays) have to match, or can it be used to second-guess, the motel's separate claim that over 50% of its gas/electricity usage is residential for sales tax exemption purposes?
No, the two don't have to match, because they're governed by different statutes measuring different things. Under Tex. Tax Code § 151.054(c), a utility seller is relieved of tax liability if it accept…
Can a customer who rents an aircraft in Texas and flies it out of state sign a Texas Aircraft Exemption Certificate, Out-Of-State Registration and Use, to avoid paying sales tax on the rental?
No. Tax Code § 151.328(a)(4) exempts aircraft SOLD for use and registration in another state or nation, before any use in Texas beyond flight training and transporting the aircraft out of state -- but…
When a homeowner buys a pest/termite warranty from a warranty company, and later pays a trade fee (deductible) directly to the pest control company doing the actual work, who owes sales tax on what -- the initial warranty fee, the deductible, and the warranty company's pass-through payment to the pest control company?
It splits by who pays whom. The pest control company may accept a resale certificate from the warranty company instead of collecting tax on services it bills to the warranty company (since the warrant…
Is labor to mow, weed, edge, and trim cemetery grounds taxed the same way as ordinary residential/commercial lawn care in Texas?
No -- cemetery grounds maintenance labor is treated differently from ordinary lawn care. Building and grounds keeping, landscaping, and lawn maintenance services are generally taxable real property se…
Is installing a permanent, built-into-the-eaves insecticide spray system in a home a taxable real property service, and is the concentrate insecticide refill taxable too?
Both the installation and the insecticide refills are taxable, though the installation's tax treatment depends on which framework applies. If installing the permanently-mounted insecticide spray unit …
In a janitorial cost-plus contract where the vendor buys and amortizes cleaning equipment over three years but the equipment stays at the customer's site under the customer's access and risk of loss, should the vendor pay tax on the equipment itself, or collect tax on the amortized charge to the customer?
The vendor should collect tax on its total charge (including the separately stated amortized equipment cost) to the customer, rather than paying tax itself when purchasing the equipment -- because und…
After Texas's scrap tire recycling program was set to expire, an industry association planned to keep charging the same amount but rename it a 'disposal fee' -- would that renamed fee still be taxable as part of the price of a tire?
Yes, the renamed 'disposal fee' is still taxable as part of the sales price of the tire. Tax Code § 151.007(a)(2) defines the sales price of a taxable item as the total amount the item is sold for, wi…
A semiconductor fabrication EQUIPMENT manufacturer uses various gases to test and clean its machines in a cleanroom, then packages the finished machines for shipping -- are the test/clean gases exempt, does the packaging materials exemption apply, and does the broader cleanroom exemption for semiconductor manufacturing cover this manufacturer's own cleanroom?
It splits by step. The gases used in steps 1 through 5 (vacuum leak testing, flow regulation testing, characterization testing, marathon reliability testing, and purge cleaning) -- all performed BEFOR…
Is the fee a wood-products manufacturer charges a land-clearing contractor to remove and process cleared trees/wood taxable, and does it matter whether the land is for new residential construction or where the wood is actually processed?
Generally taxable, with a residential-construction exception. The fee a wood-products manufacturer bills a land-clearing contractor to remove trees/wood materials is taxable as a real property service…
Is an independent insurance/risk-management consultant -- who reviews clients' insurance policies for coverage adequacy and risk retention -- required to hold a sales tax permit and charge sales tax, even though the consultant doesn't think this work fits within the tax code?
Yes -- services provided by risk managers are taxable, and risk managers must apply for a sales tax permit and collect sales tax on their service charges. The taxpayer, newly self-employed reviewing c…
Does a mold or die used to make wax patterns (which are then used to cast metal parts for resale) qualify for Texas's manufacturing exemption if it has a useful life longer than six months?
Yes, exempt -- and useful life is no longer the deciding factor for items purchased after January 1, 1995. Molds, dies, and patterns used by a manufacturer qualify for the manufacturing exemption rega…
Does Section 151.353's court reporting services exemption cover the transcription of depositions even when performed by someone other than the licensed court reporter who took the deposition, and is medical dictation transcription taxable?
