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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Are membership fees for access to an unstaffed, automated self-service dog-wash facility taxable in Texas when its stations are permanently plumbed into the building?
No. Customers washed their own dogs without employee assistance, so the taxpayer did not provide taxable dog-grooming services. The permanently plumbed stations were real-property improvements, not le…
Does Texas use tax apply to mobile lodging camp buildings brought in from Canada and set up on leased land to house oil and gas workers?
Yes, use tax applies. Mobile lodging, dining, and recreational modular buildings brought from Canada and set up on leased Texas land to house oil and gas workers remain taxable tangible personal prope…
Is a subscription fee for accessing freely-licensed, company-branded open-source software (bundled with support services) taxable in Texas, even though the underlying open-source license itself is free?
Yes. Texas ruled that a company's subscription fee — charged to access and download its own branded, machine-readable build of open-source software, bundled with software support services — is fully t…
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…
When a Texas company sells substantially all of its business assets, how does it apportion the gross receipts among tangible personal property, contract rights, and other intangibles for Texas franchise tax purposes?
It depends on the asset type — when a company sells substantially all its business assets, Texas sources the gross receipts asset-by-asset: tangible personal property (TPP) delivered/possessed in Texa…
Does a laparoscopic-surgery trocar system that delivers carbon dioxide gas (not fluids or drugs) into the abdomen qualify for Texas's sales tax exemption for intravenous (IV) systems?
No. The Comptroller ruled that a laparoscopic-surgery trocar system -- an access port, cannula, gas-pressure control device, and connecting tubing that introduces carbon dioxide gas into the abdomen t…
Are sales to foreign customers who pick up the goods in Texas counted as Texas gross receipts for franchise-tax apportionment?
Yes, they are Texas gross receipts. Where a company's customers from Mexico travel into Texas to pick up (take possession of) the merchandise, the receipts from those sales are delivered to the purcha…
For Texas franchise-tax apportionment, when may software embedded in tangible personal property be treated separately from the property?
Software embedded in tangible personal property is generally treated as part of the property sale. The Comptroller said the software receipt may instead be apportioned to the payor's location only if …
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 …
Is a wholesaler of prepaid telephone calling cards required to collect Texas sales tax when selling the cards to a retailer who will resell them?
A wholesaler selling telephone prepaid calling cards is engaged in selling taxable tangible personal property — Tax Code § 151.01032 defines a prepaid calling card (a card, item, or access code repres…
When an advertising agency has printed folding advertisement cards made and places them in racks at hotels/motels for tourists to take, and charges restaurant clients a flat fee to be featured on the cards, is the agency selling a nontaxable advertising service or a taxable sale of tangible personal property?
It's a taxable sale of tangible personal property, not a nontaxable advertising service. Rule 3.321(c) treats an advertising agency in this fact pattern as a retailer of the advertising cards it produ…
When is a portable building, prefabricated steel shelter, or similar item like playground equipment or picnic tables just taxable tangible personal property, and when does installing it turn the deal into a real-property improvement contract instead?
It depends on the installation. Items sold free-standing or that only need above-ground mounting/anchoring (like playground equipment, picnic tables, benches, and outdoor athletic equipment) stay tang…
Can a business get a refund of sales tax it paid when buying decontamination trailers and brush chippers that it now rents out to customers, and how does that differ from using the same equipment to provide a service?
Yes, if the equipment is genuinely rented to customers who get operational control (not used by you to perform a service) and doesn't carry a manufactured-home label. A decontamination trailer and a b…
What property could reduce the Texas sales-tax base or motor vehicle tax base as a trade-in?
A dealer could allow a trade-in credit for a motor vehicle or customer-dismantled vehicle parts against a sale of tangible personal property. But when the dealer sold a motor vehicle, only another mot…
When a restaurant building is subleased to a franchisee together with a separately billed charge for the restaurant equipment, is sales tax due on the equipment rental charge?
No. Under Rule 3.294(k)(1), if a real property lease/rental contract also includes the lease or rental of tangible personal property (like restaurant furniture or equipment) as part of the same agreem…
A company plans to hold a Texas seminar training pharmacists on preparing compounded pharmaceutical products, and will provide notebooks and workbooks as part of the training. Is the training taxable, and who pays sales tax on the materials?
