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 manufacturer rebate received after buying a battery reduce the taxable sales price?
No. The full price remained taxable because the rebate came later. Cash discounts, coupons, or store rebates reduced tax only when taken at the time of sale.
When does adding square footage or finishing out space in an existing Texas structure count as 'new construction'?
The work is treated as new construction. New construction includes all new improvements to real property, including finish-out work done at any time before an area is first occupied (for example, fini…
Are services a parent corporation provides to its subsidiaries — and services one subsidiary provides to a joint venture — subject to Texas sales tax?
The parent corporation's services to its two subsidiaries are not taxable, but only if all the entities report to the IRS on a single consolidated income tax return for the tax year the transactions o…
Which charges for surveying and drafting to locate a pipeline right-of-way are subject to Texas sales tax, and which are not?
Charges to establish a pipeline right-of-way are taxable surveying of real property, because the work determines the boundaries of the right-of-way and of the land the pipeline crosses. Taxable work a…
Is the electricity used in timeshare condominiums that are occupied for less than 30 days at a time taxable in Texas?
Tax is due. Electricity used in the timeshare condos does not qualify as exempt residential use under Rule 3.295 when a unit is occupied for periods of less than 30 days, so the electricity consumptio…
Does Texas sales tax apply to the sale and hauling of dirt, sand, caliche and rock, and does it matter whether the material has been processed?
As of June 13, 1988, Texas no longer taxes the sale or transportation of unprocessed materials such as sand, dirt, and gravel. Materials that have been processed — crushed, mixed, or subjected to any …
Can a Direct Payment Permit holder get a refund of only the local (city) sales tax it paid a seller, using an exemption certificate?
No. A buyer that holds a Direct Payment Permit cannot obtain a refund of only the local sales tax it paid to a seller; the exemption certificate it issued for that purpose is not valid, and the local …
Are the data-processing services a jointly owned title plant buys taxable, and are the shareholders' cost-share reimbursements taxable too?
The data-processing services are taxable to the title plant when it purchases them. When the jointly owned title plant later charges its title-insurance shareholders for their share of those costs, th…
Which dirt, sand, gravel, and limestone products are taxable in Texas, and does washing, sizing, crushing, or mixing make a difference?
Materials sold in their natural state are not taxable, and neither is the transportation charge — this covers sand, fill dirt, and top soil dug from the earth, gravel that has only been washed and scr…
Is a tour that is primarily transportation to and from a destination a taxable amusement service in Texas?
No. Where a tour is primarily transportation to and from a destination — here, a ranch to which customers buy their own admission tickets and pay tax on those tickets separately — the tour is not an a…
Are charges for boat lift and boat ramp services — used to launch and reload boats — taxable amusement services in Texas?
No. Charges for a boat lift — a hoist operated by the business to lift customers' boats for launching and re-loading — and for boat ramp services that let customers use the ramp to launch and load the…
Is the transportation charge to return a repaired trailer taxable, and does it matter whether the repaired item is a motor vehicle?
The transportation charge to return a repaired trailer is not taxable. Because a tube trailer is a motor vehicle, its repair labor is nontaxable and the separately stated parts are taxable — and the c…
When a contractor assembles or installs lockers, racks, and similar items, which charges are subject to Texas sales tax?
It turns on assembly versus installation. If you assemble tangible personal property — such as bolting together locker parts, building a wire cage, or hooking together pallet/drive-in racks — the tota…
Is the merchandise a security company buys during secret (mystery) shopping taxable, and how should it be billed alongside the taxable security service?
The merchandise itself is not taxed if it is bought and then returned to the client for a refund — that is treated as a return of merchandise, separate from the taxable surveillance and polygraph serv…
Does Texas use tax apply to equipment brought in from out of state, and what is the one-year exception?
Equipment brought into Texas from out of state is subject to Texas use tax on its purchase price. You get credit against the Texas tax for sales or use tax legally due and paid to another state on non…
Does Texas sales tax apply to frac tank rentals and the set-up, transportation, and related charges billed with them?
