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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Is a custom software development contract taxable when a Texas consulting company builds a program from scratch for an out-of-state client and transfers all exclusive rights to the customer with no license fee?
Not taxable. A computer consulting company was contracted to design and build, completely from scratch (not a combination or customization of existing software), a custom program for a California cust…
Do cotton gins need a predominant-use study to claim the manufacturing exemption on electricity, given that ginning is a seasonal activity rather than year-round?
No predominant use study is required for a cotton gin to qualify for the exemption on electricity measured through a single meter and used for both exempt (processing) and taxable purposes. But becaus…
Is computer repair and maintenance performed at a home exempt from Kansas sales tax under the residential-repair exemption?
Still taxable. The Department ruled that computer repair and maintenance services are subject to Kansas sales tax whether performed at a residence or elsewhere. The residential repair/remodel exemptio…
Is an annual membership fee for access to an online hunting-lease database taxable as an information service, even though the company calls it a "membership" rather than a service, and charges a flat yearly fee instead of per-inquiry pricing?
Yes, it's taxable — calling the fee a "membership" rather than a per-use service charge doesn't change the outcome. A company selling yearly memberships giving instant access to an online database of …
Working on a city airport construction contract, is EVERYTHING a contractor buys tax-exempt just because the customer is a government agency, including a rented crane?
No, it's much narrower than "everything is exempt because it's a government job." The city itself is exempt on its own purchases under Tax Code § 151.309, but the contractor's exemption under § 151.31…
For the taxable-capital component of the Texas franchise tax, are accrued reserves like warranty reserves or accrued employee costs treated as debt or as part of surplus?
They are part of surplus, not debt. For the taxable-capital component of the franchise tax, Tax Code Sec. 171.109(a)(1) defines surplus as a corporation's net assets minus its stated capital and expre…
How are hotel rooms rented long-term by a single corporation taxed under Kansas sales tax and transient guest tax?
Sales tax always; transient guest tax only for stays of 28 days or less. The Department ruled that all hotel room rentals are subject to Kansas state and local sales tax regardless of length of stay (…
Is a business that advises clients about college, scholarships, financial aid, and occupations subject to Kansas sales tax?
It is not a taxable service. The Department ruled that a business advising clients about college, scholarships, financial aid, and occupations — compiling the information into a folder or notebook — i…
Must a non-profit collect Kansas sales tax on its annual fundraising events?
Yes — a planned annual fundraiser is taxable. The Department confirmed that a non-profit must collect sales tax on its annual fundraising events even though the events are held only once a year, the o…
How does Kansas sales and use tax apply to a quarry operator that also uses its rock to perform construction contracts?
The operator is a 'contractor-retailer' taxed under two different rules. The Department ruled that (1) selling quarried sand, rock, and gravel is a retail sale of tangible personal property, because s…
Are retail sales of vegetable and garden seed packets subject to Kansas sales tax?
They are taxable. The Department ruled that seed sales are subject to Kansas sales tax because, unlike some states, Kansas does not exempt sales of groceries or food products. States that exempt groce…
If we hide sales records during an audit and only pay when the state catches the rest, can New Mexico add a 50% fraud penalty?
Yes — the protest was DENIED. Quality Exteriors, Inc. (formerly Caffey Construction), a Lubbock, Texas contractor that installed siding and windows in New Mexico, registered for gross receipts tax in …
Is electricity used to run a mobile home community's shared sewer pump an exempt residential use, and does it matter that this letter corrects an earlier answer from the same Comptroller office?
Yes, exempt — and this letter explicitly corrects an earlier May 16, 2000 letter (200005305L) on the same account. Electricity used to operate a sewer pump serving a mobile home community is an exempt…
Can a private investigation firm exclude reimbursed overhead costs — rent, phone lines, payroll, management fee — from the taxable price it charges a debt-collection client for its investigation services?
No, the firm cannot exclude those reimbursed expenses. A private investigation firm's contract with a debt-collection client reimbursed the firm monthly for half its rent, an accounting fee, two phone…
Is a section 183 utility's liquidation into its parent (or conversion to a single-member LLC) treated as paying a dividend for the section 183 franchise tax?
