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 qualifying prior-contract exemption survive when unchanged data-processing contracts passed to a surviving company in a liquidation?
Yes. The exemption remained because the contracts were transferred unchanged and the surviving company was bound by the same terms.
How did Texas treat partner-interest transfers, dissolution distributions, and a later computer-equipment sale involving assumed debt?
Partner-interest sales and dissolution distributions were not taxable. The later debt-assumption transfer was a sale but could qualify as an occasional sale.
Was a nonrefundable $1 admission fee to a self-service auto-wrecking yard taxable as an amusement service?
No. The admission fee was not a taxable amusement service when it was nonrefundable and could not be applied to a purchase.
When was rebuilding a damaged aircraft radome or flight surface taxable manufacturing rather than repair?
Near-complete reconstruction was taxable manufacturing on the total charge. Restoring the original item was repair, with separated labor nontaxable and materials taxable.
What Texas sales-tax duties arose when an out-of-state direct seller used demonstrators to take orders at Texas home parties?
The company had to collect Texas tax on distributor sales. Local sourcing depended on delivery or distributor facts; hostess gifts created tax for the retailer, and handling was taxable.
Could manufacturing tenants claim a utility exemption when gas and electricity accounts remained in the commercial landlord's name?
No. Utilities bought through the landlord's account were treated as the landlord's taxable commercial use and part of rent, even when the tenant paid the utility directly.
Which purchases for a bond-financed air-pollution-control facility were exempt from Texas sales tax?
Materials and equipment incorporated into the facility could be bought tax-free with an exemption certificate; items merely used but not installed were taxable.
Did a guaranteed residual-value rider make the described equipment lease a financing lease under Rule 3.294?
No. Based on the transfer, purchase-option, lease-term, return, and residual-value facts presented, the agreement did not meet Rule 3.294's financing-lease definition and was an operating lease.
Was a property manager's fee for overseeing an owner's commercial remodeling contract taxable?
No. The manager acted as the owner's eyes and ears and did not perform the remodeling or daily construction supervision, so the 5% fee was not taxable.
Was bovine somatotropin used to stimulate dairy-cattle milk production exempt from Texas sales tax?
Yes, as medication or a tonic when used exclusively on a farm or dairy to produce agricultural products for sale and bought with an exemption certificate.
How did Texas tax the sale and installation of tires, batteries, shock absorbers, and mufflers under its revised 1988 policy?
Installation labor was not taxable. On lump-sum repairs the repairman paid tax on the part; on separated bills the customer paid tax on parts but not labor.
When could a seller accept resale certificates from janitorial suppliers or carpet cleaners, and which cleaning products qualified?
Resale treatment covered products transferred to customers, not consumed supplies. The seller needed good-faith acceptance without actual knowledge that the sale was not for resale.
How did Texas tax geophysical-data licenses, transferred media, reproductions, and third-party computer processing?
Exclusive and nonexclusive data licenses were not taxable. Some related media charges were nontaxable, while third-party reproduction and computer processing were taxable.
Could a credit-reporting service use a customer's historical taxable percentage for multistate purchases?
Yes. The customer could use prior-year data for an exemption certificate, but the percentage and certificate had to be updated annually and supported by records.
Was an out-of-state computer service that processed Texas-prepared tax-return data subject to Texas use tax?
Yes. Texas classified the host-computer work as data processing and said the per-return service fee was subject to Texas use tax.
Were independent contract programmers taxable when creating a program from scratch or modifying software sold by someone else?
No under this 1988 letter. Texas distinguished nontaxable contract programming from sales of completed software, which were taxable.
Was a dealer participation fee for administering lease-vehicle deductions subject to motor vehicle tax?
No. The fee paid for matching a lease vehicle to an available deduction, calculating taxable value and tax, preparing Form 132-U, and reporting deduction balances. The letter treated those as paperwor…
Did telephone-cooperative patronage allocations retroactively reduce individual sales prices and support sales-tax refunds?
No. Texas treated the allocations as profit sharing rather than renegotiation of specific sales, and cash-flow settlements obscured whose money was credited.
Was a club membership fee taxable when access to trip routing, product prices, and automobile dealer-cost information was a significant benefit?
Yes when bundled. If the information charge was separated from other privileges, only that charge was taxable; as marketed, the entire membership fee was taxable.
Were charges for visiting a customer's home twice daily to feed, water, and walk dogs taxable?
No. Texas treated the described dog-sitting service as nontaxable, but the provider had to pay tax on supplies used to perform it, such as dog food.
Was a separately stated $1 city programming and access fee passed through on cable subscribers' bills subject to sales tax?
