State Tax Rulings
Free state tax letter rulings and advisory opinions with plain-English summaries, full citations, and the original source on every page.
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If a customer gives me an exemption certificate that turns out to have been altered, do I lose my deduction, or does good-faith acceptance protect me?
Good faith protected the seller — the protest was GRANTED and the refund ordered. Duke Engineering & Services provided nuclear engineering services to Johnson Controls, which resold them to Los Alamos…
Can a business that repairs tangible personal property accept a resale exemption certificate on the repair services and parts it sells to other retailers?
Yes. The Department ruled that a business repairing tangible personal property may accept a resale exemption certificate when it sells repair and maintenance services and parts to other retailers. The…
When a corporation restructures its employees into a partnership's general-partner entity to satisfy an employee stock purchase plan requirement, is that arrangement an exempt staff-leasing arrangement or a taxable one?
The proposed arrangement did NOT qualify for the staff-leasing exemption. Even though the company met two of the three Rule 3.364 conditions (including the new-business exception), its own contract st…
Is oilfield 'swabbing' — running cable and rubber cups down a well to remove hydrostatic water and start/restart production — a taxable service in Texas?
It depends on the specific downhole task. Swabbing done to start or restart a well — running cable with rubber cups to remove hydrostatic water, even with incidental sand or paraffin — is a nontaxable…
Is a $1,500 assessment added to a country club member's required stock equity subject to Texas sales tax, and does it matter whether membership stock is later resold by the departing member or by the club itself?
Likely taxable, based on the facts given. A country club's assessment added to a stockholding member's required equity is generally treated the same as the sale of that mandatory membership stock, whi…
Is electricity used to treat wastewater from a residential community exempt from Texas sales tax, and does it matter whether a third-party treatment company or the landlord itself buys the electricity?
It depends on who buys the electricity. Treating wastewater is a nontaxable service, so the manufacturing exemption under Tax Code § 151.318 doesn't apply to the electricity used to power that treatme…
Was a university's combined transportation and parking fee taxable, and could it allocate the fee between taxable parking access and nontaxable services?
The fee was taxable to the extent it granted students a license to use university parking, even when spaces were limited. The university could reasonably allocate away the nontaxable transit portion; …
Was an $8,900 lump-sum contract to install a moored electrical fountain in a retention pond a taxable retail sale or a real-property improvement?
It was a real-property improvement. The driven mooring, electrical connection, and expected indefinite placement showed permanent attachment. The contractor owed tax on purchased materials—or fabricat…
Does a support endowment corporation formed solely to support an exempt community-based mental retardation center share that center's sales-tax exemption?
Yes. The Department ruled that the support corporation (an endowment formed for the sole purpose of supporting an exempt community-based mental retardation center, and controlled by that center throug…
Must the Department offset a tax balance with the taxpayer's interest credit from overpayments as of the date the net tax was determined?
The taxpayer prevailed on the methodology. After an IRS audit of 1989-1994, the taxpayer filed amended Kansas returns showing overpayments in some years and underpayments in others. The Department kep…
Which manufacturing-adjacent equipment qualifies for Texas's manufacturing sales tax exemption — hand tools, quality-control gauges, mold-design equipment — and which doesn't?
Mostly no exemption. Disposable epoxy applicator bottles and hand-operated calipers (digital or not) are hand tools and do NOT qualify for the manufacturing exemption, regardless of whether the readou…
Which repairs, steam-channeling equipment, and chemicals qualified for Florida exemptions at natural-gas cogeneration plants?
The generation-equipment exemption covered repairs, maintenance, and replacements, not just original construction, and the revised affidavit was acceptable documentation. Steam and condensate channeli…
Were canned-software licenses taxable when the reseller physically loaded the program onto a customer's server but left no disk or CD?
Yes. The reseller's engineer physically delivered canned software on a disk or CD and loaded it onto the Florida customer's server, making each license taxable even though the media was removed. Hardw…
Are the gross receipts from a statistical tank-and-line testing service for underground storage tanks subject to Kansas sales tax?
No. The Department ruled there is no imposition in the law to tax the described service — a statistical form of tank and line testing for underground storage tanks, in which the provider takes data, r…
Is electricity an agricultural cooperative uses to process its members' farm products exempt from Texas sales tax under the agricultural exemption, or some other exemption?
Exempt, but for a different reason than the cooperative may have assumed. The agricultural exemptions in Tax Code §§ 151.316(a)(7)-(8) and 151.317(a)(5) are limited to farms/ranches and to an 'origina…
What are the requirements for a predominant use study that lets a print shop claim the manufacturing exemption on its natural gas and electricity?