Frac tank rentals are taxable in Texas, and so are the set-up charges (mobilizing, transporting, testing, connecting, and disconnecting the tanks) because those are services connected with the rental.…
Is the labor to install parts like batteries, shocks, and mufflers during a motor vehicle repair subject to Texas sales tax?
No, under the rule change described in this September 1988 policy letter. The Deputy Comptroller said batteries, shock absorbers, mufflers, and similar items sold as part of an automobile repair, toge…
Are claims-adjusting services an insurance agency performs for an insurance carrier taxable in Texas?
Yes. Claims-adjusting services an insurance agency performs for an insurance carrier are taxable insurance services under Rule 3.355. Insurance coverage (for which premiums or sales commissions are pa…
What tax exemptions applied to Texas university employees' hotel stays and vehicle rentals on official business?
The letter allowed an official-business employee to give a hotel a state-tax exemption certificate, with local hotel tax still due. STAR later clarified the vehicle rule: an employee may issue a renta…
Are freight charges billed directly by a third-party carrier to the buyer part of the taxable sales price in Texas?
No. The Comptroller agreed that transportation charges a third-party carrier bills directly to the purchaser are not included in the taxable 'sales price' — so no sales or use tax is due on them — whe…
In a nonresidential remodeling job, which installation, freight, and service charges are taxable, and which stand-alone services can be excluded?
In a nonresidential remodeling job (here, a hotel renovation), the renovator charges tax on the total contract price, including installation, warehousing of construction materials, and freight — minus…
Is the sale of sand, dirt, and gravel taxable in Texas, and does washing, sorting, or mixing change the answer?
The sale of unprocessed sand, dirt, and gravel is exempt from Texas sales and use tax. Washing and sorting these materials is not considered processing, so they stay exempt. But crushing, mixing, or c…
Is repair work on a pleasure yacht taxable in Texas, and when does the commercial-vessel exemption apply?
Yes — repairing a pleasure yacht is taxable. Pleasure yachts are tangible personal property under Rule 3.292, so a repairman is a retailer who must hold a tax permit and collect tax on the entire char…
Is the rental of equipment like a sand and gravel plant taxable, and does leasing it together with real property change the answer?
Renting tangible personal property such as a sand and gravel plant is taxable. But the lease is not taxable if the same contract also includes the lease of real property — for example, leasing the pla…
Do professionals like lawyers, engineers, and architects have to charge Texas sales tax on extra copies of documents they give clients?
No. In this internal Comptroller policy memo, the agency states it will not require professionals — such as lawyers, engineers, and architects — to hold a sales tax permit and charge tax on additional…
How does Texas decide whether sand, gravel, and similar materials — and the charge to deliver them — are taxable?
Materials that are only washed or sorted count as unprocessed — the material and its delivery charge are not taxable, however billed and whether the customer picks it up or the seller delivers it. Any…
Does Texas tax charges to access a foreign company's electronic mailbox, and does the company owe Texas franchise and sales tax?
Charges to access a foreign company's electronic mailbox are a telecommunications service, and Texas sales tax applies when the accessing call is placed from a point within Texas — regardless of where…
Is a hospital's purchase of an infant incubator exempt from Texas sales tax?
Yes. A hospital's purchase of an infant incubator is not subject to Texas sales tax because the incubator qualifies as a prosthetic device under Comptroller's Rule 3.284. The incubator maintains an in…
Does a telemarketing charge trigger Texas sales tax, and does soliciting Texas clients from out of state create nexus for those clients?
An out-of-state company's charge to clients for marketing their goods and services by telephone is not itself taxable, so the telemarketer does not need a Texas sales tax permit to solicit accounts. S…
Are transaction-processing services that reformat a customer's own data into reports taxable data processing or a nontaxable information service in Texas?
Reformatting a Texas customer's own transactions into reports that only that customer can use is a taxable data processing service under Rule 3.330(a) — not a nontaxable information service. But a 'lo…
How did Texas tax a leased tractor-trailer containing MRI equipment when the equipment was attached or separately purchased?
