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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When a state-contracted data center operator procures software licenses on behalf of tax-exempt government agencies, does the operator owe sales tax on those purchases?
No — when a company operating a state data center under contract procures business application software at a governmental customer's request, and the software vendor licenses the software directly in …
When a landlord builds two new K-8 charter-school campuses and leases them to the school for 25 years each, can the construction contracts qualify as tax-exempt, and can the landlords' suppliers avoid paying sales tax on materials used in the build?
Yes — build-to-suit leases under which landlords construct two new K-8 charter-school campuses and lease them to a tax-exempt charter-school operator for 25-year primary terms qualify as exempt constr…
When a landlord builds a new charter-school campus and leases it to the school for 25 years, can the construction contract qualify as tax-exempt, and can the landlord's suppliers avoid paying sales tax on materials used in the build?
Yes — a build-to-suit lease under which a landlord constructs a new charter-school campus and leases it to a tax-exempt charter-school operator for a 25-year primary term qualifies as an exempt constr…
When a landlord builds a new charter-school campus and leases it to the school for 25 years, can the construction contract qualify as tax-exempt, and can the landlord's suppliers avoid paying sales tax on materials used in the build?
Yes — a build-to-suit lease under which a landlord constructs new charter-school campuses and leases them to a tax-exempt charter-school operator for a 25-year primary term qualifies as an exempt cons…
For Texas sales tax, is labor to replace or abandon a natural gas pipeline taxable real property repair, or non-taxable new construction/demolition?
It depends on depth and method, ruled across twelve fact scenarios: labor to lay a new pipeline in a new trench beside the old one, or at a depth at least one-third greater or shallower than the old p…
For Texas sales tax, is a cloud-based business texting platform a taxable data processing service, and is a separately billed printer rental fee taxed the same way?
Two different tax treatments for two separately billed charges — a cloud-based (SaaS) texting and messaging platform that stores, retrieves, and analyzes customer message data is a taxable data proces…
For Texas sales tax, is a restaurant's monthly charge for tabletop ordering devices a taxable equipment rental or a nontaxable service, and are patron fees for premium content on those devices taxable?
Both charges are taxable, for different reasons — the restaurant's monthly per-unit charge to its vendor for tabletop ordering devices is taxable as the rental of tangible personal property (the 'esse…
Does a franchised car dealer owe Texas sales tax on a ground lease for the land where it operates its dealership and stores vehicle inventory?
No — a franchised motor vehicle dealer's ground lease of the real property where it operates its dealership (including storing inventory per TxDMV licensing requirements) is a nontaxable lease of real…
Does a cash-basis landscaping company owe sales tax when it collects a refundable customer deposit, or only later when it invoices completed work?
No, not at the time the deposit is received — a seller using the cash basis of accounting does not have to report and remit sales tax on a refundable customer deposit when it's collected; tax is due o…
Can an LLC buy an aircraft tax-free as a sale for resale and lease it back to its own parent company, and does later using the aircraft itself trigger sales tax?
Yes, with a one-year condition — a company that buys an aircraft to lease it to another party (even a related party, like its own parent) qualifies for the sale-for-resale exemption from sales/use tax…
Does selling recovered salts and minerals as a byproduct disqualify a water desalination company's equipment purchases from the Texas desalination sales tax exemption?
No — a company's equipment, services, and supplies used in desalinating water remain exempt from Texas sales and use tax under the desalination exemption even if the company sells the recovered salts …
Are 'dial before you dig' underground-utility notification centers providing a taxable information service to the utility operators who fund them?
No — a statewide 'dial before you dig' notification center that alerts underground utility operators when excavators plan to dig near their lines is NOT providing a taxable information service, even t…
Is a dealership membership program that pays a car buyer's depreciation loss (beyond their insurance settlement) after a total loss or theft taxed as insurance, and does the benefit affect motor vehicle sales tax on the replacement car?
Three separate answers for three separate charges — the membership fee a car buyer pays to join a dealership's vehicle depreciation-protection program is NOT a taxable insurance service (because the p…
Is a lender's insurance-tracking vendor providing a taxable data processing or insurance service when it monitors whether borrowers maintain required hazard/flood insurance?