A print shop's electricity/gas can be exempt under the manufacturing exemption if it powers equipment directly used and necessary/essential to manufacturing (§ 151.318(a)(2)), equipment that powers/su…
Does an out-of-state corporation with no other Texas contact create Texas sales tax nexus just by sponsoring/having its logo appear at a charitable event in Texas, without selling or promoting its products there?
No nexus is created by mere sponsorship recognition. A foreign (out-of-state) corporation with no other Texas contacts that hosts or sponsors a charitable event in Texas -- where its logo and name app…
Does Kansas tax the unrelated business taxable income of an ESOP that owns 100% of an S corporation's stock?
Kansas follows the federal treatment, so the ESOP's income is exempt to the same extent it is exempt federally. Under I.R.C. Section 512(e)(3), certain unrelated business taxable income of an employee…
Are stretch-wrapping and shrink-wrapping machines used in a manufacturing plant's production and distribution for resale exempt from Kansas sales tax?
Yes. The Department ruled that the purchase, rental, or lease of stretch-wrapping machines and shrink-wrapping machines used in the direct production and distribution of items intended for resale by a…
Is labor to restore residential real property damaged by fire, flood, or explosion tax-exempt in Texas, and how has that answer changed over time (pre-1988, 1988-1993, and after October 1993)?
It depends entirely on the timing and the type of disaster declaration. Before the Legislature added Tax Code Section 151.350 (effective October 1, 1993), labor to repair or restore real and personal …
Was a mortgaged-property transfer between two direct-support organizations acting as agents for the same college subject to documentary stamp tax?
No. The foundation and housing organization were both statutory direct-support organizations acting as agents for the college. Because the property moved from one agent to another on behalf of the sam…
Is the sale of a custom mold by a Utah manufacturer exempt from sales tax, even if the mold itself stays in Utah and the buyer is an out-of-state company?
Yes, it can be exempt. A mold qualifies as tax-exempt "machinery and equipment" under Utah's manufacturing exemption (§ 59-12-104(14)) because Utah Admin. Rule R865-19S-85(A)(3) specifically lists mol…
Is a restaurant's scale/dispenser that portions out a fixed weight of uncooked french fries before frying exempt from Texas sales tax as manufacturing equipment?
Taxable, but only since a rule change. A restaurant scale/dispenser that measures out a fixed weight (e.g., one or one-and-a-half pounds) of uncooked french fries into a frying basket was EXEMPT befor…
Are construction materials and labor for a project on an Indian reservation subject to Kansas sales tax?
The labor is not taxed, but the materials are. The Department ruled that labor services performed on the Indian reservation are not subject to Kansas sales tax. However, the contractor is treated as t…
Were free monthly advertising publications exempt when distributed at newsstands in Florida or shipped by the printer to other states?
Yes. Both monthly periodicals were distributed free through newsstands and consisted primarily of advertising, so they met section 212.08(7)(w). Printer shipments by common carrier to other states als…
Were separately stated freight charges taxable when prestressed-concrete buyers could choose F.O.B. plant pickup or F.O.B. job-site delivery?
No. The buyer could avoid freight by choosing F.O.B. plant instead of F.O.B. job site, and the manufacturer stated transportation separately on the invoice. Those facts kept the third-party freight ch…
Is a calligrapher's labor charge to address wedding envelopes and fill in marriage certificates -- using materials the customer provides -- subject to Texas sales tax?
Yes. A calligrapher's labor charge to address wedding invitation envelopes or fill in names on marriage certificates is subject to Texas sales and use tax, even when the customer supplies the item bei…
Is the sale of an individual boat slip at a marina, sold by bill of sale without an interest in the adjacent land, subject to Texas sales tax?
No. The Comptroller ruled that a charge for the sale of a boat slip is the sale of real property and is not subject to Texas sales and use tax, even though the slip was conveyed by a bill of sale iden…
Does Kansas tax labor and remodeling services, and which construction labor is exempt?
Kansas taxes installation, application, and repair labor, but exempts original construction and residential remodeling labor. Under K.S.A. 79-3603(p), Kansas imposes sales tax on the service of instal…
Are the gross receipts from a custom statistical-modeling information service — delivered as technical specifications or as electronic score output — subject to Kansas sales tax?
No. The Department ruled there is no imposition in the law to tax the described service — a company that builds custom statistical credit, collection, behavior, recovery, and marketing models, deliver…
Is the construction of a livestock lagoon for a dairy farm exempt from Kansas sales tax as farm machinery and equipment?
