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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Did a pre-July 22, 1987 lease qualify for Texas's prior-contract exemption when the customer bore later sales-tax increases?
No. Texas denied the prior-contract exemption because the master lease made the customer responsible for sales-tax changes or increases. That clause protected the lessor from a rate change, meaning it…
How did Texas tax freight-bill auditing combined with computerized or manual accounts-payable processing?
Freight auditing was nontaxable whether performed manually or by computer. Accounts-payable processing was taxable data processing when computerized but nontaxable when manual. Because taxable account…
How did Texas tax installation, standby-consultant, and mileage charges for oil-and-gas well equipment?
Installation connected with selling, leasing, or renting wellhead and well components was taxable, as was installation forming part of taxable nonresidential repair or remodeling. The described standb…
How did Texas divide a strip-center project between new construction and taxable remodeling under a lump-sum contract?
Rebuilding from the slab up and adding square footage were new construction; removing walls and repainting were remodeling. If remodeling exceeded 5% of one lump sum, the entire charge was taxable.
Were road blading and watering taxable repairs or maintenance, and how did Texas distinguish residential from commercial roads?
Blading, alone or with watering, was repair; watering alone was maintenance. Repairs to a road connecting a residence to a public road were not taxable, but repairs to private commercial roads were.
Were broiler-house litter cleaning and wood shavings used as a farm desiccant taxable in Texas?
No. Texas said cleaning wood shavings and sawdust from broiler-house floors was a nontaxable service to farmers. The provider could buy shavings and sawdust tax-free with an exemption certificate when…
Did Texas sales tax apply to insurance services performed under stop-loss coverage for self-insured plans?
No. The Tax Policy Committee decided not to apply sales tax to those services, made the policy retroactive to October 1, 1987, and said the rule would be amended.
Which automatic-teller-machine network charges did Texas treat as taxable or nontaxable?
Texas taxed ATM per-transaction processing, file-label generation, network maintenance, data lines, vendor service contracts and installation, equipment, after-hours response pay, and debit-card proce…
Were charges for installing, assembling, repairing, refinishing, or moving a customer's tangible personal property taxable in Texas?
Standalone installation and moving without reassembly were not taxable, but assembly or erection and repair or refinishing were taxable. Related services became taxable when performed with the taxable…
How did Texas tax a separated contract containing both new construction and repair or remodeling work?
Materials were taxable, and the repair-or-remodeling percentage applied only to labor. Each subcontractor had to determine its own taxable labor; the contractor could not simply tax that percentage of…
Was a pre-screening service taxable as credit reporting in Texas, and how did the Comptroller source the service?
Yes. The Comptroller treated pre-screening as a credit-reporting service and sourced it to the delivery point; Texas tax was not due when delivery occurred outside Texas.
Could labor to restore, repair, or remodel a National Register historic building be purchased tax-free in Texas?
Yes. The letter allowed qualifying labor to be purchased tax-free under Rule 3.291(b). With a separated contract and direct-pay certificate, the requester would remit tax only on materials.
Did Texas sales tax apply when Kansas bought debt-collection services for Kansas tax debts owed by people or businesses in Texas?
No. The Comptroller agreed that Kansas was not doing business in Texas under Section 151.107 and could give an exemption stating that it was not engaged in business in Texas.
Were custom-software work, computer repair, and recovery of deleted data taxable under Texas's 1988 rules?
Deleted-data recovery was taxable data processing. Programs made from existing modules and related services were taxable; programs written entirely from scratch were not, and separately stated trainin…
Which sales-tax rate applied when telecommunications equipment was rented with service, rented alone, or sold outright?
Equipment rented with telecommunications service used the service's applicable tax rate. Equipment rented without service or sold outright used the full tax rate in that area; state tax applied to eve…
Could a Texas taxable-service provider buy maintenance agreements, transferred items, natural gas, or electricity tax-free for resale?
Transferred goods and an integral taxable service could be bought for resale, but the provider's maintenance agreements, natural gas, and electricity were not exempt for use in providing taxable servi…
When did taxable debt-collection and insurance services make a bundled accounts-receivable management charge taxable in Texas?
The overall management service was not data processing, but collection follow-ups and insurance-claim preparation were taxable. If bundled taxable services exceeded 5% of the total, the entire charge …
When were a service provider's consultation fees taxable, and was its sale of postage stamps taxable?
General consultations about a customer's ongoing business needs were not taxable, but consultations defining a specific word-processing assignment were taxable. Postage-stamp sales were not taxable.
Were school pictures sold to students exempt from Texas sales tax when the photographer sold them directly or through the school?
No. School-picture sales to students were taxable whether made by the photographer or through the school, because the students—not the school—were making the purchases.
Could Southwestern Bell charge Texas, Dallas, and DART sales tax on a separately stated special municipal charge?
Yes. The Comptroller treated the charge as part of taxable basic local exchange service, and both Dallas and DART imposed sales tax on telecommunications services.
