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 cotton mote fiber processing operation qualify for the same sales tax exemption on electricity (without needing a predominant use study) that Texas already grants to cotton ginning operations?
Yes. The Comptroller found that the process and equipment used to condition, clean, and package cotton mote fiber (a waste byproduct of cotton ginning) are substantially the same as those used in cott…
Is an elevator or wheelchair lift installed in my home exempt from Texas sales tax if my doctor prescribes it?
Yes -- an elevator or wheelchair lift installed in a home can be exempt from Texas sales tax as a therapeutic device, but only if the doctor provides a written prescription and a signed statement of m…
Can a contractor rent equipment tax-free using a resale certificate if the equipment is used to improve real property or perform a taxable service?
No. Contractors who improve new real property, repair or remodel residential real property, or provide taxable services like nonresidential repair/remodeling must pay sales tax when they purchase, ren…
If I offer customers a discount for paying early (or charge a fee for paying late or not ordering electronically), how does that affect the sales tax I have to collect?
A true cash discount for paying early reduces the taxable selling price -- tax applies to the discounted amount actually paid, not the original invoice amount. A separately stated charge purely for la…
I'm a sole proprietor disputing a sales tax audit. If I ask Texas to settle my liability because paying it would make me insolvent, can the Comptroller count my spouse's wages and our community property, not just my business assets?
Yes. In this Comptroller's Decision on Rehearing (Hearing No. 29,794), the Administrative Law Judge held that when a sole proprietor asks the Comptroller to settle a tax assessment under Tex. Tax Code…
If I test or stage computer hardware/software in Texas before exporting it out of state, does that testing count as a taxable 'use' of the property in Texas, even if I hold a direct payment permit?
Yes -- testing or 'staging' tangible personal property (including computer hardware and software) in Texas before exporting it out of state is a taxable 'use' of that property in Texas. This applies r…
Are replacement parts for shaker screens and sand screws, and a concrete reclaimer, exempt from Texas sales tax as manufacturing equipment at a sand/gravel processing plant?
It depends on timing and equipment type. Replacement parts for sand screws (which sort, separate, grind, crush, and clean materials) are exempt from tax, and a concrete reclaimer that separates water,…
Did a contractor auctioning seized vehicles for the U.S. Marshals Service have to collect Texas motor vehicle or salvage-vehicle tax?
For ordinary motor vehicles, no: as agent for the unlicensed U.S. Marshals Service, the contractor did not collect motor vehicle sales tax but had to give buyers the title and tax-payment paperwork. F…
Is a utility-line-locating 'damage prevention' service — where a contractor uses a computer-dispatched service to find and mark underground utility lines before excavation — taxable in Texas?
No. In this internal Comptroller memo, Tax Administration audit staff described a 'damage prevention' service in which a company, under contract with utility companies, uses a one-call center and a co…
Is a nutritional drink taxable in Texas, or exempt like a food product or meal replacement?
Taxable, as of this 1996 letter. The Comptroller advised that products marketed as a replacement or substitute for a meal (such as Slim Fast and Ultra Slim Fast) are treated as food products and are e…
Do clean-room air handling systems and floor panels qualify for Texas's manufacturing exemption in semiconductor fabrication?
Yes — the Comptroller confirmed that air handling equipment, ceiling vents, and waffle floor panels used in semiconductor (microchip) fabrication clean rooms qualify as equipment used in manufacturing…
Texas Letter Ruling 9406L1329G11: Textbooks — Sold To Students Or Exempt Org Members Vs. Included In A Lump Sum Charge For A Class
When a textbook is bundled into a single lump-sum charge for a class and not separately billed, the lump-sum charge to the student is not taxable. Instead, the course provider owes sales/use tax on th…
Texas Letter Ruling 9406L1309F10: Meals/Food To Go — Entrees/Dinners Delivered To Customers In Refrigerated Or Frozen State With No Utensils Provided
No sales tax is due. Because the gourmet entrees are delivered refrigerated or frozen for the customer to heat and eat later, and no eating utensils are provided with the sale, the sale falls under th…
If an exempt organization resells amusement park tickets to its members, does it owe sales tax on those ticket sales?
Yes. Under Rule 3.322(g)(1), an exempt organization that resells an amusement park's tickets to others (such as its own members) as the park's agent still owes sales tax on those ticket sales, because…
Is a late fee charged for renewing a maintenance contract late subject to Texas sales tax when it is stated separately on the invoice?