The training itself is not subject to Texas sales tax. If the seminar provider gives materials like notebooks or workbooks to attendees as part of the seminar (bundled into the price), the PROVIDER mu…
Did a remote Internet seller create Texas franchise-tax nexus by having a Texas corporation drop-ship hardware and software to customers nationwide?
No, on the assumptions stated. A remote seller used an out-of-state server to sell hardware and software, while a Texas corporation shipped products from its inventory by common carrier. If there was …
Were sales of tangible personal property Texas receipts when an affiliated distributor took possession at an out-of-state warehouse before shipment to customers?
No. The taxpayer retained title while an affiliate finished and stored the products outside Texas, then sold them to a distributor. The affiliate selected, packaged, and delivered the products to carr…
Did an aircraft owner have Texas franchise-tax nexus when it leased planes to a carrier operating flights involving Texas?
It depended on the carrier's Texas activity. The aircraft owner was subject to franchise tax if its planes were leased to common carriers providing intrastate Texas transportation or maintaining Texas…
When were Internet sales of tangible personal property Texas franchise-tax receipts under the former delivery and throwback rules?
The sales method did not matter. Tangible personal property sold online or otherwise was a Texas receipt when shipped or delivered to a Texas buyer. Property delivered from Texas to an out-of-state pu…
Did the former Texas taxable-capital throwback rule apply when goods were shipped from Texas to a state where the seller was not taxable?
Yes. When a corporation shipped tangible personal property from Texas to a purchaser in another state where the corporation was not subject to taxation, Rule 3.549(e)(41)(I) treated the sales as Texas…
Were computer components delivered through Texas border facilities Texas receipts when the ultimate customers were maquiladora operators in Mexico?
It depended on where the buyer took possession or control. Delivery to a Texas freight forwarder hired by the purchaser was not a Texas receipt when the forwarder delivered the goods to the purchaser …
Were computer components delivered through Texas border facilities Texas receipts when the ultimate customers were maquiladora operators in Mexico?
It depended on where the buyer took possession or control. Delivery to a Texas freight forwarder hired by the purchaser was not a Texas receipt when the forwarder delivered the goods to the purchaser …
Did subleasing office space create nexus and establish other-state taxability that prevented Texas throwback?
Yes. An investment company's sublease of former Texas office space was leasing Texas property and created nexus for taxable capital and earned surplus. In the separate throwback scenario, a Texas sell…
Our telecom company is leasing fiber-optic cable (which will run through conduit we own) from a leasing company, under a lease that says both parties intend the fiber to remain tangible personal property, is cancellable, and lets the leasing company repossess the fiber on default. We're having a third party install the leased fiber. How is the fiber classified for sales tax, and is the installation charge taxable?
The telecommunications fiber is classified as tangible personal property, not a real property improvement — based on the lease terms showing both parties intend it to stay personal property, the lesso…
How were three tiers of related-party product sales sourced when Texas inventory was drop-shipped to U.S., Canadian, and overseas customers?
Each related entity transferring title for consideration recognized a gross receipt. Because the first two buyers did not take possession, the transactions were drop shipments and ultimate customer de…
Did an Oregon equipment lessor have Texas franchise-tax nexus when its leased property was used by Texas lessees?
Yes. Although the Oregon corporation had no other physical presence or business activity in Texas and executed its operating leases under Oregon law, it retained ownership of equipment used by Texas l…
How did the former Texas throwback rules treat out-of-state delivery to a Texas buyer, independent solicitation, and foreign-country sales?
Delivery to another state was non-Texas unless throwback applied, and the buyer's Texas incorporation did not change that. Independent solicitation in the destination state created taxable-capital nex…
Did independent agents soliciting Texas orders for publications create nexus for both former franchise-tax components?
They created taxable-capital nexus. Independent agents soliciting Texas orders for tangible publications made the corporation responsible for franchise-tax reports under Rule 3.546(c)(4). The corporat…
Did delivering products to Texas in vehicles borrowed or assigned from a parent corporation create earned-surplus nexus for both companies?