How did Texas tax reroofing an apartment building that also contained an insurance office or other commercial space?
Materials were taxable. If commercial space was 5% or less, the whole building was residential and labor was not taxed; otherwise, residential labor had to be separately stated to remain nontaxable.
How did Texas's April 1988 cable-television bulletin tax new plant, extensions, residential drops, nonresidential repairs, and periodic maintenance?
New plant, extensions, residential work, and qualifying new-building drops had nontaxable labor. Nonresidential repair or upgrades were taxable; scheduled preventive maintenance was not.
How did Texas tax title-company purchases of property-tax searches, customer reimbursements, and tax-search services between affiliated corporations?
The title company paid tax when buying a search, but its closing-party reimbursement was not taxable. Qualifying consolidated-return affiliates could provide the service tax-free after paying tax on i…
Which programming, laser printing, stationery, mail-shop, postage, and plastic-card services were taxable in Texas?
Programming and tape-data manipulation, laser printing, stationery, and card embossing or encoding were taxable. Separately stated mail-shop work and postage bought with the client's check without mar…
Were sightseeing tours taxable amusement services, and was a tour consisting primarily of transportation to a rodeo taxable?
The sightseeing tours were taxable amusement services. The rodeo trip was primarily transportation and not taxable, but the operator still had to account for tax on the rodeo admission.
How did Texas tax pool and spa repair, remodeling, equipment work, and cleaning on residential versus commercial property?
Commercial pool work and pool cleaning were taxable on the total charge. Residential pool labor was not taxable, including apartment and HOA pools, but separately charged parts were taxable.
How did Texas classify and tax cleaning, repairing, and repainting storage tanks under its 1988 rules?
Tanks over 500 barrels were real property; tanks of 500 barrels or less were personal property. Cleaning was maintenance, and repainting was remodeling, with the letter treating the described services…
When were pumping containers and cleaning lines in a nonresidential grease-trap, grit-trap, or septic system taxable repair rather than nontaxable maintenance?
Work on a system with flow reduced by waste buildup was taxable repair. Regularly scheduled pumping and line cleaning while the system flowed properly were nontaxable maintenance.
Were a record-storage facility's charges for document pickup, storage, and certified shredding taxable, and what about its garbage-company charge?
The facility's pickup, storage, and shredding charges were not taxable. The facility had to pay sales tax on the garbage collection company's charge for hauling away the shredded material.
Were charges for storing and destroying documents and microfiche taxable after the Comptroller revised an earlier 1988 answer?
No. The Comptroller's April 19 revision said the client's document-storage and destruction charge was not taxable, replacing the February 2 answer that had treated destruction and disposal as taxable.
Was a lump-sum charge combining electronic tax-return transmission and a bank loan fee taxable in Texas?
Yes. Although return preparation itself was not taxable, the unseparated transmission and bank-fee charge was fully taxable. The franchise taking the transmission order had to report the tax.
Were rent-to-own agreements true leases or contingent sales for Texas's historical prior-contract exemption?
Texas treated the agreements as true leases, not contingent sales. Only renewal periods already in effect before July 21, 1987 qualified for the historical prior-contract exemption.
Did Texas's $25 sales-tax permit fee or state and local sales and use taxes apply to the National Railroad Passenger Corporation?
No. The letter said the permit fee did not apply and that the National Railroad Passenger Corporation was exempt from state and local sales and use tax under the cited federal provision.
How did Texas distinguish nontaxable insurance premiums and commissions from taxable insurance-service fees and mixed insurance packages?
Premiums and agent commissions for obtaining coverage were not taxable, but loss prevention, claims adjustment, and other defined insurance-service fees were. Mixed packages were presumed fully taxabl…
Which supplies could a Texas word-processing business buy tax-free for resale, and which items were taxable business-use purchases?
Paper, mailing labels, and report covers transferred to clients could be bought for resale. Printer ribbons, computer hardware, and software used by the business were taxable when purchased.
Were fees an insurance carrier paid to third-party administrators exempt as insurance premiums when used to buy taxable insurance services?
No. The administrator fees were taxable payments for insurance services, not premiums for insurance protection, even when the carrier funded them from premium revenue.
Were a seller's meat products, sandwiches, and other food ready for immediate consumption taxable in Texas?
The meat products were not taxable, but sandwiches and any other food ready for immediate consumption were taxable. The letter did not separately analyze whether smoking changed the result.
Did out-of-state testing prevent Texas tax on aircraft components installed before the customer took possession of the aircraft in Texas?
No. Texas tax was due on the components because the customer took possession of the aircraft in Texas, even though the aircraft then went out of state for required testing.
Could a Texas remodeler exclude separately stated engineering, drafting, architectural, and related postage charges from its taxable remodeling price?
Yes. Separately stated professional-service charges and their postage were nontaxable, but telephone, equipment, and extra-copy costs directly related to remodeling stayed in the tax base.
