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 Texas tattoo shop have to collect sales tax on tattooing charges and on related books, magazines, or photographs?
Tattooing people was not taxable. Sales of tangible items were taxable, including books or magazines showing tattoos and photographs of tattooed people.
Could a seller accept a client's direct-payment certificate when taxable items were billed to the client's advertising agency?
No. The advertising agency had to pay tax on taxable items billed to it, even when acting for a direct-pay client. The seller could accept the client's certificate only if it billed the client directl…
Was an auction buyer's fee taxable when the auctioned item itself was subject to Texas sales tax?
Yes. The buyer's fee was part of the taxable sales price. A taxable item sold for a $200 bid plus a 10% buyer's fee had a total taxable sales price of $220.
Were amusement-park locomotives and coaches, track materials, operating supplies, and repair or maintenance charges exempt from Texas sales and use tax?
Yes. The trains qualified as exempt rolling stock; essential fuel, track, ties, trestles, and operating supplies were exempt; and repair or maintenance charges were exempt because the serviced propert…
Did a service vendor avoid Texas sales tax merely because its customer was a joint venture holding a government contract?
No. The vendor had to charge tax on taxable services sold to the joint venture unless it received a valid resale certificate. The joint venture could issue one only if it directly resold the service t…
Was remote mainframe emulation and software-testing time taxable data processing, and could the software developer claim resale or manufacturing treatment?
The time-sharing and testing service was taxable data processing. But the developer could issue a resale certificate if the service was essential to software sold as tangible property, or a manufactur…
Could an exempt organization buy an athletic-club membership tax-free for its members?
Yes, but only if the exempt organization paid the entire initiation fee and monthly dues and gave the club an exemption certificate. If the individual member paid, the membership remained taxable even…
Could the sale of an identifiable production division qualify for Texas's operating-asset exemption even though the plant had been idle since 1986?
Yes. The idle plant remained an identifiable business segment because the corporation could trace income and expenses directly to each production facility through its subsidiary accounting records.
Were typing and secretarial charges taxable when performed with a computer or memory typewriter rather than a manual typewriter?
Yes for computer-based word processing: the provider had to collect tax on typing, copies, and report covers. Manual, non-memory typewriter services were not taxable, and the provider instead paid tax…
Which restaurant equipment qualified for Texas's 1990 processing-equipment refund?
Restaurants were processors eligible to request a refund of 25% of state sales tax paid on qualifying equipment bought on or after January 1, 1990. Fryers, ovens, mixers, broilers, and stoves qualifie…
Would the proposed standardized certificate qualify as a Texas resale certificate, an exemption certificate, or both?
It qualified as a resale certificate, but not as an exemption certificate because it lacked a space for the exemption reason. Adding a certificate-type checkbox and an exemption-reason field would mak…
Could a restaurant buy toys tax-free for resale when every taxable children's meal included a toy that could not be bought separately?
Yes. The toy was part of the taxable meal sale, even though the meal price increased by only $0.06 while the toy cost about $0.41. The restaurant correctly collected tax on the meal package and could …
Were colostomy pouches, Foley catheters, and leg urinal drainage bags exempt from Texas sales and use tax?
Yes. The Comptroller treated colostomy pouches and leg drainage bags as ileostomy, colostomy, or ileal-bladder appliances and Foley catheters as prosthetics. The purchaser should not have been charged…
Were medical-waste incineration and collection charges taxable, and did the collector need to issue an exemption certificate to the incinerator?
The incinerator's destruction charge to the collector was not taxable, so no exemption certificate was needed. The collector's garbage-collection charge to customers was taxable, including any passed-…
Did a purchaser's written refund request to its supplier stop Texas's four-year sales-tax refund limitations period?
No. The period ran four years from when the tax was due and payable to the state. Only a refund request filed with the Comptroller by the person who paid the tax directly to the Comptroller could toll…
Could a contractor buy natural gas tax-free while using it to test and balance HVAC units and keep pipes from freezing during construction of a public high school?
Yes. The gas was used in performing the construction contract, so the contractor could claim exemption if the high school was public. The utility exemption certificate had to identify the exempt schoo…
How did Texas tax an oilfield company's hauling of water, brine, plugging mud, and KCL, its frac-tank rentals, testing, and waste disposal?
Third-party hauling was generally nontaxable unless it was taxable waste removal or well servicing. Seller-billed transport followed the product: fresh or natural brine water was exempt, while process…
What requirements applied to Texas's historical residential child-care facility vehicle-tax exemption?
The vehicle had to be purchased, used, or rented by a qualifying 24-hour residential child-care facility and used primarily to transport resident children. The facility said it met the licensing and m…
Which Texas sales taxes were refundable on natural gas and electricity billed to a nursing home after nursing homes became residential users?
For billing periods beginning on or after January 1, 1988, nursing-home gas and electricity were exempt from state, county, and MTA/CTD tax. City tax depended on the city's election; because this city…
Could an off-road motorcycle or ATV trade-in reduce the taxable amount on a street motorcycle?
