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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Were labor and material charges for repairing, painting, or lining railcars subject to Texas sales tax?
No. Texas said railcar repairing, painting, and interior lining were nontaxable, including both labor and materials, whether the work occurred inside or outside Texas.
Could a Texas electricity customer exempt only the percentage used in processing, or did predominant use make all electricity taxable or exempt?
Percentage exemption was not allowed. With only 6.7% exempt use, all electricity was taxable; if more than 50% was used for processing, all purchases would be exempt.
How did Texas divide sales tax and hotel occupancy tax on lodging packages with meals, instructional programs, and health-club or spa access?
Meals bundled with taxable lodging followed hotel occupancy tax. Instructional charges were not sales-taxable, while health-club or spa charges were; long-term lodging shifted meals to sales tax.
Which Texas sales-tax rate applied to utility billing periods that began before or after January 1, 1987?
The increased rate applied to billing periods beginning on or after January 1, 1987. A period that began before January 1 used the old rate.
Did work chaps used strictly for farm and ranch jobs qualify for Texas's agricultural sales-tax exemption?
No. The Comptroller treated work chaps as taxable despite their livestock and ranch use and said the seller could back-bill customers for the tax.
Did a 1986 special order delivered in 1987 use the old Texas sales-tax rate when the customer paid a nonrefundable deposit?
Yes, if the original order had a set price, the customer signed it, and the customer paid the nonrefundable deposit.
Which purchase orders and contracts qualified for the Texas sales-tax rate in effect before the January 1, 1987 increase?
Pre-1987 actual orders for specific items and binding contracts with a definite price or pricing criteria outside the parties' control used the pre-increase tax rate.
Did Texas assess tax on liquor and mixer ingredients lost when restaurant employees or customers spilled drinks or broke bottles?
Employee spillage and breakage were not assessed, but ingredients in a replacement for a customer-spilled drink were taxable like a complimentary drink. Records had to prove who caused each loss.
How did Texas tax a business that remodeled old buses into traveling vehicles and collected progress payments?
The total remodeling charge was taxable. The converter could buy materials for resale, had to separately state and remit tax, and generally reported it as income was recognized unless tax was collecte…
Was a lump-sum charge taxable when a business computer-printed standardized real-estate advertising postcards and mailed them for customers?
Yes. Texas treated the business as producing tangible personal property—standardized advertising postcards—and taxed the total lump-sum charge.
What information did a Texas utility need on exemption certificates from religious, 501(c), nonprofit, or other exempt-entity customers?
Certificates identifying a qualifying exemption type could be accepted. A certificate saying only 'nonprofit' or 'exempt' required verification; liability relief also required a complete certificate a…
Was a sign company's charge for hanging a tenant-owned sign on the sign company's pole subject to Texas sales tax?
No. Under the stated facts, Texas did not require the sign company to charge tax on its fee for hanging the customer's sign on the company's pole.
Did equipment used by Texas farmers and ranchers to control predators qualify for a sales-tax exemption?
No. The Comptroller stated that no exemption was available for equipment farmers and ranchers used to control predators.
How did Texas apply the January 1987 rate increase to advance-billed telephone service, dated calls, and bulk-billed items without service dates?
Advance bills spanning January were apportioned and dated calls used the rate for their date. A correction gave undated bulk-billed items a grace period, applying the higher rate when billed on or aft…
Was alcohol purchased from an out-of-state supplier for processing surgical biopsies and Pap smears exempt from Texas tax?
No. Texas treated the alcohol as a taxable medical-facility supply, and the purchaser could accrue and remit the tax on its sales-tax return.
Did Texas give retailers time to convert cash registers to the January 1, 1987 sales-tax rate without penalties?
Yes. A December amendment replaced the earlier no-grace answer and granted a five-day penalty-free conversion period from January 1 through January 5, 1987.
Were annual bicycle-association membership fees and per-race competitor entry fees subject to Texas sales tax?
No. The Comptroller treated both the described annual membership package and race entry fees as nontaxable.
How did Texas tax a petroleum storage facility's capital contribution, leaseback, third-party sale, ground lease, and related subleases?
The capital contribution and realty leases were nontaxable. The ruling nevertheless called the third-party sale taxable immediately after saying the improvements were not tangible personal property, w…
Were monthly leases of real estate with incidental personal property or of an entire purchased operating business subject to Texas sales tax?
No under the stated facts. Real-property rent remained nontaxable with incidental tax-paid personal property, and the purchased business assets qualified as an occasional sale before the exempt lease.
How did Texas apply its 1984 and 1987 state tax-rate changes to a fixed written lease extending through January 1991?
The lease qualified for the 1987 prior-contract exemption. A pre-October 1984 lease also had temporary protection from the earlier one-eighth-percent increase, expiring September 30, 1987.
Were fees charged by video-rental outlets for rewinding returned cassette tapes subject to Texas sales tax?