Was tenant showroom finish-out in a decades-old warehouse converted into a design center taxable remodeling or nontaxable new construction?
It was taxable remodeling under Rule 3.357(a)(6). The total charge to the tenant was taxable, and tenants who had not paid tax were told to pay the remodeler or the state.
Could a security company exclude separately stated insurance, patrol-vehicle, polygraph, or administrative costs from its taxable service charge?
No. All were taxable as costs directly related to the security service, even when separately stated. A polygraph examination performed apart from security service was not taxable.
When were sales, installation, and repair of blinds, drapes, or shades taxable under Texas's 1988 rules?
Selling and installing them was taxable on residential or commercial property, as were sales alone and repairs. Installation was not taxable when the installer did not sell the items.
Was a medical billing and practice-management company's percentage fee taxable merely because it used outside computer services?
No. Its basic management and billing fee was not data processing, but separately billed claims preparation or debt collection was taxable, and bundled taxable services over 5% made the whole charge ta…
When did repair work make a real-property maintenance contract taxable, and what records and historical prior-contract rules applied?
Repairs at 5% or less did not change the nontaxable contract. Above 5%, the whole contract was taxable unless repairs were separately stated, and inadequate records caused full taxation.
When did Texas presume an 800-line call originated in Texas for sales-tax purposes?
If station-message records did not establish that the call originated outside Texas, the call was presumed to originate in Texas and Texas sales tax was due.
Did Texas classify oil-and-gas flowlines as tangible personal property whether they were above or below ground?
Yes. The Comptroller retained its industry-wide position that flowlines above and below ground were tangible personal property and declined to change it in 1988.
Was mesquite, hickory, or pecan wood used by restaurants to cook food for sale exempt from Texas sales tax?
Yes. Wood used to cook food for sale qualified for exemption, provided the seller obtained a properly completed exemption certificate from the purchaser.
Which grapefruit packing activities counted as processing, and when could the separately metered facility's electricity qualify for exemption?
Waxing was processing, but washing, grading, and packing were not. More than 50% of the facility's electricity had to be used in waxing for the electricity to qualify for exemption.
Was the proposed Texas electricity sales-tax exemption certificate acceptable, and what was missing when a nonregistered engineer certified the study?
The certificate was otherwise acceptable, but it needed the owner's certification when the study was certified by an engineer who was not registered. Identifying the engineering college was suggested.
How did Texas's 1988 state, city, county, and transit sales taxes apply to residential and nonresidential electricity?
Residential electricity was exempt from state, county, and transit tax and usually city tax. Nonresidential electricity owed adopted half-percent city and county taxes on 1988 service billings.
After Texas revised its answer, were the described typing service and additional résumé copies taxable?
The March 22 response said the typing service was not taxable data processing, reversing the February 1 answer. Additional résumé copies remained taxable, and printing bought for resale could use a re…
How did Texas tax title-company charges for government certificates, joint-plant reimbursements, copies, delivery, and tax-search information?
Government pass-throughs and joint-plant reimbursements could be nontaxable, while added title-company fees, plant copies, taxable-item delivery, and purchased tax-search information were taxable.
Were a forensic engineer's accident, fire, or loss investigations taxable insurance services, and was separately stated court testimony taxable?
The investigative engineering services were taxable claims adjustment or processing under Rule 3.355(a)(5). Separately stated charges for testifying in court were not taxable.
Did a law firm's separately stated reimbursement of taxable electronic legal-research costs create another taxable information-service sale to its client?
No. The database charge was the law firm's taxable expense. It could seek an equal, separately stated client reimbursement without additional tax and label the tax portion 'Sales Tax Reimbursement.'
What distinguished real-property maintenance from repair or remodeling under Texas Rule 3.357?
Maintenance preserved functioning property on a regular schedule; work that restored, enhanced, or improved a quality was repair. Scheduling or documenting a repair did not turn it into maintenance.
Were a toxicologist's consulting services for insurance claims taxable when subcontracted by an attorney or performed directly for an insurer?
Yes. Claims-investigation consulting was taxable in litigation and non-litigation settings. The attorney's legal service was nontaxable but could not buy the toxicologist's work for resale.
How did Texas tax custom millwork installed in original construction, incorporated into an existing nonresidential building, or supplied without installation?
For separated original construction, materials and finish work were taxable but the installer's labor was not. Existing-building remodeling and supply-only sales were taxable on the total charge.
Was a truck stop's $5 fee for weighing a truck a taxable service in Texas?
No. The Comptroller said the described $5 truck-weighing fee was not a taxable service.
How did Texas tax HVAC new construction, commercial remodeling, residential work, and window-unit sales and service under different contract types?
New construction and residential real-property work followed contractor rules based on contract type; commercial repair or remodeling was taxable in full, as were window-unit sales and service.
Were receipts from coin-operated breath analyzers taxable, and did the operator owe tax when buying the machines?
The receipts were not subject to sales tax, but sales tax was due when the operator purchased the breath-analyzer machines.
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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.