A separately stated late charge for renewing a maintenance contract late is not subject to Texas sales tax, but only if it is truly a penalty and not a forfeiture of an early-payment or prompt-payment…
Texas Letter Ruling 9406428L: Hot Tub/Spa — Therapeutic Equipment With Doctor'S Prescription — Size Is No Longer Consideration To Determine Exemption
Yes — a hot tub or spa qualifies as an exempt therapeutic appliance under Texas sales tax law if the customer gives the seller a signed statement from a licensed physician or other healing-arts practi…
Texas Letter Ruling 9406L1313G06: Copies — Professionals (Lawyers/Architects/Engineers/Accountants) Purchasing Photocopies For Transfer To Clients As Part Of Nontaxable Services — No Resale/Exemption Certificate Allowed
No. A lawyer, architect, engineer, or accountant who buys photocopies, blueprints, or similar items to pass along to a client as part of a nontaxable professional service must pay sales tax on that pu…
Texas Letter Ruling 9406L1307A03: Hazardous Waste/Excluded Waste — Containers/Drums/Roll — Off Boxes — Used To Provide Nontaxable Removal Services — Provider Cannot Issue Resale Certificate
No. A hazardous waste removal company cannot issue a resale certificate for the containers, drums, or roll-off boxes it uses on the job, because hazardous waste removal is a nontaxable service (exclud…
Texas Letter Ruling 9407673L: Relocation/Relocating Telephone/Gas Lines To Add New Customers Or New Areas — New Contruction
Whether relocating or connecting telephone/gas lines is taxable remodeling or exempt new construction depends on the facts: extending service into an area that never had it before is new construction,…
Texas Letter Ruling 9406L1306A08: Stock Market Investors Service — Computer Tracking / Monitoring Of Client'S Investments And Alerting When Prices Change
Yes — the Comptroller ruled that a service using computers to track clients' stock investments and alert them by fax or pre-recorded phone message when prices moved a set percentage is a taxable infor…
When a golf course is reworked to fill in a creek, install drainage, add a lake spillway and waterfalls, and re-sod disturbed areas, which parts of the job count as tax-favored new construction versus taxable remodeling or landscaping?
The Comptroller split the job feature-by-feature: filling in a natural creek, grading/shaping it into rough, and installing drain pipe and inlets is new construction; sprigging the area with Bermuda g…
Is adding 1,000 square feet of new putting surface to an existing golf green new construction or taxable remodeling for Texas sales tax purposes?
Enlarging an existing putting green by adding new square footage is generally new construction (not taxable as remodeling labor), but the strip where the new surface ties into the old green is remodel…
Texas Letter Ruling 9406L1305D08: Golf Course — Made Up Of A Number/Collection Of Improvements (Lake,Fairways, Cart Paths, Gabion, Tee Box/Signs, Greens, Clubhouse, Trenches) New Construction Vs. Remodeling
It depends on what work is done to which improvement: totally demolishing and rebuilding a green from scratch is new construction, but roto-tilling/reshaping an existing green is remodeling (though so…
Is close captioning work performed as part of producing a film or video subject to Texas sales tax, and can the captioner buy tapes tax-free?
Close captioning is treated as one of the steps in creating a master film or video, not as a separately taxable service. The captioner should get an exemption certificate from the client stating the f…
If a husband and wife run a residential cleaning business together, is their cleaning service exempt from sales tax as household employees, or must they collect tax as a business?
If the husband and wife clean the same homes together and equally share the revenue, they are not treated as employees of the household and their company must collect sales tax on its residential clea…
Can a manufacturer located in a Texas enterprise project claim the phase-in sales tax exemption on manufacturing machinery and equipment in addition to the tax refunds available under the enterprise project program?
Yes. A manufacturer located in an enterprise project may claim the phase-in exemption on qualifying manufacturing machinery and equipment in addition to the tax refunds available under the enterprise …
Do retailers owe Texas sales tax on the paper, ribbons, boxes, and bags they buy to provide gift-wrapping services to customers?
Yes. Under Rule 3.314, a retailer must pay sales tax on the purchase price of gift-wrapping supplies (paper, ribbons, boxes, tissue, bags, etc.) used to provide gift-wrapping services, and must also c…
Is a service that cuts lines in a customer's semiconductor chip and creates new connections, without adding or removing any material, subject to Texas sales tax?
Yes. The Comptroller ruled that cutting lines in a client's semiconductor chip and forming new connections is taxable as repair or remodeling of tangible personal property under 34 Tex. Admin. Code Ru…
Is admission to an event or tour held at a building listed on the National Register of Historic Places subject to Texas sales tax?