Yes. Solicitation already created taxable-capital nexus for both foreign corporations. For earned surplus, Corporation A controlled the borrowed, assigned, or leased vehicles and used them to deliver …
Did an out-of-state sign manufacturer create Texas franchise-tax nexus by arranging local installation for customers?
Yes. Although signs arrived by common carrier and the manufacturer had no other Texas representatives, Texas installers acted as its agents when it arranged installation for purchasers. That activity …
Did a bank create former Texas franchise-tax nexus by leasing automobiles used in Texas, despite having no Texas real property, payroll, or active solicitation?
Yes. Leasing tangible personal property used in Texas created nexus for the lessor. The bank was subject to Texas franchise tax even though it had no Texas real property or payroll and did not activel…
If software is purchased for use on a server located in Texas, is the purchase taxed as tangible personal property (with a multistate benefit-of-service allocation available), or as a data processing service?
The software purchase is taxable as tangible personal property (TPP), not as data processing — Tex. Tax Code Sec. 151.009 defines TPP to include a computer program. Because it's TPP rather than a serv…
How did a corporation apportion its share of a Texas partnership's receipts under the former taxable-capital and earned-surplus components?
For taxable capital, the corporation generally included its share of partnership net profit, although it could use its share of gross receipts if GAAP treated them as revenue. Net-method receipts were…
How does Texas tax prepaid telephone calling cards, and what changed when S.B. 862 reclassified them as tangible personal property effective September 1, 1997?
Effective September 1, 1997 (corrected from an earlier-stated October 1, 1997 date), Senate Bill 862 recharacterized the sale of telephone prepaid calling cards from a telecommunications service to a …
Is the sale of a house that a house-moving business removes from one lot and relocates to another taxable, and does it matter how the contract itemizes the house price, moving cost, and foundation work?
A house attached to realty is generally not taxable to sell, but once it's detached from realty and sold WITHOUT installation, it becomes a sale of tangible personal property, and sales tax is due on …
Were commissions earned in Texas and shoe sales delivered in California Texas receipts under the former franchise tax?
The commissions were Texas receipts for both former franchise-tax components because the taxpayer performed the customer service in Texas. The shoe-sale receipts were not Texas receipts because delive…
Did a wooden farm wagon count as a motor vehicle for Texas tax purposes?
No. The wooden farm wagons were not designed to carry people or property over the highway, so Texas treated them as tangible personal property rather than motor vehicles. Changing the business's SIC c…
Is installing an awning or canopy taxable as new construction, or as a sale of tangible personal property, under Texas sales tax rules?
It depends on whether the canopy becomes an improvement to the realty. If it does, the installation labor counts as new construction and is not taxable, but the materials are taxable (per the lump-sum…
Are checks that a bank or credit union sells to its customers subject to Texas sales tax, and who has to collect it?
Yes -- checks are taxable tangible personal property under Sec. 151.010, so the sale of checks delivered to a purchaser in Texas is taxable. Who must collect and report the tax depends on how the bank…
I'm leasing land, a car wash building, and the car wash equipment together to my own S corporation -- is that lease subject to Texas sales tax?
No. The Comptroller ruled that leasing the land, building, and equipment together to the S corporation is treated as a lease of real property, so no sales tax applies to the lease payments -- the same…
How did Texas source property sales, interest, rental-broker services, and railroad-car lease receipts under the former franchise tax?
Tangible-property sales were sourced where delivery occurred; interest followed the payor's legal domicile; lease-negotiation and car-rental management receipts followed where services were performed;…
Is the labor to set up a computer -- connecting the monitor, mouse, keyboard, and printer to the CPU -- taxable in Texas?
Yes. The Comptroller ruled that the initial set up of a computer -- connecting the monitor, mouse, keyboard, and printer to the CPU -- is considered assembly of tangible personal property and is subje…
When did the former Texas throwback rule treat equipment shipped from Texas to another state as Texas receipts?
Sales shipped from Texas entered Texas receipts when the seller was not subject to tax in the destination state. Taxable capital used charter, authority, or doing-business standards; earned surplus as…
Did the former Texas throwback rule cover interstate solicitation and products sold to customers outside the United States?