The transcription is exempt ONLY if performed by a licensed court reporter as part of court reporting services under § 151.353(b) -- the exemption doesn't extend more broadly to transcription work per…
A joint venture bills an insurance company a single charge covering many different accounting/administrative functions -- some classified as taxable insurance services, others as taxable data processing, and some seemingly nontaxable -- does the 5% threshold for taxing an entire bundled charge apply function-by-function, or to the whole contract?
The 5% guideline applies to the AGGREGATE of all taxable services performed under the contract, not separately to each type of taxable service. Citing Hearing 30,261, the Comptroller classified severa…
If a company guts a previously-occupied shopping center down to a shell and does finish-out work to prepare it for new tenants, is that finish-out taxed as nontaxable new construction (like a brand-new building's initial finish-out), or as taxable remodeling?
It's taxable remodeling, not exempt new construction. Rule 3.357(a)(5)'s definition of "new construction" includes the INITIAL finish-out work of a structure -- but that exemption applies only to a st…
Are ATM transaction fees, home banking service fees, pay-by-phone charges, and free software given to bank customers taxable in Texas -- for both a bank's own customers and non-customers using its ATMs?
None of these banking fees are taxable to the customer -- because Tax Code § 151.0101 lists only fifteen specific taxable services, and "banking services" is not one of them. This covers: (1) free sof…
A contractor building a new manufacturing plant under a lump-sum contract asked a comprehensive set of questions: who can issue manufacturing exemption certificates, how lump-sum vs. separated contracts are taxed differently, what a direct payment permit is, and what Texas's sales tax rate and permit procedures are -- what's the full picture?
This letter is a comprehensive contractor tax primer. (1) Only the MANUFACTURER itself -- never a contractor or subcontractor -- may issue an exemption certificate for qualifying manufacturing machine…
A GPS vehicle-tracking company runs a test program with an insurance company, paying the cellular carrier directly and then allocating/re-billing the charges to the insurer and individual drivers at cost with no markup -- is this a nontaxable reimbursement, or does it make the tracking company a taxable cellular service reseller subject to security-service tax and the Telecommunications Infrastructure Fund (TIF) assessment?
Neither "reimbursement" nor "resale" was quite the right frame -- the underlying service itself is taxable. The company's core offering (GPS tracking with electronic tracking of a vehicle's location, …
Does a country club housed in a building bearing a Texas Historical Commission marker qualify for the sales tax exemption on amusement services (dues/initiation fees) available to a Recorded Texas Historic Landmark?
No -- the club's building does not qualify. Rule 3.298(g)(1)(F) exempts amusement services (like a country club's dues and initiation fees) only when provided exclusively in a place designated as a "R…
When one lump-sum contract adds new square footage onto two existing, partially-demolished buildings while also redoing their remaining structures, how should the new-addition work be split from the remodeling work for sales tax purposes?
The contract must clearly separate the two categories, because they're taxed differently. Work on the existing building slabs -- including new siding, new fronts, and the plumbing/electrical/HVAC serv…
Are crew uniforms and their monthly cleaning exempt from Texas sales tax when purchased for the crew of a ship operating in interstate coastal commerce?
No. Crew uniforms and the monthly cleaning of those uniforms do not qualify for the Tax Code § 151.329 exemption for machinery, equipment, and consumable items used to operate certain ships and vessel…
When a Texas printer/fulfillment house mails direct-mail advertising for an out-of-state customer to addresses both inside and outside Texas, how much of the charge is subject to Texas sales tax?
Only the pieces mailed to Texas addresses are subject to Texas tax; pieces mailed by the third-party mailer to addresses outside Texas are not taxed, even though the seller (a Texas business) billed a…
If a lessor leases a building along with tangible personal property inside it (like computer equipment) for one combined rent with no separate charge for the equipment, is any part of the rent subject to Texas sales tax?
No. Under Comptroller's Rule 3.294(k)(1), when a lease of real property (a building) also includes the lease of tangible personal property located in that space -- here, computer hardware and software…
Are services to run temporary electrical drops and power temporary trailers at a new construction job site taxable in Texas?