No — a company that monitors whether a lender's borrowers maintain required hazard and flood insurance coverage, using its professional insurance-industry knowledge plus an automated system to process…
When several co-owners jointly act as landlord under a single 25-year build-to-suit lease for a two-campus charter-school facility, does the § 151.311 construction exemption still apply?
Yes. The Comptroller ruled that a build-to-suit lease and purchase option covering two charter-school campuses, where several parties collectively act as "Landlord" under a single 25-year primary term…
When a single landlord builds one facility housing two charter-school campuses and leases it for 25 years with a purchase option limited to years one through four, does the § 151.311 construction exemption still apply?
Yes. The Comptroller ruled that a single build-to-suit lease covering two charter-school campuses built by one landlord and leased back for a 25-year primary term — with the school's purchase option l…
If a charter school already holds legal title to its land but ground-leases it to a landlord entity for construction financing, then leases back the remodeled/expanded campus, does the § 151.311 construction exemption still apply?
Yes. The Comptroller ruled that a build-to-suit lease qualifies as an EXEMPT CONTRACT under Tax Code § 151.311 even where the charter school itself holds legal title to the land but grants a ground le…
If a charter school's build-to-suit lease runs through a chain of separate holding entities (one created just to shield against environmental liability), does the § 151.311 construction-contract exemption still apply?
Yes. The Comptroller ruled that a build-to-suit lease qualifies as an EXEMPT CONTRACT under Tax Code § 151.311 even though the property sits behind two layers of separate holding entities — a non-qual…
When a charter school relocates a campus by having a for-profit landlord build a new facility and lease it back for 30 years, with an option to buy at any time, does the construction contract qualify as a tax-exempt improvement to realty?
Yes. The Comptroller ruled that a build-to-suit lease under which a for-profit landlord constructs a relocated charter-school campus to the school's specifications, then leases it back for a 30-year p…
When a landlord builds a new high-school campus for a charter school and leases it back for 25 years with a purchase option, does the construction contract qualify as tax-exempt under § 151.311?
Yes. The Comptroller ruled that a build-to-suit lease under which a landlord constructs a new high-school campus to a charter school's specifications and leases it back for a 25-year primary term (wit…
A charter school's build-to-suit lease was amended to stretch its term from 20 to 25 years shortly before the ruling request -- does that longer, amended term satisfy the § 151.311 two-prong exemption test?
Yes. The Comptroller ruled that a charter school's build-to-suit lease — which the parties AMENDED on June 12, 2015 to increase its term from 20 years to 25 years — qualifies as an EXEMPT CONTRACT und…
Texas Private Letter Ruling 201507252L: For the 'large' data center exemption (as opposed to the standard qualifying-data-center exemption), when must the $500 million capital-investment agreement be made, how long does the exemption last, and what equipment and jobs qualify?
The Comptroller ruled on Texas's separate, larger "large data center project" exemption under Tax Code § 151.3595 (distinct from the standard § 151.359 qualifying-data-center exemption): the taxpayer'…
Is the sale of an extended warranty or service contract on a motor vehicle taxable in Texas, and can the warranty provider buy replacement parts tax-free using a resale certificate?
No, the sale of an extended warranty or service contract on a motor vehicle isn't itself subject to Texas sales/use tax or motor vehicle tax, whether the vehicle is sold or leased -- but the used-car …
Is a 'bead blasting' service that removes stubborn scale build-up from swimming pool tile ordinary nontaxable pool cleaning/maintenance, or taxable real property restoration -- and does the answer change for a residential vs. a commercial pool?
Restoration, not routine cleaning -- and the tax result differs by property type. The Comptroller ruled that a 'bead blasting' service (using microscopic glass beads sprayed by an air compressor to re…
Amended Texas Private Letter Ruling: Is converting pipeline-quality natural gas into liquefied natural gas (LNG) at a new Texas LNG plant exempt manufacturing 'processing,' or is it all just excluded 'transportation' activity because the gas is being prepared for overseas shipment?
AMENDED RULING (corrects typographical errors in a December 19, 2014 original). At least some of the activities that convert pipeline-quality natural gas into liquefied natural gas (LNG) at a planned …
Is a hospital vendor-credentialing service -- compiling vendor documents and issuing access badges -- a taxable 'data processing service' in Texas, and can the credentialing company buy the access badges tax-free?