Yes. Texas treated the separately stated pass-through fee as part of the cable-television sales price under Rule 3.313(b).
When did a parent's equipment transfer to its wholly owned subsidiary become a taxable sale rather than a nontaxable capital contribution?
No tax applied without consideration, including added stock while ownership stayed at 100%. Assumed debt was consideration and made the transfer a taxable sale unless exempt.
How did Texas tax a manufacturer-installer's permanently affixed airport baggage-handling system?
The system was an improvement to realty and the installer was a contractor. New-construction treatment depended on lump-sum or separated billing; nonresidential remodeling was fully taxable.
Were Texas cellular calls made by visiting out-of-state users taxable when billing went through their home-state cellular provider?
No under the stated facts. The calls were not billed to a Texas telephone number, billing address, or service address, so Texas sales tax did not apply.
Were charges for advertising space on freely distributed laminated message boards taxable as sales of tangible property?
No. Texas treated the business as selling advertising space, while requiring it to pay tax on printing, laminating, or materials used to produce the boards.
What did good-faith acceptance of resale or exemption certificates require from a Texas retailer?
A properly completed certificate protected a seller without requiring an investigation, unless the seller actually knew the claim was invalid or the item could not be resold.
Were labor charges for aircraft inspection estimates, resulting work, general service, repair, or remodeling taxable?
No. Texas said the aircraft labor charges were not taxable, while materials used in repair, remodeling, maintenance, or restoration were taxable.
How did Texas tax electronic transmission of income-tax returns to the IRS and monthly bookkeeping or profit-and-loss preparation?
Electronic filing was taxable telecommunications, with local tax based on origin. Franchise transmissions were resale transactions; monthly bookkeeping and P&L work were not taxable.
How did Texas tax contract gauging, written reports, greasing, maintenance, and repair when billed separately or together?
Gauge reading and reports were not taxable; greasing, maintenance, and repairs were taxable. A lump-sum combination was fully taxable unless nontaxable work was separated.
Was teleprompting taxable as data processing or equipment rental when the provider supervised the equipment?
No. Texas found teleprompting was not data processing, and provider-supervised equipment meant the customer received a nontaxable service rather than a rental.
Were enteral and parenteral feeding systems and their related supplies exempt as prosthetic devices?
Yes for the systems and supplies directly related to and integral to them. The exemption applied without a prescription but required a specific exemption certificate.
When was Texas use tax due on foreign equipment stored in a Texas bonded warehouse before delivery to a job site?
Tax was deferred while the equipment remained in the bonded warehouse and became due when it was removed for use. A direct-pay permit offered a separate inventory rule.
Was a water district's charge for measuring and reporting landowners' water depletion taxable as an information service?
No. Texas said the described water-depletion information was not taxable as an information service under Rule 3.342(d)(2).
How did Texas tax advertising on free driving-guide maps, gift certificates accepted for ads, and later sales of the maps?
Advertising charges were not taxable, but the publisher paid tax on production. Gift certificates were taxed when redeemed for taxable items, and map sales were taxable.
When was seismic data delivered on tape nontaxable information versus a taxable sale of copy tapes?
A tape carrying newly furnished nontaxable seismic information was not taxable. Copy tapes of information the customer already owned were taxable tangible property.
Were short-lived vacuum cleaners used to remove oil and metal chips from manufacturing machinery exempt production equipment?
No. Even though they lasted under six months, the vacuum cleaners were taxable because they were not used in the actual manufacturing process.
Was the annual fee for the described preferred vision-care plan subject to Texas sales tax?
No. Texas said the annual fee charged for the preferred vision-care plan was not taxable under the facts submitted.
How did Texas tax an advertising agency's outsourced audio masters, tape copies, shipping, print production, commissions, and agent purchases?
Client-specific master creation was not taxable, but tape copies and related Texas delivery were taxable. Agent status determined whether the agency paid suppliers or bought for resale.
Which pipeline surveying, drafting, staking, permit, easement, and right-of-way charges were taxable when separately stated?
As-built and boundary-related surveys were taxable. Certain drafting, contractor drawings, centerline staking, permit drawings, and right-of-way negotiation could be nontaxable if separated.
How did Texas tax a provider's hotel calling-card service, purchased transmission time, customer billing, and installed equipment?
The provider could buy transmission for resale, while billing phone companies remitted customer tax. Provider-owned hotel equipment and other Texas property were taxable to the provider.
Was electricity used by one subsidiary to process seismic data gathered by another subsidiary exempt as exploration?
No. Because the processing subsidiary did not gather the data, Texas found it was not itself engaged in exploration and taxed the computer electricity.