The Comptroller's internal response treated the MRI tractor-trailer as a motor vehicle regardless of its medical equipment or function. Equipment attached when the lessor bought the trailer was includ…
When one contract covers both new construction and remodeling, and includes demolition, which charges are taxable in Texas?
When a single contract covers both new construction and remodeling/repair, the taxable and nontaxable portions must be separately stated or the entire project is treated as taxable. Demolition work in…
Is the freight a printer/distributor charges to ship stored business forms to a customer's offices taxable, even when billed separately later?
Yes. Under the revised Rule 3.303, transportation charges billed by the seller to the customer are taxable. A business-forms distributor that stores a customer's forms and later ships portions to the …
Is a refundable country-club or athletic-club initiation fee taxable in Texas, and what about the membership transfer fee?
A refundable initiation fee for membership in a country club or athletic club is not taxable in Texas, but the club's membership transfer fee is taxable. The Comptroller's Tax Policy Committee reached…
Are freight and installation charges taxable in Texas when equipment is sold delivered and given its final assembly at the customer's location?
When equipment is sold to be delivered and installed, and its final assembly happens at the customer's location, the separately stated freight and installation charges are taxable in Texas. The Comptr…
Are powdered drink mixes like Kool-Aid taxable in Texas after the food exemption was repealed?
Powdered drink mixes such as Kool-Aid are taxable in Texas. The exemption that once covered these mixes was repealed effective October 1, 1987, so their sale has been subject to sales tax since that d…
Are rent-to-own contracts taxable operating leases in Texas, or exempt 'prior contracts' or conditional sales?
The Tax Policy Committee determined that the taxpayer's 'rent to own' contracts — which the taxpayer had argued were actually 'conditional sales' — are operating leases, and they do not qualify for ex…
Are hyperbaric oxygenation, colon hygiene, and cranio-sacral therapy sold for a separate fee by a Texas health club taxable?
Three services a health club offers members for a separate fee are all nontaxable in Texas. Hyperbaric oxygenation and a colon-hygiene session are each nontaxable personal services, and cranio-sacral …
Are the fees a shared computer reservation system charges hotel and vehicle-rental affiliates taxable data processing, or a nontaxable information service?
The reservation-system operator (CORP X) is not providing taxable data processing services to the reservation companies (CORP A and CORP B). It is providing information, but information gathered or co…
Are high-sugar snacks like fruit roll-ups, cookies, and sugary cereals taxed as candy in Texas, or exempt as food?
Under the 1988 rules, candy is taxable while food and food products are exempt, and the line between them turns not just on ingredients but on marketing intent and other criteria — chocolate kisses (c…
Are enteral and parenteral feeding systems and their supplies exempt from Texas sales tax as prosthetic devices?
Yes. Enteral and parenteral feeding systems are considered prosthetic devices and are therefore exempt from Texas sales tax under Rule 3.284, because they perform the function of one or more vital org…
Is moving a customer's sign to a new location taxable in Texas, and how are servicing, re-facing, and lettering signs taxed?
Simply moving a customer's own sign from one location to another — where you do nothing to the sign but relocate it — is nontaxable third-party transportation, and the re-installation and hole-digging…
How does Texas tax coupons and deli food sales, and what transition relief applied to grocery retailers?
Texas treats all coupons — manufacturer's or store's — as a price discount that reduces the taxable sales price. The Comptroller gave retailers until October 1, 1988 to comply (time to reprogram scann…
Is testing commercial underground gasoline storage tanks taxable in Texas?
Testing commercial underground gasoline storage tanks is a nontaxable service in Texas. The equipment used to provide that testing service is, however, taxable to the service provider — the provider p…
Does a 'Write Your Own' flood insurance company owe Texas sales tax on claims-processing services it buys, even though the federal government reimburses it?
A 'Write Your Own' (WYO) company in the National Flood Insurance Program must pay Texas sales tax on the claims-processing and claims-adjustment services it buys, even though the federal government re…
Is resurfacing tennis courts and playgrounds — applying colored coatings and coal-tar sealant, and repairing asphalt or concrete — taxable in Texas?