No — the lagoon construction is not exempt. The Department ruled that a livestock lagoon is an improvement to real property, so it cannot qualify as farm machinery or equipment. Kansas sales tax is im…
Is an outside vendor's service of cleaning (waterblasting) a storage tank at a manufacturing facility subject to Kansas sales tax?
No — tank cleaning is a nontaxable service. The Department ruled that the gross receipts from cleaning storage tanks are exempt from Kansas sales tax. Although K.S.A. 79-3603(q) taxes the service of r…
Is a federal government contractor's training service taxable in Kansas, and how does it buy parts and maintain federal equipment tax-free?
The training is not taxable, and the maintenance goes through a project exemption certificate. The Department ruled there is no imposition in the law to tax the training services the contractor provid…
When exempt nutritional supplements are packaged and sold together with taxable business tools for a single charge, how is the bundle taxed?
It depends on which item is the package's 'essential character.' If the taxable business tools are the PRIMARY component of a package sold for one price, the ENTIRE sales price is taxable. If the exem…
Is natural gas sold for residential use subject to a special purpose district's local sales tax, even though the utility had been advised to collect it?
No. Natural gas consumed for residential use is exempt from ALL layers of Texas sales and use tax on the transaction -- state, county, metropolitan transit authority/city transit department (MTA/CTD),…
How could a nonprofit hospital buy materials tax free for additions to its hospital and emergency outpatient center?
The hospital could use a retail-sale-plus-installation contract with every property sale stated before execution, or the approved direct-purchase procedures. Under the latter, it issued documented ord…
Can a single-member LLC that is a federally disregarded entity get its own Texas franchise-tax exemption based on its tax-exempt sole member?
No. A single-member LLC treated as a federally disregarded entity cannot obtain its own Texas franchise-tax exemption. Tax Code Sec. 171.063(b) exempts a corporation that is exempt under IRC Sec. 501(…
A company monitors customers' Wide Area Networks (WAN) from Texas for a flat monthly fee per monitored device, occasionally performing remote repairs itself (about 10% of the time) at no extra charge, with other repairs referred to third-party carriers or equipment vendors who bill the customer separately. Is the monthly monitoring charge taxable, does it matter that the customer isn't charged extra when a repair happens, and how does location (Texas vs. out-of-state customers) affect the answer?
It depends on where the repair happens, not on billing structure. Monitoring related to a repair of a customer's LAN or WAN is subject to Texas state and local sales tax if the repair is performed IN …
Can a wholesale power plant buy natural gas tax-free in Utah when it burns that gas to generate electricity that it sells only to other utilities, not directly to end users?
Yes, the natural gas used to generate electricity is exempt under the 'compounding' exemption (§ 59-12-104(28)), and this holds true regardless of who ultimately buys the electricity or whether that r…
Are concert ticket sales and food/beverage sales at the concert taxable when the concert is put on by a 501(c)(3) tax-exempt organization?
Generally, concerts (amusement services) are taxable under Tax Code Sections 151.0101(a)(1) and 151.0028 and Rule 3.298(a)(1)(A), and food/beverage sales are separately taxable under Section 151.314(c…
Can an insurance settlement or a total-loss vehicle reduce the taxable value of a replacement car in Texas?
No. Cash insurance proceeds did not reduce the replacement vehicle's taxable value. A vehicle declared a total loss also no longer met the motor-vehicle definition for this trade-in rule, so surrender…
Is a farm bale-hauling attachment taxable when bought separately versus when mounted on a pickup before delivery, and are its repair parts taxable?
It depends on how it's sold. A pickup that is not used exclusively for farming is taxable when the farmer buys it. A bale-hauling attachment bought as a separate sale is exempt as farm equipment, and …
Can a nonprofit with a federal 501(c)(3) exemption obtain a Kansas sales-tax exemption, and how?
No — a federal 501(c)(3) does not create a Kansas sales-tax exemption. The Department ruled that Kansas law does not contain a sales-tax exemption for the requesting organization. Even though the orga…
Are the gross receipts from an online information service that sells downloadable teaching ideas subject to Kansas sales tax?
No sales tax. The Department ruled that no imposition exists in Kansas law to tax the information service described - selling downloadable teaching ideas (delivered as PDF or PowerPoint files) over th…
Is nitrous oxide and other medical gas sold to a dentist exempt from Texas sales tax the same way it is when sold to a hospital?