No. Services to run temporary electrical drops (so subcontractors can plug in power tools) and to connect electrical power to temporary trailers at a new construction job site are not taxable. The com…
Does a coffee manufacturer's own grinding machine, placed in a grocery store for the store's customers to use on already-shipped coffee beans, qualify for the Texas manufacturing exemption?
No -- this letter corrects an earlier (January 10, 1997) ruling from the same office. A coffee storage/grinding machine that a coffee manufacturer places inside grocery stores, for the stores' own cus…
When used refinery equipment bought in Texas is dismantled, inspected, refurbished, and shipped out of the country over several months, does the export exemption still apply, and are the dismantling/inspection/refurbishing services themselves taxable?
The purchase of used refinery equipment for export is exempt from Texas sales tax, and local tax on the sale is refundable to the buyer once proof of export is provided under Rule 3.323. Rule 3.323(c)…
When a city agrees with a municipal utility/management district to impose city sales tax and hotel occupancy tax in its extraterritorial jurisdiction (ETJ), when does the new city sales tax actually take effect?
Even though the City of Galveston and Galveston County Municipal District Number One had already held public hearings and signed an agreement to impose both the Galveston municipal hotel occupancy tax…
Is a subscription publication made up mostly of attorney-written trial reports exempt from Texas sales tax as a magazine, even though it looks and is delivered like one?
No. Even though the publication has every physical characteristic of a magazine -- paperback, illustrated, published at regular intervals, containing stories/articles/essays and ads, sold by subscript…
An electrical contractor's customer used a sales tax recovery firm to seek a refund of tax paid on several jobs, claiming a manufacturing exemption -- which of the contractor's charges (moving equipment, repairing manufacturing equipment, upgrading a building's electrical system, partial demolition) actually qualify?
It depends on the specific work, and the Comptroller broke it down by job type. (1) Simply moving equipment between plants, setting it in place, and hooking it up to the existing electrical system is …
Is a waste management company's flat monthly fee for supplying and servicing portable toilets (port-a-potties) at a manufacturing plant taxable, and if so, which local tax applies?
Yes, taxable. A waste management company's flat monthly fee to supply portable toilets at a manufacturing plant and clean them out twice a week is taxable as the rental of tangible personal property -…
If a business charges customers to play a no-stakes black jack table (chips have no monetary value, dealt by a live dealer), does it owe Texas sales tax on the charge?
Yes. Charging customers to play black jack -- even a for-fun table where the chips have no monetary value and a live dealer runs the game -- is taxable as an amusement service. The business must get a…
A firm charges insurance adjusters for accident-scene photos, travel time, mileage, diagrams, measurements, traffic-signal timing, witness canvassing, and obtaining police reports -- which of these itemized charges are subject to Texas sales tax?
All of it is taxable -- confirming that the firm was "correctly charging tax on the total amount charged," though under three different legal categories. (1) Photo charges are taxable as the sale of a…
Is a ranch's two-way radio repeater system and handheld radios, used to keep in contact with employees working the ranch, exempt from Texas sales tax as farm/ranch equipment?
No. A ranch's two-way radio repeater tower system and handheld radios -- used to keep in contact with employees working various areas of the ranch -- are not exempt from Texas sales tax. Although usef…
Is a line drawing sold to a t-shirt manufacturer, for use in its manufacturing process, taxable as graphic artwork, or can the seller accept an exemption certificate instead?
Graphic artwork -- including a line drawing -- is generally taxable under Rule 3.312. But because this line drawing is being sold to a shirt manufacturer that will use it in its manufacturing process,…
(1) Can a wholesaler accept a manufacturing exemption certificate from a grocery store buying packaging supplies it knows are used only to repackage, not manufacture, products? (2) When taxable and nontaxable items ship together for one delivery charge, how much of that transportation charge is taxable?
Two separate answers. (1) A wholesaler CANNOT accept a manufacturing exemption certificate in good faith from a grocery-store customer if the wholesaler actually knows the packaging supplies are used …
Does a crane that lifts scrap metal from a metal-cutting shear to a bin for processing -- and can only be used for that one task -- qualify for the manufacturing exemption?
