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 Texas charge sales tax on telemanagement services that get refunds for clients who were overbilled by telecom companies?
No. The Texas Comptroller ruled that telemanagement services consisting of obtaining refunds for clients who were overbilled for telecommunications services and equipment are not subject to Texas sale…
Does a Texas laboratory that tests soil, water, wastewater, and materials samples and sells the results as a report have to charge sales tax on that service?
No. The Comptroller ruled that a laboratory's testing and analysis of soil, water, wastewater, concrete, and metal samples is not a taxable service under the information services rule. But the lab sti…
If a health club member gets a written prescription from a doctor for an exercise program, is the membership fee exempt from Texas sales tax?
Only partly, and only for some members. The Comptroller ruled that a health and fitness facility's membership and initiation fees are exempt from sales tax as an amusement service only to the extent t…
Is an electric cart bought as a substitute for a wheelchair exempt from Texas sales tax?
Yes. The Texas Comptroller confirmed that an electric powered cart bought to use in place of a wheelchair is exempt from Texas sales tax, and no doctor's prescription is required for that exemption.
Does a shop that adds armor and modifies brakes/suspension on motor vehicles have to charge sales tax on the whole job, and can it buy the armor materials tax-free?
Yes. Texas treats this armor and brake/suspension work as taxable 'remodeling,' so the shop must collect tax on its total charge — materials, skill, and labor combined. The shop can buy incorporated m…
When can a Texas retailer accept an export certificate in good faith, and when does a sale to a Mexican buyer become taxable?
A Texas retailer cannot accept an export certificate in good faith if it already knows the goods have not yet left the country. But the retailer also does not have to collect sales tax until the sale …
Which surveying services are taxable and which are exempt under Texas sales tax?
It depends on the type of survey. Surveys that establish or determine a property boundary (boundary surveys, lot staking for conveyance, platting) are taxable. Surveys that only locate structures with…
Can a paging company give its local telephone company a resale certificate for the incoming phone lines and numbers it leases and then provides to its paging customers?
Yes. Because the paging company passes the leased telephone numbers and incoming lines through to its paging customers as part of a taxable paging service, it may issue a resale certificate to the loc…
Can a Texas business file sales tax returns based on a 4-4-5 (or 5-4-4) retail fiscal accounting calendar instead of standard calendar months?
Yes. Texas lets a business file sales tax returns on its 5-4-4 (or similar 4-4-5-style) fiscal accounting calendar instead of strict calendar months, as long as returns are still due the 20th and the …
If a Texas trucking company's driver buys a replacement tire in another state and pays that state's sales tax, can the Texas tire dealer credit that tax against the Texas use tax owed when the truck returns to Texas?
Yes. Texas use tax is owed on tires bought outside Texas only if the truck carrying them comes back to Texas within one year of purchase. When it does, the dealer can credit any sales or use tax legal…
Does a Texas broker owe sales tax on the fees earned brokering animal fat and byproducts sold to Mexican buyers, or on the underlying sales themselves?
No. The Comptroller ruled that a broker's fees for arranging sales of animal fat and byproducts between a seller and Mexican buyers are not subject to Texas sales tax. The underlying sales themselves …
Does a city Bureau of Vital Statistics have to charge sales tax when it sells summary lists of births in response to verbal open-records requests?
No. The Comptroller ruled that summary lists of births sold by a city Bureau of Vital Statistics are exempt from Texas sales tax under Rule 3.341(a), because the office is required under the Texas Ope…
Is an anesthesia ventilator exempt from Texas sales tax as a prosthetic device, even though the anesthesia machine it plugs into is taxable?
Yes. The Comptroller ruled that anesthesia ventilators, which mechanically breathe for a patient who cannot breathe on their own under anesthesia, qualify as exempt prosthetic devices under Rule 3.284…
Is a post-production video animation studio that adds computer-generated special effects and animation to video programs (like TV ads, courtroom presentations, and product demonstrations) at the direction of the producer performing a taxable service?
No. The Comptroller ruled that a video animation studio that adds special effects and animation to video programs under a producer's direction, with no creative control of its own over the finished vi…
Is computer consulting — system design, analysis, and estimating — taxable in Texas, and when does it become taxable because it's tied to a hardware or software sale?