No. A liquidating distribution -- whether the utility is liquidated into its parent or converted into a single-member LLC and dissolved -- is not the payment of a dividend for purposes of the section …
Does Texas's intercorporate services exemption cover computer services one bank buys from an affiliated bank if the buying bank is eligible to file a consolidated federal return but has chosen not to?
Yes, for services first made taxable after September 1, 1987 (like data processing). Two banks were both owned, directly or indirectly, by the same parent and were both eligible to file a consolidated…
Is a company's automated call-processing and reporting service a taxable data processing or telephone answering service in Texas, and can it buy its own telephone service tax-free with a resale certificate?
Yes. A company that uses computers to receive, store, and process incoming customer communications and generate summary reports is performing taxable data processing services (80% of the charge taxabl…
For a tour company that sells all-inclusive tour packages, how much of the package revenue is a Texas gross receipt for the franchise tax?
Only the part of the tour performed in Texas is a Texas gross receipt; total package revenue is receipts everywhere. A corporation assembled complete tour packages, sold them, and acted as tour guide;…
How many tax-free fundraising sales can a fraternal organization's Texas chapter hold each year, and does it need a sales tax permit?
Each chapter of a fraternal organization holding a federal 501(c)(10) exemption (like Masons, Elks, Knights of Columbus, or Eastern Star chapters) — along with organizations exempt under IRS Section 5…
Are engineering consulting, project management, and phone technical-support charges taxable when a Texas company also sells and installs the computer equipment involved?
It depends on whether the consulting is genuinely separable from the equipment sale. Project engineering consulting related to selling and installing computer equipment and cabling is presumed part of…
How does a Texas business-loss carryforward work for the franchise tax, and must a corporation use the loss in a year when it already owes no tax?
A business loss carries forward up to five years, but it must be applied to each succeeding year's earned surplus - even if no tax is otherwise due. Texas franchise tax gives no deduction against earn…
Can a Utah dealer get a 'title-only' Utah title (with the financing bank's lien recorded) for a motor home sold to a nonresident who takes it out of state, to protect the lender if the buyer never re-titles it in his home state -- and would that trigger Utah sales tax?
No to the proposed title-only workaround -- Utah law doesn't allow it. A Utah dealer cannot get a Utah "title-only" certificate (recording the financing bank's lien) for a motor home or trailer sold t…
For an engineering firm doing accident reconstruction for insurance carriers, which parts of the work (reports, depositions, evidence storage) are taxable insurance services, and does it matter where the incident happened versus where the client is located?
An engineering firm's accident reconstruction is a taxable insurance service under Rule 3.355 when performed for consideration for an insurance carrier, policyholder, insured, or others regarding a po…
After emerging from Chapter 11, must a corporation using fresh start accounting for financial reporting also use it for the Texas franchise-tax taxable-capital report, and can it write down assets?
It must follow whatever method GAAP requires, but it still cannot write down assets in computing surplus. A company emerged from a Chapter 11 bankruptcy (finalized January 27, 2000) and used fresh sta…
Is safety and protective apparel furnished to production employees at a chemical plant exempt from Kansas sales tax?
Safety gear exempt, uniforms not. The Department ruled that the expanded manufacturing exemption in K.S.A. 79-3606(kk)(1) reaches safety and protective apparel an employer buys and furnishes free to e…
Is the part of an IRA distribution attributable to interest on U.S. obligations exempt from Kansas income tax?
Not exempt. The Department ruled that Kansas follows the federal tax treatment of IRA (and Roth IRA) distributions: if the distribution is in federal taxable income, it is in Kansas taxable income. A …
When a Delaware corporation converts into a Delaware LLC (and then an LP), is it the same entity for Texas franchise tax, and can the LLC use the corporation's business losses?
It is treated as the same entity, and the LLC keeps the corporation's business losses. A Delaware C corporation converted under Delaware law to a Delaware LLC in April 2000, with the LLC set to conver…
If a training company includes books in a single tuition charge for a class, are those books subject to Kansas sales tax?