No. Under 34 Tex. Admin. Code § 3.298(g)(1)(E), admission charges for amusement services provided exclusively at a place listed on the National Register of Historic Places are exempt from Texas sales …
Is a fee charged for a loading zone parking permit subject to Texas sales tax?
Yes. The Comptroller ruled that a charge for a loading zone permit -- which allows a passenger-type vehicle to legally park in a freight loading zone -- is subject to Texas sales and use tax as a moto…
Are hand-operated measuring and inspection gages (like micrometers and thread gages) exempt from Texas sales tax as manufacturing equipment?
No. The Comptroller ruled that manually operated inspection instruments -- snap gages, thread gages, plug gages, dial gages, micrometers, and similar tools used to check product dimensions during manu…
Is a fee charged for a computer-generated mortgage cost-savings analysis, used as a sales tool for an equity-acceleration program, subject to Texas sales tax as a data processing service?
Yes, if a charge is made. The Comptroller held that when a homeowner is charged for a consultation and receives a computer printout analyzing potential interest savings (generated by inputting the cus…
Is an international organization recognized under the International Organizations Immunity Act (22 U.S.C. 288) and the NAFTA Implementation Act exempt from Texas sales and use tax?
No. The Comptroller held that the International Organizations Immunity Act grants covered organizations and their officers/employees only specific federal-law privileges -- immunity from suit, exempti…
Does Texas sales tax apply to a company's service of picking up hazardous chemical waste, processing it to meet state disposal requirements, and hauling it to a disposal site?
No — the Comptroller ruled that the company's service of picking up hazardous chemical waste, processing it to meet state requirements, and transporting it to a disposal site is not a taxable service.…
Is a refundable deposit fee charged to towel rental customers part of the taxable sales price?
No, not the initial deposit -- a refundable up-front deposit collected before towels are ever delivered is not part of the taxable sales price. However, a separate 'automatic replacement deposit,' cha…
Is a charge for cleaning railroad cars subject to Texas sales tax?
No. The Comptroller ruled that charges for cleaning railroad cars are not taxable, because Tax Code Section 151.3111(a) exempts services performed on tangible personal property that is itself exempt d…
If a customer buys goods for export but the shipper doesn't pick them up from the seller's warehouse within 30 days, does the seller lose the export tax exemption?
No, not automatically. The Comptroller held that the export exemption is not lost just because the 30-day time limit is exceeded, when the item(s) sold are warehoused by the seller solely because the …
Is a fee charged for preparing the paperwork and claim forms needed to obtain a rebate from the Texas Natural Resources Conservation Commission (TNRCC) subject to Texas sales tax?
No. The Comptroller ruled that a company's service of gathering invoices, calculating payment percentages, filling out TNRCC forms, and otherwise documenting a customer's claim for a rebate from the T…
Is a golf cart converted into a farm utility vehicle (with pickup bed, tractor tires, and lighting) exempt from Texas sales tax when sold to a farmer or rancher?
It can be, but only conditionally. The Comptroller ruled that a farmer or rancher is not automatically exempt from sales tax, so the converted golf cart is eligible for the agricultural exemption only…
Is a service that negotiates with creditors on behalf of a debtor business to settle past-due accounts payable a taxable debt collection service in Texas?
Yes. The Comptroller held that any activity performed for consideration to collect or settle a delinquent debt is a taxable debt collection service, regardless of which side of the debt hires the serv…
Does a company owe Texas sales tax when it buys custom-printed book covers that it plans to donate to a school district?
No. The Comptroller ruled that a donor's purchase of custom-printed book covers is not subject to sales tax when the book covers are subsequently donated to school districts. The printer therefore sho…
If a local transit sales tax rate drops during the term of a fixed-term equipment lease, does the lease switch to the lower rate or keep the rate that applied when it was signed?
A fixed-term operating lease (rental) of tangible personal property that was executed before a local MTA tax rate decrease stays taxable at the old, higher rate until the fixed term expires -- it does…
Is electricity used to run cooling equipment and circulating fans that keep bananas cold and slow their ripening during transit exempt from Texas sales/use tax as manufacturing/processing?
No. The Comptroller held that cooling bananas and running circulating fans to deter or delay ripening during shipment is considered storage, not processing, so the electricity used for that cooling an…
Does a wholesaler/merchandiser owe Texas sales tax on boxes, dry ice, and other packaging materials used to ship products to customers, including offshore customers?
Yes. Under 34 Tex. Admin. Code § 3.314(c), a wholesaler or retailer (as opposed to a manufacturer or processor) must pay sales tax on wrapping and packaging supplies like boxes and dry ice used to shi…
Does a doctor's prescription for cellular phone service exempt the telecommunications charges from Texas sales tax?