Taxable data processing, not a nontaxable security service. The Comptroller ruled that a company's healthcare-facility vendor-credentialing service -- compiling vendor-submitted documents and accredit…
Is a company's fee for representing claimants in Social Security disability applications and appeals a taxable 'insurance service' in Texas?
No. The Comptroller ruled that a managed-care company's division providing Social Security disability (SSDI) representation services -- completing applications and appeals, gathering medical records, …
When a company installs a custom VIP interior into a 'green' (interior-less) aircraft that a customer already bought from the manufacturer, is that manufacturing (with its sales-tax exemption) or taxable remodeling -- and does it matter that the FAA issues a new Standard Airworthiness Certificate only after the interior goes in?
Remodeling, not manufacturing -- and an FAA airworthiness certificate or pilot's license proves nothing about Texas tax status. The Comptroller ruled that a company hired to design and install a custo…
If a charter school sells undeveloped land it already owned to a single landlord LLC, who then builds a new campus and leases it back for 25 years, does that sale-leaseback structure qualify for the § 151.311 construction exemption?
Yes. The Comptroller ruled that a build-to-suit lease and purchase option qualifies as an EXEMPT CONTRACT under Tax Code § 151.311 where the charter school first SOLD undeveloped land it already owned…
If a charter school already owns undeveloped land it can't afford to build on, SELLS it to landlord entities who then build the campus and lease it back for 25 years, does that sale-leaseback financing structure still qualify for the § 151.311 construction exemption?
Yes. The Comptroller ruled that a build-to-suit lease and purchase option qualifies as an EXEMPT CONTRACT under Tax Code § 151.311 even where the charter school first SOLD undeveloped land it already …
When a 17-campus charter-school network has three out-of-state LLCs jointly acquire land and build a new campus, then lease it back for 25 years with a purchase option in years 2-5, does the construction qualify as exempt under § 151.311?
Yes. The Comptroller ruled that a build-to-suit lease and purchase option under which three Idaho LLCs, acting jointly as "Landlord," acquire previously unimproved land and construct a new campus to a…
When a landlord renovates a former retail building (a furniture store) into a charter-school campus and leases it back for 30 years, does that renovation contract qualify as exempt under Tax Code § 151.311 -- the same as new ground-up construction?
Yes. In what the Comptroller describes as a question of first impression not previously addressed with these precise facts, the Comptroller ruled that a build-to-suit lease and purchase option under w…
For an existing Texas cloud-computing data center planning a 100,000+ square foot expansion, seven questions: does hosting customer data violate the exemption's single-occupant rule; is the pre-2013 existing center itself exempt; can the expansion qualify on its own; can shared jobs/investment/electricity/equipment be split between the old and new parts; do contractor-staffed jobs count; does providing some telecom service disqualify the project; and is a backup generator outside the building eligible?
A foundational, seven-question ruling on the qualifying data center exemption (Sec. 151.359). Key holdings: (1) hosting customers' data and letting them run their own programs on the operator's own se…
When a state university system (the exempt party) is the LANDLORD and a non-exempt LLC is the TENANT building student housing on university land -- the reverse of the usual exempt-tenant/taxable-landlord setup -- does the construction still qualify as an exempt § 151.311 contract, and who can issue the exemption certificates down the contractor chain?
Yes, exempt -- but under a different legal test than the familiar two-prong lease-term test. The Comptroller ruled that a 514-bed student-housing facility built on Texas A&M University System land und…
Can a PRIVATELY owned hotel next to Houston's George R. Brown Convention Center still qualify as a 'qualified hotel project' entitled to a 100% state tax rebate for 10 years, even though a private company (not the city) owns the hotel itself?
Yes. The Comptroller ruled that a Houston convention-center hotel PRIVATELY owned by an LLC can still qualify as a 'qualified hotel project' entitled to the 10-year, 100% state sales/use and hotel occ…
For a city developing two separate convention-center-area hotel projects (with ancillary restaurants/shops), when can each qualify as a separate 'qualified hotel project' entitled to a 10-year 100% state and local tax rebate, and how do ancillary businesses sign up for and split that rebate?