For interstate sales, independent solicitation created taxable-capital nexus but was protected under Public Law 86-272 for earned surplus, so the same shipments could avoid throwback for one component…
When a multi-level marketing company sells vouchers to its distributors that are redeemed for printed goods like trading cards, who owes sales tax on the sales to the final customer?
The company itself, not just its independent distributors, is a 'direct sales organization' responsible for sales tax on the full selling price of the vouchers and related items sold through its distr…
How did the former Texas throwback rule source receipts from medical products shipped from Texas, including exports?
Delivery to a Texas buyer produced Texas receipts. Delivery to another state produced non-Texas receipts unless the seller was not subject to tax there, in which case the receipts threw back to Texas.…
Is telephone or on-site technical support for software and hardware subject to Texas sales tax, and does it matter whether the same company sold the property?
Yes, if the property being supported is located in Texas. Telephone technical support for tangible personal property (hardware or software) is taxable when the property is in Texas, and exempt under T…
Is cleaning a petroleum storage tank subject to Texas sales tax, and does it matter whether the tank is above ground, below ground, or over 500 barrels in capacity?
It depends on whether the tank counts as an improvement to real property. Cleaning a below-ground tank, or an above-ground tank holding more than 500 barrels, is treated as nontaxable real property re…
Is steam exempt from Texas sales tax the same way ice is exempt?
No. The Comptroller ruled that steam does not qualify for a sales tax exemption. Although steam, like ice, is water in an altered state, the Tax Code only grants specific exemptions to ice (Tax Code 1…
Is labor to repair real or personal property damaged by a disaster exempt from Texas sales tax even if the damage occurred outside an area officially declared a disaster area?
No. Once the Legislature enacted Tax Code Sec. 151.350, the exemption for disaster-repair labor applies only to property damaged within an area officially declared a disaster area by the Governor or t…
A fabric awning manufacturer/installer asked whether it's a manufacturer or a contractor, how to tax mixed-use supplies like screws and grommets, whether awning storage and reinstallation is taxable, and whether it still qualifies for the manufacturer utility tax exemption.
It depends on the facts of each job. If custom awnings are attached to a building with the intent to become a permanent improvement to realty, the installer is acting as a contractor (not selling tang…
Is renting a university recording studio, including a technician's time, subject to Texas sales tax, and what about the tapes used during the session?
No, the hourly charge for using the university's recording studio is not taxable, and the charge for the technician's time is not taxable either. However, the charge for the materials provided during …
Do I owe Texas sales tax on sports cards sold through vending machines, including the chance cards redeemable for an autograph?
Yes -- receipts from sports card vending machines are subject to Texas sales tax because the cards are tangible personal property, not an amusement activity. These machines are not treated as skill-or…
Does a monitor a photographer uses to let customers preview and crop a photographic image before it's printed qualify for the Texas manufacturing sales-tax exemption?
No. The Comptroller ruled the monitors don't qualify for the manufacturing exemption because they're used primarily as a marketing tool to show customers the image before the final print — Tax Code § …
If a Texas business creates a website for a customer located in Mexico, does it still owe Texas sales tax on the charge?
Yes. The Comptroller confirmed that creating website software is taxable as tangible personal property, and that tax applies even when the customer is located in Mexico, because the software resides o…
If a company hires contractors to clean up PCB contamination at its facility, does it owe sales tax on the site inspection, soil removal, decontamination cleaning, and waste-hauling charges?
It depends on the specific service. Site inspection and removal/replacement of contaminated soil are nontaxable services. Decontamination cleaning of the real property itself (like the compressor stat…
Does a photographer owe Texas sales tax on a fee charged for licensing the use of a copyrighted photograph, versus on photographs delivered to a Texas advertising agency for an ad?
It depends on what is being sold. A fee charged for licensing or for the right to use a copyrighted photographic image, illustration, or transparency for publication is not subject to Texas sales tax.…
Does a paper machine made of interconnected, bolted-down manufacturing equipment count as real property (an improvement to realty), or does it stay tangible personal property for Texas tax purposes?
It stays tangible personal property. The Comptroller's Tax Policy Division toured a paper manufacturing facility and agreed that the 'paper machine' — actually a series of interconnected machines that…
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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.