No. A crane (a 1993 Link-Belt Hydraulic Crawler Excavator) that's attached to a metal-cutting shear and uses a magnet to move scrap to a bin for processing does not qualify for the manufacturing exemp…
Is an apartment locating service taxable, where the locator gets paid a referral fee by the apartment complex (not the renter) for each successful referral?
No. Apartment locating services are not taxable in Texas when the locator's fee is paid by the apartment complex for each successful referral.
Does a 5,500-gallon storage tank plumbed directly into a chemical-blending manufacturer's mixing kettles qualify for the Texas manufacturing exemption?
No. A chemical-blending manufacturer's newly acquired 5,500-gallon storage tank -- plumbed directly into its mixing kettles so material can be fed into a batch-in-process by opening a valve -- does no…
When shareware software is downloaded for free but the user later pays a registration fee to unlock it, is that a taxable sale in Texas, and does it matter which server the customer downloaded the software from?
Downloading shareware for free is not a taxable sale, because there's no consideration exchanged at that point. Tax Code § 151.005 defines a "sale" as a transfer of title or possession of tangible pro…
Is developing original design specifications for a client's custom home project taxable, even though the designer isn't a licensed architect or engineer -- and how does that compare to drafting services or selling stock house plans?
Developing original specifications and producing an original design for a client -- creating, conceiving, originating, and relating the planning and specifications of a project such as a custom home -…
Is the labor charge for a contractor splicing a new section of fiber optic cable into an existing cable TV network taxable?
Yes. When an outside contractor splices a newly constructed cable line into an existing cable TV network at a pedestal splice point -- detaching the old cable pairs and attaching a new group of cable …
When a seller inside the City of Austin ships taxable items to a delivery address in Travis County that's outside the Austin MTA boundary, what local tax rate applies?
A seller located inside the City of Austin that ships or delivers taxable items to a Travis County address OUTSIDE the Austin Metropolitan Transit Authority (MTA) boundary collects 7.25% total sales t…
Is a disposable, one-time-use bone-marrow stem-cell concentration kit -- sold to hospitals/physicians, not directly to patients, and used to filter out cancer cells and debris before an autologous bone marrow transplant -- exempt from Texas sales tax as a prescription medicine or therapeutic device?
No. A disposable, one-time-use biological kit that processes a cancer patient's own bone marrow (reducing 3 liters down to 4.5 milliliters of vital cells, removing cancer cells and debris) as part of …
A firm whose main business is insurance adjusting is paid per-claim to re-inspect plumbing work as part of a class-action settlement over faulty pipe -- is that re-inspection service a taxable insurance service?
No. Re-inspecting plumbing work done as part of a class-action lawsuit settlement over faulty pipe -- charged per claim to a Texas company -- is not a taxable insurance service, even though the firm's…
When is a country club's mandatory gratuity charge on meals and food exempt from Texas sales tax, rather than taxed as part of the sales price?
A mandatory gratuity charge that a country club adds for serving meals and food (including soft drinks and candy) for immediate consumption is exempt from Texas sales tax if ALL four conditions in Rul…
Is cloud seeding a taxable service in Texas, and does the company doing the cloud seeding owe tax on the materials and aircraft it uses?
Cloud seeding itself is not a taxable service -- no tax is due on the charge for cloud seeding whether performed for an exempt or a non-exempt entity. However, the firm performing the cloud seeding ow…
Is a torque turning and computerized torque measurement service (joining/tightening drill pipe and measuring joint torque) for oil and gas wells taxable in Texas, and does it matter whether it's a new well or a producing/workover well?
Torque turning and computerized torque measurement service -- joining and tightening pipe on wells being drilled or serviced, and measuring the torque applied to each joint -- is not, by itself, a def…
Does a business that recycles and resells used air filters for large trucks owe sales tax on those sales -- and how does that differ from a motor vehicle repairman who cleans a filter and puts it back in the same truck?
Yes, sales tax is due on the sale of recycled air filters, and the seller must collect it unless it receives a valid resale or exemption certificate. This is different from a 1984 letter (document 841…
Does using a third-party answering service that routes paged messages to a mobile locksmith count as having a "place of business" at that answering service's location for local sales tax purposes?