Yes. An internal Tax Policy memorandum classified video-cassette rewinding charges as taxable maintenance.
Did equipment added to pre-October 1984 maintenance agreements keep the historical prior-contract tax exemption?
Only additions made before December 1, 1986 kept the earlier administrative treatment. Additions from that date used current tax rates, and renegotiating the contract voided the exemption entirely.
How did Texas reclassify motor-vehicle undercoating after an administrative hearing had treated it as processing for earlier audit years?
The processing classification remained correct for the 1979–1983 audit period, but effective February 12, 1986 Texas treated undercoating as protection or maintenance under Rules 3.292 and 3.312.
Were separately stated storage and transportation charges taxable when a restoration company moved, cleaned, stored, and returned damaged household goods?
Yes. Texas treated both the separately stated storage fee and the pickup, delivery, and handling transportation charge as taxable under the described restoration arrangement.
How did this November 1986 Texas letter apply the coming rate increase to advance-billed, dated, and undated telephone charges?
It apportioned December bills covering January service and used actual dates for known calls. It originally applied the higher rate to undated bulk bills on January 1, but a later STAR letter correcte…
Could purchase-order language serve as a Texas resale or exemption certificate, and when could blanket certificates or direct-payment permits be used?
The submitted purchase orders were insufficient. Certificates had to be recognizable, contain proper language, and have a certificate-specific signature; blanket certificates or a direct-payment permi…
Were a minimum-usage shortfall charge and a separate service-line charge in a mixed interstate and intrastate long-distance plan taxable in Texas?
Yes. The Comptroller said both the additional amount needed to reach the minimum charge and the separate service-line charge were taxable.
Which materials and equipment were exempt when contractors fabricated and installed pollution-control facilities under the Clean Air Financing Act?
Only materials and equipment actually installed in the control facility could be bought tax-free. Equipment used and materials consumed while performing the contract remained taxable.
How did Texas tax printed grocery sacks used for advertising, the advertising-space charge, and art setup or plate fees?
The seller paid tax when buying the printed sacks and did not tax advertising space. The $45 art setup and plate fee was taxable, with resale-certificate treatment for outsourced workup.
Did a standard mattress and box spring qualify for a Texas medical sales-tax exemption when sold on a doctor's prescription?
No. The Comptroller said the standard mattress and box spring did not qualify for exemption and confirmed that the seller correctly charged sales tax.
Could a basketball team collect and remit tax for tickets sold through third-party outlets, and did handling charges enter the taxable price?
Yes. The team was authorized to assume collection and remittance, but tax had to be based on the outlet's actual selling price, including handling charges.
Were copies of court, bankruptcy, probate, real-property, and other governmental records sold by a research service subject to Texas sales tax?
Yes. The Comptroller said sales of copies of documents, publications, or general information obtained from governmental entities were taxable transactions.
Did a parking-contract rider qualify for prior-contract treatment, how were exemptions documented, and when was prepaid parking script taxed?
The indefinite-price rider did not qualify. Exemptions needed valid certificates and matching payment records; parking script was taxed when sold, so no second tax was due at redemption.
What Texas sales-tax rate applied to student meal plans paid in late 1986 but used after the January 1, 1987 rate increase?
The pre-increase four-and-one-eighth-percent state rate applied because the university was bound by a fixed-price written contract entered before January 1, 1987.
Were prescribed external urinary incontinence devices exempt from Texas sales tax, and what documentation supported unlimited refills?
Yes. Texas exempted the external devices when prescribed by a doctor; if the prescription allowed unlimited refills, the seller could retain it for the ongoing exemption.
Could Texas suppliers accept a Mexican pedimento that listed only weight and value as export proof when detailed warehouse and customs records were also retained?
Yes. Suppliers could accept the pedimento with the detailed supporting records, provided the exporter kept six specified documents together and produced them to the Comptroller on demand.
When did cotton module builders and tarps qualify for Texas's agricultural exemption, and did a cotton gin qualify as the original producer?
They could qualify only when used exclusively to process, pack, or market the original producer's own products. A cotton gin was not the original producer and had to pay tax.
How did Texas tax hotel guest phone charges, complimentary calls, supplier-tax credits, and mixed interstate and intrastate long-distance billing?
Tax applied to the guest charge. Complimentary calls required no guest tax, supplier tax could be credited, and failing to separately state taxable and nontaxable calls made the total charge taxable.
How did proposed Texas contractor Rule 3.291 treat short-lived assets, financing leases later returned as rentals, and intracompany sales under the aggregate method?
Actual useful life could replace four years for short-lived nonvehicles; capitalized financing leases stayed in the aggregate method, and intracompany transfers did not count as sales.
Was horse feed subject to Texas sales tax when used for work, pleasure, show, parade, trail-riding, 4-H, or breeding horses?