No. The Department ruled the books are not subject to Kansas sales tax. Although books are normally taxable tangible personal property under K.S.A. 79-3603(a), here the true object of the transaction …
When a seller ships goods into Kansas and stocks them at a customer's site as inventory for resale, is that shipment subject to Kansas use tax — or is tax due only when the customer draws items from the stock?
Tax is due when the customer pulls an item from the stock, not on the shipment. The Department ruled that goods the seller ships to the customer's premises and holds there as inventory for resale are …
Under Kansas's expanded manufacturing exemption, are the purchase and installation of new production machinery — including the labor and materials to reconfigure the plant to accommodate it — exempt from sales tax?
Exempt. The Department ruled that under the expanded manufacturing exemption effective July 1, 2000 (K.S.A. 79-3606(kk)(1)), the new wash-and-oven production system, the electrical and mechanical part…
Is the sale of a retiring business's equipment exempt as an occasional sale if the assets are sold in pieces to more than one buyer?
No. A retiring business owner sold equipment, machinery, materials, and supplies to several different buyers over multiple invoices — the entire operating assets were NOT sold in a single transaction …
Is construction-site cleanup (rough cleanup and final house cleaning) taxable in Texas, and does it matter whether the building is a new residence?
Construction site cleanup — both rough cleanup (picking up debris) and final cleanup (cleaning inside the house) — is a taxable real property service, and the company must collect Texas sales tax unle…
Was a deed from nominee partners to their converted limited partnership stamp-taxable?
No. The four partners held record title as agents, while the partnership had long been the beneficial owner. Converting the general partnership to a limited partnership preserved the same entity, so t…
Did corrective deeds used only to cure a title defect require full documentary stamp tax?
No. Only minimum tax was due on the purchaser's deed back to the developer and the simultaneous deed of the replacement condominium unit because both cured the title defect, added no consideration, an…
Is a 501(c)(3) organization exempt from Kansas sales tax on food it buys to prepare meals for senior citizen sites?
Yes — the purchases qualify for exemption. The Department ruled that a 501(c)(3) organization preparing meals for senior citizen sites falls within the K.S.A. 79-3606(v) exemption, which covers 'all s…
How could Kansas taxpayers donate to the World War II Memorial Fund on their income tax return?
Senate Bill 226 created the Kansas World War II Memorial Fund and, for tax years 2000 and 2001 only, let individuals donate to it directly on their Kansas Individual Income Tax return (Form K-40) by c…
How did Senate Bill 226 change the Kansas Homestead Property Tax Refund starting July 1, 2000?
Effective July 1, 2000, Senate Bill 226 made three changes to the Kansas Homestead Property Tax Refund. First, the 'income' used to test a claimant's eligibility no longer includes Social Security dis…
What is a Kansas managed audit agreement and what benefit does it give a taxpayer under Senate Bill 226?
Effective July 1, 2000, Sections 1-5 of Senate Bill 226 let the Director of Taxation enter a voluntary 'managed audit agreement' with an eligible sales or use tax taxpayer. Under an audit plan develop…
As a small contractor, do I owe gross receipts tax on the part of my customer's payment that just covers materials I bought?
Yes — the protest was DENIED. Ronald Frost did part-time framing and carpentry (decks, sheds, small remodels) under fixed-price contracts that covered both labor and materials without breaking them ou…
Is sales tax due on remodeling work done to bring a nonresidential building up to code after a citation for a code violation?
Yes. An office building was cited by a state licensing agency for building-code violations dating back to its original 1984 construction, including sill gaps between an elevator cab and the hoistway t…
Is a construction company's charge for a dump truck with an operator that hauls debris away from a jobsite taxable, even if the truck/operator charge is billed separately from any waste-removal charge?
Yes, it's taxable. A company dispatched a dump truck with its own employee operator to a construction jobsite, charged the contractor/customer an hourly rate for the truck-with-operator, then hauled t…
Could a much larger and more diversified group stop filing Florida consolidated returns?
Yes, subject to four conditions. Separate filing began for 1999; no unrecognized intercompany or deferred items could escape separate returns; the group could not rejoin a Florida consolidated return …
Can a Missouri county buy tangible property tax-free in Kansas under the exemption for government purchases?