Computer consulting charges (system design, analysis, estimating) are not taxable in Texas unless the consultant also sells the hardware or software recommended in the engagement. If all equipment or …
An oil and gas services company asked the Comptroller about the sales/use tax treatment of several things: well pressure testing services, flare stack sales and rentals, other rentals/leases of tangible personal property, an environmental/energy-conservation repair exemption, whether Texas has a state income tax, and direct payment permit procedures for contractors.
Well pressure testing services are not subject to Texas sales or use tax, though they may instead be subject to the 2.42% oil well service (occupation) tax under Chapter 191 of the Tax Code. Flare sta…
A nursing home operator hires Texas and out-of-state contractors to do electrical repair work at its nursing homes, sometimes billed as a lump sum and sometimes with materials and labor separately stated. Should the contractor charge Texas sales tax, and if the tax is owed but not collected, does the state pursue the nursing home or the contractor?
It depends on how the contractor bills the job, not on whether the contractor is based in Texas or out of state. On a lump-sum bill (materials and labor combined into one price), the contractor should…
Can a farmer or rancher file a single agricultural/farm-purposes exemption certificate with a retailer and then just sign later invoices marked 'Exempt agricultural purposes,' instead of filing a new certificate for every purchase?
Yes. A farmer or rancher can file one properly completed exemption certificate with the retailer, who keeps it on file, and afterward the purchaser can simply sign subsequent invoices stamped 'Exempt …
Does a Texas hauler of dirt, sand, caliche, or rock have to charge sales tax on the material or on delivery charges?
It depends on whether the material is processed. Since June 1988, the Comptroller has exempted sales of unprocessed sand, dirt, and gravel from sales tax. But processing — including crushing, mixing, …
Is natural gas used to fuel a boiler that makes steam, which then powers chemical-processing equipment, exempt from Texas sales tax, or is it too 'one step removed' from manufacturing to qualify?
No, the natural gas is not too far removed from manufacturing to qualify. The Comptroller ruled that natural gas used to fuel a boiler that heats water into steam, where the steam powers equipment use…
Is a service that verifies the bond ratings in a customer's portfolio a taxable information service, even if the customer considers their portfolio contents confidential?
Yes. The Comptroller ruled that verifying bond ratings against a customer's portfolio is a taxable information service, because the bond rating information itself is general information available to a…
A company tests underground storage tanks for leaks using a van equipped with a computer, to help customers comply with Texas Water Commission leak-detection regulations. Should the company be collecting sales tax on these testing charges?
No. Charges to test whether an underground storage tank leaks more than allowed by Texas Water Commission or other regulatory standards are not taxable. However, the testing company still owes sales o…
A company duplicates (dubs) master audio or video tapes into copies. Does dubbing count as manufacturing or processing, and can the company get a refund or reduction of sales/use tax on its dubbing equipment?
Yes — the Comptroller confirmed that making duplicates of master tapes is processing or manufacturing, so dubbing machinery and equipment can qualify for a phased-in sales/use tax refund or reduction:…
A commercial vehicle monitoring service places decals with an 800 number on trucking/shipping company vehicles so other drivers can call in complaints about how the vehicle is being driven; the service forwards the complaint reports back to the vehicle-owning company. Is this service taxable as an information service?
No. The Comptroller withdrew its two earlier opinion letters and ruled that this vehicle-monitoring service is not taxable because it qualifies as a proprietary information service under Rule 3.342(d)…
How is sales tax charged on the installation of a new lawn sprinkler system — what part of the cost, if any, is taxed on the invoice, and at what rate?
Installing a new sprinkler system is an improvement to realty, so how tax applies depends on billing: if the installer bills a lump sum, the customer owes no tax and the installer instead pays tax on …
An out-of-state company leases equipment to customers in Texas, buying the equipment from outside Texas and delivering it to various Texas locations. After the Quill v. North Dakota decision, does this lessor still have to collect and report Texas sales and use tax?