No. The Comptroller ruled that telecommunications services, including cellular phone service, do not qualify for exemption merely because a doctor prescribed them. The letter is brief and does not cit…
When a gun dealer sells a handgun at a gunshow but transfers it through a local dealer to complete the Brady Law background check and waiting period, which dealer collects sales tax, and is the local dealer's transfer/handling fee taxable?
The selling dealer (Dealer 'A', who received payment from the customer at the gunshow) is the one who must collect and remit Texas sales tax on the handgun -- not the local dealer ('B') who merely han…
Is a four-wheel ATV bought for use on a farm or ranch exempt from Texas sales tax?
Yes, but only if the ATV is used exclusively on the farm or ranch to produce agricultural products held for sale in the regular course of business. A farmer or rancher can give the dealer a properly c…
What eye-care supplies (lens cleaners, contact solutions, cases, chains/straps, spectacles) are exempt from Texas sales tax when dispensed by an optometrist or ophthalmologist?
Under Tex. Tax Code § 151.313(6), a range of corrective-lens-related supplies are exempt from Texas sales and use tax when sold or dispensed by an optometrist or ophthalmologist -- including complete …
When a company buys equipment under a resale certificate and leases it to a customer, is sales tax owed on the rental payments or on the outstanding balance when the equipment is returned to the vendor?
Tax is owed on the rental stream — either accrued on the rental payments or remitted as each payment is received — not on any outstanding balance owed to the vendor when the equipment is returned at l…
Can a motorcycle/ATV dealer accept a farmer's or rancher's sales-tax exemption certificate for an all-terrain vehicle without first getting Comptroller approval?
ALERT: as of 01/01/2012, H.B. 268 (82nd Legislature, 2011) requires anyone claiming this agricultural/timber sales-tax exemption to first obtain an ag/timber registration number from the Comptroller a…
Is the Kendall A-V Impulse System, a sequential compression device (SCD) that promotes blood circulation, exempt from Texas sales and use tax?
Yes. The Comptroller ruled that the Kendall A-V Impulse System, a sequential compression device that provides assisted circulation to ambulatory patients by creating pressure to force blood through th…
Can a newsletter publisher buy the envelopes it uses to mail newsletters to subscribers tax-free with a resale certificate?
No. The Comptroller ruled that mailing envelopes are taxable wrapping and packaging supplies under Tax Code Section 151.302(c), so the publisher must pay tax on them even though it can issue a resale …
Is a computer-generated wake-up call service sold to private duty nurses subject to Texas sales tax as a telecommunications service?
Yes. The Comptroller ruled that a service placing computer-generated, recorded wake-up calls to private duty nurses (who confirm receipt by pressing a key) is a taxable telecommunications service. The…
Can a cable television company claim the manufacturing exemption on the electricity it uses to produce and deliver its cable signal?
No. The Comptroller ruled that CATV providers cannot claim the Tax Code § 151.317 manufacturing exemption on electricity used to produce their signal, because cable television service is specifically …
Does a private dining and athletic club have to collect sales tax on dues and food charged to the federal or a state government?
No. The Comptroller ruled that a company providing private dining and athletic club services is not required to collect sales tax on membership dues, food, or services when a federal, federal-related,…
Does building a completely new parking lot or street, or enlarging an existing one, count as tax-favorable new construction rather than taxable repair?
It depends on what you actually do, not on the paving process used. Building a completely new street/parking lot, adding length or width to enlarge an existing one, or fully removing and replacing an …
Does selling an airplane back to the original leasing company and leasing it back under a financing lease or operating lease trigger Texas sales tax?
It depends on the type of lease and the facts. For a financing lease, if the corporation originally paid tax on the plane, the new lease is also a financing lease, and there is evidence the corporatio…
Are drafting charges from a third party taxable when building or remodeling a natural gas pipeline in Texas?
It depends on who creates the design. If a third party is simply handed schematic drawings and specifications and produces drafting work (drawings/blueprints) from them, that firm is a taxable 'drafts…
Does the manufacturing phase-in exemption cover a power shear and the mobile power unit that runs it at a metal recycling yard?
Yes, the shear itself qualifies for the manufacturing phase-in exemption, and the mobile power unit that powers it qualifies too, but only if the power unit is used predominantly to power the shear du…
How does a Texas roll-off box / solid waste collection company source local sales tax — where the box is placed, or where the office takes orders?
Local tax on a roll-off box/waste collection service is based on where the box is placed, not where the company takes the order. The Comptroller told this taxpayer to collect tax at the rate in effect…
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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.