When were hotel housekeepers supplied by a staffing company nontaxable temporary help, and were permanent-placement fees taxable?
Fill-in or peak-period housekeepers were not taxable; an ongoing contracted housekeeping staff was taxable. Permanent professional-placement fees were not taxable.
Did Texas grant governmental sales-tax exemption to a state-authorized transportation association?
Yes. The association could buy, lease, or rent taxable items tax-free for its exempt function with a certificate and seek refunds of tax paid on those items.
Were Myotrac biofeedback units exempt therapeutic devices when sold to an individual under a practitioner's prescription?
Yes. Texas treated Myotrac units as therapeutic devices exempt for prescribed sales, leases, or rentals to individuals, but taxable when sold to providers or institutions.
Was a fee for a discount-service membership card taxable, and who collected tax on members' discounted purchases?
The membership fee was not taxable or an amusement charge. Participating merchants collected tax when members bought taxable items at the discounted price.
How did Texas tax installed erosion-control systems, nonresidential repair, related real-property services, and products sold for customer installation?
Permanently installed systems followed contractor rules. Nonresidential repair was fully taxable, related real-property services were taxable, and direct product sales were taxable.
How did Texas's 48-month aggregate method treat equipment sold, traded in, scrapped, or abandoned, and did one rock crusher qualify as an occasional sale?
Sold equipment left the formula at sale; traded, scrapped, or abandoned equipment stayed for 48 months. The single rock crusher was not an occasional sale of a business segment.
How did Texas tax hot-tapping labor on plant transmission lines and other pipe, tanks, or pressurized vessels?
Plant-line hot taps were nonresidential real-property repair or remodeling, with labor taxable from January 1, 1988. Tangible-property repair labor was already taxable.
Is the pay to a part-time worker in my department subject to Texas sales tax, and when does hiring outside help become taxable?
The part-time worker's pay is not taxable. Because she works on an hourly basis under your direction, using your supplies and equipment, she is acting as your employee for sales-tax purposes, so her s…
Is custom contract programming taxable in Texas, and what about the compilers, languages, and library modules a programmer uses?
Custom contract programming — designing and building a system specifically for a client 'from scratch' — is not taxable, and the programming languages, compilers, and other software the programmer use…
Which fees, sales, and services at a private hunting and fishing club are subject to Texas sales tax?
Memberships, annual dues, hunting and fishing fees, guide services, dog boarding and training, and cleaning members' game are not taxable. Taxable items include shotgun shells, logo hats and merchandi…
Is hydraulic dredging of dirt, mud, silt, and sand from channels, rivers, ponds, and boat slips a taxable service in Texas?
Yes, generally. The hydraulic dredging service described in the taxpayer's brochure is a taxable real property service under Rule 3.356, which treats solid waste removal as a taxable service. However,…
For Texas franchise tax, at what value does a corporation report property an owner contributed tax-free in exchange for stock — federal tax basis or fair market value?
It depends on the corporation's surplus. Under Tex. Tax Code § 171.109(c), a corporation whose surplus is less than $1 million may compute its surplus using the same method it uses for its federal inc…
Does a private corporation that remodels and operates a detention facility for a city owe Texas sales tax on its purchases and on the remodeling work?
Yes on its inputs, even though the service itself is not taxable. A private corporation that operates a detention facility for a city is providing a nontaxable service to the city, and the city in tur…
Was a multiple-sample blood-collection needle and vacuum container exempt as a hypodermic needle or syringe?
No. Although Texas exempted medical hypodermic needles and syringes, it treated the combined multiple-sample needle and vacuum collection container as taxable.
Did a golf cart modified to transport a totally disabled person qualify for Texas's prosthetic-device exemption?
No. Texas said the golf cart was not prosthetic medical equipment even after modification, so the purchaser was not entitled to a tax refund.
Were fees for combining advertisers' videos and playing copies in malls and airport lounges taxable?
No. Texas treated the display service as nontaxable, but the provider had to pay tax on monitors, dubbing equipment, blank tapes, and other inputs.
Were advertising charges in a home-shopping publication taxable, and who paid tax on its production?
The advertising charges were not taxable. The publisher paid tax on production materials and supplies and on outside printing charges.
Can a provider of taxable amusement services buy the gas and electricity it uses tax-free in Texas?
No. Utilities used to provide taxable amusement services are themselves taxable — the Legislature chose not to exempt utilities used to provide amusement services, and gave no utility exemption to any…
Was a 10% handling charge added to a third party's taxable seismic-tape copying cost itself taxable?
No. The geophysical provider correctly paid tax to the copying vendor, but its 10% handling add-on was part of its nontaxable service.
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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.