Yes. Because the lessor retains title to the equipment while it is leased and located in Texas, it is considered to have property in the state, which by itself is enough to make it "engaged in busines…
A general contractor has a separated contract (materials and labor billed separately) to build a new commercial building, and subcontracts landscaping (grass, bushes, trees) and a hardwired burglar alarm system to other companies who install those materials into the realty. How does sales tax apply between the subcontractors, the general contractor, and the customer — and does it matter if the job is residential instead of commercial?
The subcontractors' full charges (materials and labor) to the general contractor are taxable. The general contractor can either pay tax to the subcontractors and pass that cost through as part of its …
A hotel resells telecommunications services to guests (marking up local and long-distance calls) but also uses the same trunk lines and phone equipment for its own business calls. Can the hotel buy the phone lines and equipment tax-free with a resale certificate, or get a refund of the sales tax it already paid?
No, not in full. A hotel cannot in good faith issue a resale certificate for trunk line service that it also uses for its own business calls — resale certificates may only be issued for lines dedicate…
Are charges for a children's summer camp and instructional classes (like karate, tennis, basketball, volleyball, and cheerleading) for kids ages 3-17 subject to Texas sales tax?
No. Rule 3.298(a)(2) specifically identifies children's day camps or boarding camps and instructional classes in any sport or musical discipline as non-amusement services, so charges for these camps a…
Are bacterial/microbial products used by feedlots, poultry farms, swine farms and dairies to digest livestock waste in catch ponds exempt from Texas sales tax as a farm/ranch exemption item?
No. The Comptroller ruled that microbial products used to biodegrade manure and other waste in livestock catch ponds do not qualify for the farm/ranch sales tax exemption, because that exemption is li…
Are urological catheters, incontinence devices, and ureteral stents exempt from Texas sales tax as prosthetic devices, even if they are only implanted or used on a temporary basis?
Yes. Urological catheters qualify for the Texas sales tax exemption for prosthetic devices regardless of whether they are used internally or externally, and no prescription is required. The Comptrolle…
A country club imposes a one-time mandatory assessment on its members to pay for a special county road assessment, and passes the money on to the county for use on previously dedicated and accepted roads. Is that mandatory assessment subject to Texas sales tax?
Yes. The Comptroller ruled the one-time mandatory assessment is taxable as an 'assessment or fee charged for a special privilege, status, or membership classification' in a private club under Rule 3.2…
A monument company designs, letters, and installs headstones and vaults; inscribes dates of death on existing stones; and does jobs like moving/leveling headstones or adding curbing and marble to cemetery lots. Which of these are taxable, and how does the tax apply?
It depends on the job. Designing, lettering, and installing a headstone or vault makes the company a contractor improving realty: under a lump-sum contract it pays tax to its own supplier on its cost …
A Texas general contractor has a written separated new construction contract with a nonprofit entity but sends monthly lump-sum progress billings (only separated into materials/labor/profit in a final summary billing). Does that billing practice turn the whole contract into a lump-sum contract for sales tax purposes?
No. Monthly lump-sum progress billings alone do not convert a written separated new construction contract into a lump-sum contract. But lump-sum progress billings without any written separated contrac…
A pipeline contractor asks about the sales tax treatment of four kinds of jobs: removing and abandoning a pipeline, abandoning a pipeline in place and filling it with concrete grout, replacing an overhead pipeline crossing with a new underground pipe tied into the old line, and removing/disposing of old pipe. How is each taxed?
It depends on the job: (1) removing and abandoning a pipeline is not taxable unless it's done as part of a repair; (2) abandoning a pipeline in place and filling it with grout was first ruled taxable …
A pawnbroker was previously told (in a March 13, 1992 letter) that it should not charge sales tax when a customer redeems their own pawned property. Is that always true, or does it depend on whether the pawnbroker already declared the goods forfeited?
It depends on timing. If the original owner redeems the pledged property before the pawnbroker has exercised its option to treat the goods as forfeited, that redemption is not a taxable sale. But once…
If a pawnshop customer gets their pledged goods back after the redemption period has passed, is that a taxable retail sale, or is it still just a loan repayment?
It depends on whether the pawnbroker has already recorded the goods as forfeited. If the pledgor redeems the goods before the pawnbroker exercises the forfeiture option and records them as forfeited, …
A company already owns and has paid tax on computer equipment. It then transfers title to a lender for cash (roughly 10 times the equipment's fair market value) and simultaneously leases the same equipment back, keeping possession, depreciation for federal income tax purposes, and all the risks and costs of ownership. Are the lease payments subject to Texas limited sales tax?