A single, combined ruling covering two separate City of Irving hotel developments (the 'Northshore Project' and the 'City Project'). Key holdings: (1) two hotels within 1,000 feet of the same conventi…
A hotel and its on-site restaurant are commonly owned but separately incorporated. Guests can pay one bundled price for room-plus-meal (with the hotel doing an internal 'book transfer' payment to the restaurant), or a lower room-only price. Is hotel tax or sales tax due, is the internal book transfer itself taxable, and can the hotel give the restaurant a resale certificate for it?
Three related answers for this commonly-owned hotel-and-restaurant American Plan setup: (1) if the guest's invoice does NOT separately state the meal charge, hotel occupancy tax is due on the ENTIRE b…
A new commercial hunting lodge will charge guests for overnight rooms, meals, guided hunts, and gear rental/sales. Which parts are hotel occupancy tax, which are sales tax, and which aren't taxed at all?
A four-way split depending on what's charged and how it's billed. LODGING is subject to state HOTEL OCCUPANCY TAX (6%) under Tax Code Sec. 156.001's 'hotel' definition. If lodging, meals, and hunts/gu…
Which Texas tax applies to a park-model trailer: motor vehicle tax, manufactured-housing tax, or ordinary sales and use tax?
STAR says the rule changed on November 14, 2013: park models became subject to Chapter 152 motor vehicle tax and left Chapter 151 sales tax. Historically, the 2008 letter treated qualifying industrial…
For Texas sales and mixed beverage tax, are restaurant/bar gratuities taxable, and does it matter whether they're voluntary tips or a mandatory service charge?
It depends on whether the gratuity is voluntary or mandatory, and who keeps it — per this document's Gratuities section, voluntary tips (whether fully passed to the server or partly retained by the re…
How do Texas tax rules differ for street-legal motorcycles and off-road units when dealers charge fees, warranties, freight, and setup labor?
Street-legal units were taxed under Chapter 152, while dirt bikes, ATVs, go-karts, and similar off-road units remained Chapter 151 property. That split changed the taxability of documentary fees, inve…
A single-member LLC is disregarded for federal tax and shares its tax-exempt owner's status - is it exempt from Texas franchise tax and sales tax too?
The LLC is exempt from the Texas franchise tax as a public interest organization under Tax Code Sec. 171.057, but Texas sales tax has no comparable exemption, so the LLC is NOT exempt from sales and u…
When a hotel charges for audio/visual equipment (microphones, projectors, screens) used at a meeting, banquet, or seminar, is that sales tax or state hotel occupancy tax -- and does it matter whether the hotel is also catering the food and whether the charge is itemized separately?
It's never a tax-free equipment 'rental' either way (a hotel's A/V equipment charge is NOT treated as renting tangible personal property, since guests never get possession or control of the equipment …
An oilfield-services rental company rents out three different things -- mobile homes, trash trailers used to collect and remove jobsite garbage, and septic systems mounted on trailers. What tax (if any) applies to each, and who's on the hook if the customer doesn't pay it?
Three different taxes for three different rentals. (1) Renting a manufactured (mobile) home is subject to STATE HOTEL OCCUPANCY TAX (6%, Chapter 156), not sales tax -- rentals under 30 consecutive day…
Are a utility's connection, reconnection, damage-claim, name-change, and similar service charges taxable as part of the sales price of electricity or gas, and when did utilities have to start collecting tax on them?
Taxable, with transition relief. Charges for services like connection/reconnection, damage claims, and name changes are taxable as part of the sales price of electricity or gas when the customer's und…
A company's licensed insurance adjuster works full-time at an insurance company's office, under that company's total supervision, on an open-ended assignment -- is billing for that adjuster still taxable after the 2001 law change?
Still taxable. Even though the licensed insurance adjuster works at the insurance company's own office under its total day-to-day supervision, with the insurance company furnishing all supplies and ha…
Is a company that supplies licensed insurance adjusters to insurance companies after a catastrophe providing exempt temporary help, or a taxable insurance service?
Taxable. A company that supplies its own licensed insurance adjusters to insurance companies on a temporary basis after catastrophes is performing a taxable insurance damage-appraisal/claims-adjustmen…
If a customer redirects a software delivery into Texas for installation, is Texas sales tax due even though the customer's employees only ever use the software remotely from outside Texas?