No. The Comptroller said feed sold for horses was not taxable across all the listed uses.
Could a cable company give resale certificates for converters and their repair when the converters were included in subscriber service?
Yes. The company could buy the converters and their repair tax-free for resale. A separate repair fee billed to a subscriber was taxable; without an added fee, no additional tax was passed to the subs…
How could a monthly Texas sales-tax filer use a 13-period accounting year when only 12 returns were accepted annually?
The filer could use the 13-period system, but had to combine two periods once each year. A period ending by the 10th was due on the 20th of that month; a later-ending period was due on the 20th of the…
Was an 'equa chair' exempt from Texas sales tax because it was purchased with a doctor's prescription?
No. The Comptroller said the chair did not qualify as a therapeutic appliance or device, so the doctor's prescription did not provide a sales-tax exemption.
When were downhole fishing services taxable during drilling, completion, and later work on an oil or gas well?
They were not taxable during drilling or before initial completion. After completion they were taxable unless performed during a workover or to repair the casing string; a taxable job's full labor-and…
Which electric-utility billing periods first used the temporary 1987 Texas sales-tax increase and the later rate decrease?
The higher rate first applied to a billing period beginning on or after January 1, 1987. The lower rate first applied to a billing period ending on or after September 1, 1987.
Was placing a portable sign at a customer's premises a taxable rental or a nontaxable advertising service?
It depended on customer control. If the customer could not control the sign, the transaction was a nontaxable advertising service; if the customer could change its message, it was a taxable rental of …
Could an exempt religious organization treat a requested payment for property as a donation rather than a sale?
No. If the organization did not freely give the item away, the payment-for-item exchange was a sale even when called a requested donation or paid in a different amount. Taxability depended on the item…
When could a dealer sell motor vehicle parts tax-free to a Texas farmer or rancher under this 1986 guidance?
Only when the vehicle was used exclusively on the farm or ranch and was not licensed for highway use. Before granting the exemption, the parts dealer had to obtain an exemption certificate stating tho…
Was clothing for foster children exempt when bought with a county voucher or later reimbursed by the county?
A purchase made by the county was exempt, and its voucher sufficiently proved that status. But tax was due when another person bought the clothing and the county merely reimbursed that person.
Was Barley green, made from dried barley-plant juice, brown rice, and kelp, subject to Texas sales tax?
No. The Comptroller classified Barley green as a powdered food product and therefore exempted it from Texas sales tax.
Was a single insurance charge covering both loss of and damage to rented pagers taxable?
Yes. Separately stated loss-only insurance was not taxed, but damage-waiver fees were taxable from September 1, 1986. A single charge covering both loss and damage was entirely taxable.
Could fishing nets be purchased tax-free as component parts of a commercial fishing boat?
Yes, under the later letter, when the boat exceeded eight tons displacement and was used commercially. The customer had to provide an exemption certificate; an earlier letter in the same record had de…
Should sales tax have been included in a freight claim when shipped equipment was totally destroyed?
Yes. Tax charged on the original sale became part of the selling price and should have been included in the claim. The carrier's statement was not a valid resale certificate and could not support a ta…
Were charges for cleaning and maintaining pleasure yachts and commercial vessels taxable?
Charges for a noncommercial pleasure vessel were taxable, while the same services on a commercial vessel were not. The provider owed tax on equipment and consumable supplies, with resale treatment lim…
Were 'Smoky Canyon Pouch foods' taxable when the sales materials presumed heating before consumption?
No. Because the pouches were presumed to be heated before eating—even by being left in the sun—the Comptroller said the food was not sold for immediate consumption and was not taxable.
How did sales tax apply when a shared-tenant provider bought telephone service and resold local and intrastate long-distance access to tenants?
If it made no use of the lines, the provider could buy service with a resale certificate and collect tax from tenants on local and intrastate long-distance service. Alternatively, it could claim credi…
Were natural-gas compression charges a taxable compressor rental or a nontaxable service?
It depended on use. A community compressor station serving several users for usage-based fees provided a nontaxable service; exclusive use by one company was a taxable rental.
Could patients buy custom shoe inlays made of viscoelastic polymer tax-free?
Yes, when purchased on a doctor's prescription. The Comptroller treated the custom inlays as therapeutic appliances; sales without that prescription were taxable.
Did hotels and motels have to collect Texas sales tax on amounts charged to guests for local and intrastate long-distance telephone calls?
Yes. The Comptroller said tax applied to the full amounts charged for local and intrastate long-distance calls; uncollected tax could be assessed with penalty and interest for four years.
Were a common carrier's interstate long-distance telephone charges subject to Texas sales tax, and what applied if tax had been charged in error?
No. Interstate telecommunications were not subject to Texas tax, and erroneous tax charges could be claimed back within four years without an exemption certificate. Intrastate telecommunications remai…
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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.