No. Because the borrower never gave up possession, risk of loss, or (for federal income tax purposes) title, and the sale price and buyback price were tied to the amount of funds advanced rather than …
A blood/plasma products company asked which supplies used to collect blood and process it into blood products — collection bags, pooling bags/bottles, saline, separation-device disposable sets, reagents, and related machinery — are taxable versus exempt for Texas sales and use tax purposes.
Supplies used before processing begins to collect blood — Y-sets and 500 ML/600 ML collection bags — are taxable. Pooling bags and pooling bottles are exempt as containers under Rule 3.314 only when t…
A company is bidding on a multimillion-dollar heavy equipment job that will be exported to Latin America over about nine months, billed through progress payments, with a contract clause transferring title of designated goods to the customer at each progress payment. Should sales tax be charged/accrued on each progress payment and then refunded after export documentation is obtained?
Yes, tax is due on each progress payment as billed, because the sale is legally completed for tax purposes when title or possession transfers to the customer for consideration — here, that happens at …
A landlord leases office space in a multi-story building to a computer software manufacturer, and the electricity (partially sub-metered to cool the tenant's mainframe computers) is purchased by the landlord and passed through as part of the lease. Is that electricity exempt from sales tax as manufacturing-related use, and can the landlord get a refund?
No. The landlord's purchase of electricity and gas to supply leased office space is a commercial use, taxable under Tax Code 151.318 and Rule 3.295, regardless of what the tenant does with the space (…
Are Gore-Tex and GTAM periodontal materials, which are temporarily implanted to help regenerate gum and bone tissue lost to periodontal disease but are later removed, exempt from Texas sales tax as items that remain in the patient's body?
No. Even though these periodontal and bone-augmentation materials aid the healing process, they do not qualify for exemption because they are removed after one to nine months and do not remain permane…
If an optometrist duplicates a patient's prescription from their existing glasses (by neutralizing/measuring the old lenses) rather than performing a new refraction or receiving a written prescription, does the optometrist have to charge sales tax on the new glasses?
No. Texas Tax Code sec. 151.313(a)(6) exempts corrective lenses dispensed or prescribed by an ophthalmologist or optometrist, and the Comptroller ruled that an optometrist who duplicates a patient's p…
A medical equipment seller asked how Texas sales tax applies to four products: therapy mattress replacements/overlays, sequential compression devices, patient weighing systems (scales), and incontinence pads used with hospital/nursing home beds. Are incontinence pads exempt from sales tax?
No, not automatically. The Comptroller classified incontinence pads as therapeutic appliances, which are exempt from Texas sales tax only when sold to an individual under a doctor's prescription; when…
When did Texas start applying the agricultural exemption to ostriches, emus, rheas, and cassowaries, and does it matter whether these birds are commonly thought of as food?
The Comptroller's office began applying the agricultural exemption to ostriches in March 1990, after the Texas Department of Agriculture published information that ostriches were being raised as food …
A company runs hydrostatic tests on underground storage tanks (USTs) and drills monitor wells/test holes to check for soil contamination, sometimes breaking concrete or restoring it afterward as part of the job. Which of these charges are taxable real property/repair services, and which are nontaxable testing?
A standalone charge for running a test (leak test, contaminated-soil test hole) is not taxable. But once the job moves into breaking concrete, repouring/restoring concrete, capping a hole, or installi…
How did Texas apply use tax and minimum rental tax to out-of-state buses later placed in Texas rental service?
Generally, a tax-free registered bus brought into Texas for short-term rental carried minimum rental liability equal to use tax on the owner's purchase price. A bus operated interstate for at least on…
Which supplies and materials that a restaurant or cafe buys are exempt from Texas sales tax as resale items, and which ones are taxable?
Disposable items a restaurant provides to customers as part of the food service — like paper cups, straws, napkins, to-go containers, foam containers, and food/beverages themselves — can be purchased …
Are retailers required to collect sales tax when they gift wrap a product for a customer, and can retailers buy gift wrapping supplies (paper, ribbons, boxes, bows) tax-exempt for resale?