Yes, tax is due. Where software (treated as tangible personal property) is physically delivered and installed controls Texas sales/use tax -- not where the customer's employees are physically located …
If a retailer switches to having a third-party fulfillment house pay customer rebates (funded by manufacturer reimbursements) instead of paying them itself, does the retailer get to reduce its taxable sales price and claim a sales tax refund?
No sales tax adjustment. Rebates that a third-party fulfillment house pays to a retailer's customers -- funded by the retailer billing the manufacturers, not by the retailer's own funds -- are not con…
For an advertising agency's retainer fees, ad campaigns, ad revisions, and sales materials, what parts of the bill are taxable, and what records does the agency need to keep to prove it?
It depends on the line item. A pure monthly retainer fee is a nontaxable service. Charges for employee-fabricated property (finished art, photographs, etc.) are taxable. Preliminary art (concepts, lay…
Did Texas's tax-law definition of "person" change when the tax statutes were recodified in 1981?
No substantive change. Before the 1981 recodification, former Tex. Tax.-Gen. Ann. art. 20.01(A) broadly defined "person" to include individuals, firms, partnerships, corporations, trusts, and governme…
When a racetrack sells corporate sponsors hospitality-tent passes with closed-circuit race viewing, catered food, and rented tents/furniture, which charges are taxable, and can the racetrack buy the tent equipment tax-free for resale?
All three charges are taxable, and no resale certificate applies to the tent equipment. Admission to a racetrack's hospitality tents (with closed-circuit race viewing) is a taxable amusement service, …
When a leasing subsidiary liquidates and distributes its leased equipment to its two corporate-partner owners, is that a taxable sale, and does it matter whether the subsidiary's debt gets paid off first?
It depends on whether there's consideration. A liquidating distribution of leased equipment from a subsidiary to its corporate-partner owners is not a taxable sale if it's a true no-consideration cont…
Can a manufacturer claim a 100%-exempt sales tax refund on steam purchases by citing the "predominant use" test that applies to natural gas and electricity?
No -- wrong exemption theory, though a narrower one may still apply. The "predominant use" test in Rule 3.295/Sec. 151.317(e), which lets a taxpayer claim 100% exemption on natural gas or electricity …
Which of a property management company's typical fees are taxable -- standalone building-management services, insurance-related inspections/claims, and markup fees for rebilling contracted repair or construction work?
Mixed, by category. Standalone property management (lease administration, rent collection, accounting, ad valorem consulting, vendor/maintenance coordination, non-insurance property inspections) is no…
In Texas's deregulated electric market, is a transmission/distribution utility's delivery charge to a retail electric provider taxable, and can a municipal franchise fee passed on to the end customer be taxed too?
CORRECTION of a prior letter. A transmission and distribution utility's (TDU) delivery charge to a Retail Electric Provider (REP) is NOT a taxable service, so no resale certificate is needed or availa…
If I start a business putting on fashion shows and selling calendars/posters of the models, do I owe Texas sales tax on ticket admissions and on the calendars/posters, and do I need a tax permit?
Yes to both. Admission charged for a fashion show held in Texas is taxable, and selling calendars and posters of the models is also taxable (though you can buy the printed calendars/posters tax-free f…
A printer using offset litho (not web offset or rotogravure) asks: does a new 2001 exemption for out-of-state-mailed printed materials apply to its process, and does it change what it must collect on jobs bought from a sister company?
No, offset litho doesn't qualify. The exemption is limited by its terms to printed materials produced by web offset or rotogravure printing processes -- items printed on offset litho don't qualify, so…
In a two-step resale chain (seller to out-of-state Company A to a Texas Company B), who is responsible for Texas sales/use tax if Company A isn't itself "engaged in business" in Texas?
The original seller's sale is exempt as a sale for resale -- Company A (the out-of-state reseller) can issue a Texas resale certificate, validated with its own state's (South Carolina) retail registra…
Can a sole-proprietor furniture manufacturer occasionally install pieces that get permanently attached to real property, without losing manufacturing tax exemptions on the equipment used to make them?
It depends on the structure. A manufacturer can form a genuinely separate legal entity (a partnership or corporation -- not just another DBA under the same sole proprietorship) to sell to and install …
Browse Texas rulings by topic
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.