Repairing existing asphalt and concrete areas, applying colored materials to tennis courts and play areas, and applying protective coatings like coal-tar pitch emulsion are all taxable in Texas — unle…
Is stone that a company digs from the earth and cuts to size, then sells uncrushed, taxable in Texas?
Sales tax is due on cut stone. A company that digs stone out of the earth and cuts it to different sizes — selling it without washing, screening, or crushing — has produced tangible personal property,…
How does Texas tax software licensing, customization, installation, and maintenance, and when is related engineering design nontaxable?
Licensing a computer program to a customer is taxable in Texas, and tax is due on the total charge — including customizing, installing, and maintaining it — as is a license to technology conveyed thro…
Is a weather-recording device used to time crop spraying taxable in Texas, or can a farmer buy it under the agricultural exemption?
A device that records weather conditions to determine the best time to spray crops is taxable tangible personal property in Texas, but it qualifies for the agricultural exemption when used on a farm o…
Is testing and balancing air-conditioning and heating systems taxable in Texas, and does separately stating the testing matter?
Balancing air-conditioning and heating systems is not taxable when it is part of new construction or a residential renovation, but the whole lump-sum charge is taxable when done for a non-residential …
Are storage charges taxable in Texas — for fur garments, motor vehicles, and other items?
Storing fur garments and storing motor vehicles are specifically taxable services in Texas. But a charge to store other kinds of items — when it is not connected with the sale, lease, or rental of the…
Is a grease-control service that adds bacteria to a plumbing system to break down grease taxable in Texas?
A grease-control service that introduces grease-digesting bacteria (Mitey-Bac G) into a plumbing system connected to a sewer is not taxable in Texas. It is not taxable garbage or solid-waste collectio…
Is collecting and transporting materials taxable in Texas when the customer keeps control, and does it matter whether the materials are 'waste'?
Whether collecting and transporting materials is taxable in Texas turns on what the materials are. If they are 'waste,' the collection fee is taxable — and it stays taxable even though the customer ke…
For a car wash, fuel, and quick-oil-change business in Texas, which charges are taxable and which are not?
For a combined car wash, fuel, and quick-oil-change business, the Comptroller said not to collect sales tax on car wash receipts, gasoline sales, or lump-sum quick-oil-change and wiper/belt/hose-repla…
Is collecting and disposing of industrial solid waste taxable in Texas after October 1, 1987, and how do customers claim the exemption and get refunds?
Collecting industrial solid waste — as defined by the Texas Solid Waste Disposal Act (Art. 4477-7), except waste that is garbage or municipal solid waste — stopped being taxable in Texas effective Oct…
Is gutting a mall space down to bare walls and slab, then finishing it out, taxable remodeling or nontaxable new construction in Texas?
Stripping a previously occupied mall space down to its bare walls and slab and then finishing it out for a new tenant is taxable remodeling in Texas — not new construction. Remodeling is the replaceme…
Is offshore corrosion-monitoring equipment exempt as drilling equipment in Texas, and when is delivery to a Texas onshore location taxable?
Stray-current corrosion-monitoring systems (the Weld-Alarm and Pola-trak) and the I-Clip storage hardware are taxable in Texas — they are not 'drilling equipment' under Rule 3.332, and they aren't use…
Can a Texas school treat its yearbook sales as its one-day tax-free fundraiser, and what happens to other sales and to delivery timing?
A Texas school or educational organization may elect its yearbook sales as its once-a-year, one-day, tax-free fundraiser — a policy in place since 1984, regardless of the organization's internal order…
Are data-processing services an owner provides to his own S corporations exempt in Texas as transactions between affiliated entities?
Data-processing services that an individual provides to Subchapter S corporations in which he owns more than 50% of the stock are taxable in Texas. The Tax Code § 151.346 exemption for services perfor…
Which surveying services are taxable in Texas, and how should mixed taxable/nontaxable survey jobs be billed?
In Texas, the taxable part of 'surveying' is work that establishes or recovers boundaries; services that don't involve boundaries — such as topographic surveys — are not taxable. Firms doing both must…
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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.