No. Only a motor vehicle traded for another motor vehicle reduced the motor vehicle tax base, and the letter said ATVs and off-road bikes were not motor vehicles. For limited sales tax, it separately …
What Texas vehicle tax applied when a service member bought a car in West Germany and later sought Texas title?
The historical 6% motor vehicle tax was due on the original purchase price when the service member applied for Texas title. The letter based that result on Texas being the member's home of record desp…
How did Texas tax carpet installation in nonresidential remodeling, residences, new construction, additions, and previously unoccupied space?
Nonresidential carpet installation was taxable remodeling on the total charge. Residential work, new construction, additions, and initial finish-out were contractor jobs with taxable materials and non…
Were fees taxable when a customer paid for restricted use of software in Texas, even if the agreement called the payment a royalty?
Yes. The payment was taxable as a software sale, lease, or license fee; calling it a royalty did not change the result. The letter distinguished royalties paid to creators per copy sold, which could b…
Was a membership fee taxable when it entitled cardholders to buy merchandise from participating retailers at a discount during specified periods?
No. The Comptroller ruled that the discount-program membership fees described were not subject to sales tax.
Were consulting fees taxable when a firm reviewed repair bids, recommended contractors, and advised savings and loan institutions about real-estate repairs and maintenance?
No. The separately contracted consulting service was not taxable. The consultant had to pay tax to its suppliers on taxable items it used while providing the service.
Could a nonprofit fundraising raffle buy a boat and trailer tax-free for use as prizes?
No. Sales tax was due when the boat was purchased, and motor-vehicle tax was due to the county on the trailer. The nonprofit could not use a resale certificate because it was raffling rather than rese…
How did Texas tax removable lockers leased to nightclubs and then rented by the clubs to patrons?
The nightclubs had to collect tax on patron rentals because the lockers remained tangible personal property. The locker company could receive its share tax-free with a resale certificate, but it still…
After October 1, 1989, was city sales tax due on garbage collection when the service provider was inside the city but the dumpsters were outside city limits?
No. Beginning with the first billing cycle on or after October 1, 1989, local tax was sourced to where the waste was collected, so city tax did not apply to outside-city dumpsters. County use tax coul…
Was a retailer's supplier reimbursement taxable when suppliers covered 50% to 75% of food, drink, and supply costs for a free customer barbecue?
No. The reimbursement was not subject to sales tax because the free barbecue was a jointly sponsored promotional event. The retailer paid tax on taxable event purchases, and the supplier payments did …
Were hazardous-waste container rentals exempt, and were labor backcharges to a detailer taxable when bad drawings caused parts to be remade?
The container rental was taxable because only actual hazardous-waste disposal was exempt, not containers or equipment. The backcharge for extra corrective labor caused by the detailer's drawing errors…
How did Texas tax wallcovering and floorcovering installation in new, residential, unfinished, addition, and existing nonresidential projects?
Labor was not taxable for new construction, unfinished space before first occupancy, residential property, and new additions. Existing nonresidential installation or replacement was taxable on the tot…
How did Texas calculate tax on materials and contractor profit under a cost-plus contract with a guaranteed maximum price?
The contract was separated when materials and labor were separately stated. Materials were taxed on the higher of the contractor's actual cost or the owner's stated cost. A fee expressly assigned as a…
Was window-replacement labor taxable when work was limited to student dorm rooms inside a building used for both residential and commercial purposes?
No, if the residential labor was separately identified and documented. Materials remained taxable. Without records showing that the work was confined to dorm rooms, the mixed-use project could be trea…
Were Active 8 Beverage Crystals, Acerola Cherry Drink Mix, and Active 8 Fruit Squeeze exempt Texas food products?
No. The products were taxable packaged soft drinks or diluted juices rather than exempt food products. The collection agent had to collect tax from distributors based on the suggested retail selling p…
Did the net gains from selling two business divisions count as gross receipts, and were those receipts allocated to Texas?
Yes. The net gain from each division's tangible-asset sale was a gross receipt computed under GAAP pursuant to § 171.112, and the receipts were allocated to Texas because the assets were delivered to …
Were the listed glucose-testing supplies, insulin syringes, and insulin exempt from Texas sales tax?
Yes, under the stated conditions. The listed testing supplies were exempt therapeutic devices when sold to an individual under a doctor's prescription; medical-use insulin syringes were exempt, and in…
Who had to collect Texas sales tax on antique-mall consignment sales, and did the consignor need a permit for the mall location?
It depended on whether the consignor was identified to the buyer. If identified, the consignor was the seller and needed a permit at the mall; otherwise, the mall proprietor was the seller and had to …
Was city gross-receipts tax or a local franchise fee due from companies outside city limits when a nonutility producer sold electricity to a utility for resale?
No. The companies were outside the city, two were not utilities, and the electricity producer sold to an electric utility for resale under § 182.023. If the area were later annexed, the utility servin…
Were services by property-management employees taxable when they worked exclusively at one bank and the manager was reimbursed dollar for dollar for salary and benefits?
No. Employees permanently assigned to one property were treated as employees of that property when the management company was reimbursed for their salaries; the stated cleaning, repair, and maintenanc…
Did completely gutting and rebuilding the interior of a previously occupied office building count as tax-exempt new construction?