No. A third-party answering service that simply routes paged messages to a locksmith is not considered a "place of business" of that locksmith for local sales and use tax purposes. A "place of busines…
When a club requires patrons to buy a "dance token" before an independent-contractor dancer will perform a table/couch dance, is the sale of that token a taxable admission to an amusement service -- even though the dancers are independent contractors and the club already collects tax on a separate cover charge?
Yes. A club that requires patrons to purchase a "dance token" -- then exchange it with an independent-contractor dancer for a table dance or couch dance -- is selling a taxable admission to an amuseme…
When a manufacturing plant's waste haul-off is 95% or more industrial solid waste (nontaxable) mixed with a small amount of taxable garbage like office trash, does the Comptroller's "five percent rule" exempt the whole haul-off charge from sales tax?
No. The five percent rule does NOT exempt the whole charge just because 95% or more of a manufacturing plant's hauled-off waste is industrial solid waste. Rule 3.356(a)(3)(E) excludes industrial solid…
Was an extended warranty or service contract taxable when sold for a motorcycle, dirt bike, or ATV?
It depended on the vehicle. A service contract for a highway motorcycle was not taxable because motor vehicle repair labor was not taxed. A contract for a dirt bike, ATV, or other non-highway vehicle …
Was a separately stated scheduled-maintenance contract included in the Texas motor vehicle tax base?
No. The separately stated scheduled-maintenance contract was not part of the vehicle's taxable sale price and was not subject to motor vehicle tax. Repair and replacement parts used under the contract…
Is a third-party service that uses Interactive Voice Recognition (IVR) technology to independently verify a consumer's phone-service-switch instructions -- billed to the telemarketing company, not the consumer -- a taxable data processing service?
Yes. A company's independent, IVR-based verification service -- confirming a consumer's instruction to switch long-distance telephone carriers after a telemarketing call, matching the phone number and…
If a company performs auto damage appraisal (insurance) services for a self-insured client, are those services taxable, and does the client need to provide anything to document the exemption?
The client (referred to as CORPORATION X) was correct: auto damage appraisal services performed on behalf of a self-insured entity are NOT taxable. Rule 3.355(b) taxes insurance services performed for…
Is a $30 donation to a school booster club, given in exchange for having a name stamped on a commemorative brick placed at the school, subject to Texas sales tax?
No. A $30 donation to a high school fine arts booster club, given in exchange for having a brick stamped with the name of a student, alumnus, or other requested name and placed at the school, is not s…
When a strip-mining company is legally required to reclaim mined land by planting it with grass for future livestock grazing, does the grass seed -- and the fertilizer and heavy equipment used in reclamation -- qualify for the Texas agricultural exemption?
Partly. Grass seed used to revegetate strip-mined land as part of the legally required reclamation process DOES qualify for the agricultural exemption under Tax Code § 151.316, which exempts seeds and…
When is a multimedia presentation on CD-ROM or diskette taxable as a computer program in Texas, versus a non-taxable production service?
It depends on whether the production contains "source code." This follow-up letter clarifies an earlier ruling: "source code" means any series of instructions -- whether originally written by the prog…
Is a flood zone determination service -- checking FEMA flood hazard maps and certifying whether property is in a flood zone for mortgage lenders -- taxable in Texas as an information or insurance service?
No, it's not taxable. A service company that consults flood hazard boundary maps (FHBMs) and certifies on a FEMA form whether property is in a flood zone -- helping mortgage lenders meet a federal not…
Do a TV broadcaster's transmitters, related repair labor/parts, and the electricity used to run them qualify for Texas's manufacturing sales tax exemption?
No. Transmitters, their associated repair labor and parts, and the electricity used to broadcast are NOT exempt from Texas sales tax, even though broadcasters can qualify as manufacturers for their pr…
Does equipment like routers, servers, and hubs used by an Internet service provider to deliver service qualify for Texas's manufacturing sales tax exemption?
No. Equipment such as routers, servers, and hubs used by an Internet service provider (ISP) to provide its service is taxable at the time of purchase. The Comptroller explained the equipment can't qua…
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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.