A retailer that sells a product and charges extra to gift wrap it must collect sales tax on that gift wrapping charge, because the Comptroller treats gift wrapping as a taxable service connected with …
A precast concrete contractor asked how Texas sales and use tax applies to lump-sum vs. separated contracts, to precasters who don't erect their products on site, and to hauling/delivery charges for the concrete components.
A contractor who improves real property is the consumer (not seller) of materials under a lump-sum contract, and pays tax on the materials' purchase price (including in-bound freight) but doesn't coll…
A hotel or motel buys telecommunications trunk line service partly to resell to guests and partly for its own business calls. Can it issue a resale certificate for that service, and if it already paid sales tax on services it resold, can it get a credit?
A hotel cannot in good faith issue a resale certificate for trunk line service that it also uses for its own business calls — resale certificates may only be issued for lines dedicated to reselling te…
A taxpayer sought a refund of Texas sales tax paid on a VCR that was allegedly exported to Canada, but the formal Canadian customs entry document listed a video camera instead of a VCR. Can an affidavit or statement from the purchaser take the place of the formal export document to prove the export and support a refund?
No. Affidavits, statements, or exemption certificates given by purchasers are not acceptable proof of export. The only acceptable proof is the formal entry document from the foreign country (here, Can…
Is a nonprofit student store at a Job Corps Center required to collect Texas sales tax when it sells packaged snack food items to enrolled students?
No. Items sold in the nonprofit student store at the Job Corps Center are exempt from Texas sales tax under 29 U.S.C. § 1707(c), even though proceeds go into a student welfare fund supporting center p…
A business selling exercise, therapy, and orthopedic items asked which of its products are exempt from Texas sales tax as medical/therapeutic items and which are taxable general merchandise. A related, earlier letter also asked about orthopedic supports and an electronic monitoring device called Back Alert. Which items qualify for exemption?
It depends on the item. Soft/moldable lumbar support inserts, compression shorts, and orthopedic braces (lumbar, carpal tunnel, knee, ankle, tennis elbow supports) are exempt as braces. The AcuTemp Ho…
House Bill 11 let telephone utilities pass through an increase in their own tax liability to customers as a billing adjustment. Is that pass-through adjustment itself subject to Texas sales tax?
Yes. The tax increase from House Bill 11 was levied on the telephone carrier, not directly on the customer, so even though the carrier visibly passes it through as a billing adjustment, it's still par…
A contractor's job was bid and included in the original new-construction contract, but the work wasn't actually performed until after the building was already occupied. Is that job taxable repair/remodeling labor, or nontaxable new-construction labor?
Generally, remodeling work done after a building is first occupied is taxable repair and remodeling under Rule 3.357. But if the work was already part of the original new-construction contract, was bi…
If a contractor doing taxable asbestos abatement work on nonresidential real property separately states a charge for air monitoring, does the contractor have to collect sales tax on that air monitoring charge?
No. Air monitoring is direct scientific observation of physical phenomena, not a taxable service, and it is commonly provided as a distinct, stand-alone service. So a contractor performing taxable asb…
Is a 'continuous passive motion' (CPM) device an exempt orthopedic device or a taxable therapeutic appliance under Texas sales tax rules, and when is it exempt when sold, leased, or rented?
The Comptroller reclassified the CPM device from a therapeutic appliance to an orthopedic device under Rule 3.284(a)(9) after new facts showed it works on joints (not muscles) and doesn't function as …
A retailer of new and used manufactured homes repairs/renovates used units before resale, moves and installs units for customers, and a real estate lessor repairs and adds on to rental property — how does Texas sales tax apply to the labor and materials in each of these situations?
It depends on the scenario. Repair/renovation labor on a used manufactured home (treated as residential real property) is not taxable, but the materials generally are. Labor to move and install a manu…
If a retailer gives away merchandise for free as a promotion — like a shirt to the first ten customers, or a prize in a drawing — or sells items on a 'buy one get one free' basis, how is Texas sales tax handled?
It depends on whether the customer pays anything. On a 'buy one get one free' deal (or two-for-one pricing), the retailer only owes tax on the amount actually charged to the customer — not on the cost…
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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.