No. Because the superstructure remained and the building had already received its initial finish-out, the work was taxable nonresidential remodeling. Labor for genuinely added square footage would be …
Could a commercial nursery buy boards and nails tax-free to build plant tables needed for air circulation and disease prevention?
Yes under the 1990 ruling. The tables were equipment used exclusively to produce plants for sale, so their boards and nails could be bought with an exemption certificate. STAR warns that a 2011 law la…
Were topographic and boundary surveys taxable on land or underwater, and was real-time vessel-position information taxable?
Topographic surveying was not taxable, whether on land or underwater. Boundary, right-of-way recovery, and lot surveying were taxable. The letter did not decide real-time vessel-position service becau…
Was a separately stated federal retail sales tax collected directly from the customer included in the Texas sales-tax base?
No for the post-April 1, 1983 federal retail tax described. When separately stated and collected directly from the customer, it was excluded from the Texas tax base; Texas tax paid on it in error coul…
Was projecting live camera images of a performance onto a screen taxable when the event was not recorded?
No. Live projection without recording was a nontaxable service, so the provider paid tax on its equipment and materials. If the provider recorded the event on film or tape, the entire customer charge …
How did Texas require vending-machine operators to report food, candy, soft drinks, and cigarettes under the historical rules described in 1990?
From October 1, 1987, food was reported at 50% of retail price with no spoilage allowance. Candy, soft drinks, and cigarettes were reported at full retail price; cigarettes had been taxable since Octo…
Was lowering a concrete product into an excavation prepared by another contractor a taxable sale or an improvement to realty by the manufacturer?
It was a taxable sale when another company completed the installation. Lowering the product to street level or into the prepared hole was merely job-site delivery, so tax applied to the total selling …
Which software installation, customization, training, maintenance, programming, data-processing, and consulting charges were taxable?
Tax depended largely on whether the provider sold the software or another taxable item. Separately stated training and true contract programming were not taxable, while data processing and seller-conn…
Could a seller use tax refunded by Texas to reduce the purchaser's unrelated past-due account balance?
Not without the purchaser's consent. Tax collected from the customer had to be returned to that customer, and a state refund to the seller could not be applied against the customer's other debt unless…
Did 38 days of bank safekeeping defeat the export exemption for gold when the buyer did not take possession until removing it from the United States?
No. The rule's 30-day storage provision applied only when the buyer possessed the property in Texas. Because the seller or bank held the gold until export, the buyer did not possess it for 30 days and…
Could an equipment lessor exclude a separately stated insurance charge from tax, and were damage-waiver fees taxable?
A separately stated premium paid to an insurance company could be excluded from tax. A damage-waiver fee remained taxable because it was not an insurance premium.
Were handling, insurance-premium, and damage-waiver charges taxable when connected with a taxable sale?
Handling charges were taxable even if separately stated. A combined handling-and-insurance charge was fully taxable; a separately stated premium underwritten by an insurer was not taxable, but a damag…
Which towing-company charges were taxable: motor-vehicle storage, impound, towing, or owner-notification fees?
Storage and impound fees were taxable. Separately stated towing and notification fees were not taxable under the letter's historical guidance.
How did Texas tax portable-building sales versus permanently affixed residences or broiler houses, and did an agricultural exemption apply?
Portable-building labor and materials were taxable. Permanent real-property improvements followed contractor rules: lump-sum residential work was not taxed to the customer, separated materials were ta…
Could an FAA Part 135 air taxi buy machinery, tools, and equipment tax-free for aircraft repair, remodeling, or maintenance?
Only items used directly and exclusively to service carrier aircraft or their component parts qualified under the described exemption. General equipment supporting the shop or overall carrier operatio…
Could a nursing-home lessee claim the residential-utility exemption and a refund when the utility account still named a former owner?
Not without establishing that it was the purchaser and operator. The utility could accept a future certificate after written confirmation, and earlier refunds required proof that the lessee operated t…
Was a March 1987 custom-software maintenance agreement taxable, and what happened after Texas began taxing custom programs in October 1987?
The custom program and its maintenance were not taxable under the rule in force when the agreement began. A qualifying prior-contract exemption could cover the term through March 29, 1988, but a March…
When were a Texas firm's investigation services taxable based on where the work occurred and where the client was located?
Texas taxed investigations performed in Texas for any client and out-of-state investigations for Texas clients. Work performed outside Texas for an out-of-state client was not taxable; related expense…
Could the insurer buy equipment and telecommunications for resale when hospitals used its automated claims-submission and inquiry system?
Not on the submitted documents. They did not show that the insurer rented equipment, resold telecommunications, or sold a taxable service. A taxable information service or exclusive circuit-line lease…
How did Texas tax an automobile extended warranty and repairs performed under it?
The extended warranty and motor vehicle repair labor were not taxable, but parts, supplies, and materials were. Under a separated contract the repairer collected parts tax from the customer, usually t…
Could a taxpayer claim detrimental reliance based on a prior audit despite the disclaimer in Texas Audit Results letters?
Not merely because an auditor failed to detect an error. The disclaimer barred that theory, but it did not bar a claim based on specific erroneous written or oral advice given during the audit if the …
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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.