Yes. Nitrous oxide and other medical gases sold to a dentist qualify for the same sales tax exemption as sales to a hospital, because the Comptroller treats dentists as licensed practitioners of the h…
Could a Florida resident buy a motor coach from a Florida dealer without Florida tax if delivery and the first six months of use occurred outside Florida?
Yes, under the stated plan. Title and possession passed outside Florida, the parties completed the delivery affidavit, the coach was registered and taxed in North Carolina, and it did not enter Florid…
Could a Florida consolidated group file separately after a foreign parent acquired it and included the companies in a different federal consolidated group?
Yes. The former affiliated group ceased to exist when the foreign parent acquired it and included the companies in a new federal consolidated group; Florida could not accept a return for only a subset…
If a tax preparer never warned me about New Mexico gross receipts tax, am I excused from the penalty and interest for not paying it?
No — the protest was DENIED. Randall Summers, a race-track consultant, was paid $24,925 as an independent contractor by Pojoaque Tribal Enterprises to advise on the Downs of Santa Fe during the 1996 r…
After the Bandag decision, does a foreign corporation's Certificate of Authority to do business in Texas, by itself, create franchise-tax nexus?
No - not any more. The Comptroller had historically treated a foreign corporation's Certificate of Authority (COA) to transact business in Texas as sufficient nexus for the franchise tax under Tax Cod…
Were single-use physician-order tools for treating vertebral compression fractures exempt from Florida sales tax?
Yes. The single-use introducer tools, inflatable bone tamp, inflation syringe, and bone-filler device were exempt when federal law required the physician-order legend. The exemption did not extend to …
Can the state assess me gross receipts tax on out-of-state income just because I later moved to New Mexico, if I can't find the paperwork years later?
No — the protest was GRANTED and the assessment abated in full. James Brown taught political science at Southern Methodist University in Texas for 34 years and did outside consulting, none of it in Ne…
Are 'Hollywood 48-Hour Miracle Diet' and 'Hollywood Daily Miracle Diet' weight-loss products subject to Texas sales tax?
No. Neither the Hollywood 48-Hour Miracle Diet nor the Hollywood Daily Miracle Diet is subject to Texas sales tax. The Comptroller's official STAR subject line for this letter notes the products fall …
Did a two-step timeshare receivables securitization trigger documentary stamp or nonrecurring intangible tax on note and mortgage transfers?
Generally no. The first true sale was an assignment of notes and mortgages, and the second financing qualified as a wholesale warehouse mortgage agreement backed by previously taxed receivables. Execu…
Is installing a flag pole at a residence subject to Kansas sales tax, and does the answer change at a commercial building?
Not taxable at a residence. The Department ruled that installing a flag pole - and similar installation services performed at a residence - is exempt from Kansas sales tax under K.S.A. 79-3603(p), whi…
Under Texas's deregulated electric utility market, which separately stated charges on a retail customer's electric bill (transition, nuclear decommissioning, system benefit fund, competition transition, transmission/distribution) are subject to sales tax?
It depends on the specific charge. Transition charges, nuclear decommissioning charges, and system benefit fund fee charges are NOT taxable when separately stated on a retail electric customer's bill.…
Were chicken, potato, and pasta salads taxable when prepared elsewhere, delivered to grocery stores in bulk, and repackaged for deli sale by weight?
Yes. The salads were prepared food available for immediate consumption and were removed from their original bulk containers, repackaged by the stores, and sold by weight. The off-premises original-sea…
Were transdermal flea, tick, and other parasite medications for dogs and cats exempt from Florida sales tax?
They were exempt when a licensed veterinarian sold or dispensed them in connection with treating an animal, including prescribed flea and tick products used to prevent or cure disease or suffering. Of…
Were city and county impact fees passed through by a manufactured-home park developer included in the homes' taxable sales price?
Yes. The city and county imposed the fees on the developer for improving leased lots, not on buyers' acquisition of the manufactured homes. They were therefore seller costs that could not reduce the h…
Are charges for recruiting and placing foreign-educated nurses with hospitals -- including visa processing, document handling, medical exams, and travel arrangements -- subject to Texas sales tax?
No. Charges for providing recruitment and placement services of foreign-educated nurses to hospitals -- including advertising, recruiting, pre-selecting, processing/documenting applicants, handling vi…
Are the mileage, labor, and parts charges to repair a freestanding farm platform scale used to weigh grain exempt from Texas sales tax the same way the scale itself is?
Yes, as of this 2001 ruling: a freestanding above-ground platform scale used exclusively to weigh grain before storage on a farm qualifies for the agricultural exemption as tangible personal property,…
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