No. The Department ruled that a direct purchase by a Missouri county is not exempt from Kansas sales tax. The K.S.A. 79-3606(b) exemption for direct purchases by political subdivisions applies to poli…
Did a same-owner Delaware corporation-to-LLC conversion tax its aircraft, boats, and vehicles?
No. Delaware law treated the LLC as the same continuing entity, and only the entity's legal form changed. With no ownership transfer, Florida treated the conversion like a corporate reorganization rat…
Is a business that brokers debt instruments (mortgages, business notes, accounts receivable) subject to Texas sales tax?
No. A business that connects buyers and sellers of seller-financed mortgages, deeds, accounts receivable, business notes, bad debt portfolios, and other income streams is not providing a taxable servi…
Is sales tax due on motor oil used in a commercial plant nursery's tractors and other farm equipment?
No sales tax is due. A commercial plant nursery that grows plants from seeds or cuttings is, for tax purposes, engaged in agricultural activities, so machinery and equipment used exclusively to produc…
If an employer reimburses employees for using their own personal tools and equipment on the job through a formal reimbursement program, is that a taxable lease or rental?
No, it's not a taxable lease or rental. Under an employee tool reimbursement program, an employer reimburses its employees for their use of personal tools and equipment on the job, using a signed Agre…
Were Chapter 243 revenue bonds and their security documents subject to stamp or intangible tax?
No. The Chapter 243 revenue bonds, letter-of-credit agreement, mortgage, and related collateral assignments were exempt from documentary stamp and nonrecurring intangible tax. Payment of those taxes w…
Are component parts a manufacturer buys to build demonstration machines exempt from sales tax under the manufacturing exemption?
It depends on whether the demonstration machine is ever going to be sold. A manufacturer eligible for manufacturing exemptions may buy a 'display item' — one identical in size and function to items he…
Can an asbestos-removal contractor get a refund of the sales tax it paid on the disposable supplies (bags, suits, filters, encapsulant, etc.) it uses on each job, since those items end up contaminated and legally become the client's waste?
Yes, for nearly all of the listed items. Because federal and state law makes the client (the waste generator) the legal owner of the contaminated disposal materials, and because those materials -- fil…
Is a professional pet-sitting business's dog walking, litter box cleaning, and pet feeding service subject to New York sales tax?
Yes, generally taxable. New York's sales tax regulations classify pets as 'tangible personal property,' so a professional pet-sitting service that walks dogs, cleans litter boxes, and feeds pets count…
Does a private company that licenses a county-owned golf course and must buy its own equipment (which becomes the county's property when the license ends) get the county's sales tax exemption on those equipment purchases?
No, the equipment purchases are taxable, not exempt. Even though the county eventually gets ownership of the equipment when the license ends, and even though the licensee sometimes identifies itself a…
Is a licensed architect's standalone rendering business -- producing computer renderings and design-concept images for developers, architects, and engineers -- subject to New York sales tax?
Generally taxable. Renderings and architectural models are tangible personal property, so producing and selling them is a taxable sale, and simply holding an architecture license doesn't change that i…
Can a dental practice's own in-house dental lab (making dentures, crowns, and bridges) buy its raw materials tax-free with a resale certificate, and does it matter whether the lab operates as a division of the practice or as a separate LLC that sells the finished prosthetics back to the practice?
It depends entirely on the business structure. If the dental practice runs the lab itself as a division, its purchases of precious metals, porcelain, and acrylics are taxable retail purchases either w…
Did Florida credit upfront New Jersey tax after a leased vehicle moved into Florida?
No. New Jersey legally imposed its upfront use tax on the lessor, so Florida gave no credit even if the lessee reimbursed that cost. Florida tax applied to monthly payments from the time the vehicle w…
For local-option sales tax purposes, does a fishing guide's sale get reported in the county where the guide's shop is located, or the county where the guided trip actually happens?
It depends on the seller's business structure, not where the trip happens. A guide with one fixed place of business reports the sale there even if the trip occurs in a different county — unless a thir…
What manufacturing and warehouse machinery and equipment did House Bill 2011 exempt from Kansas sales and use tax starting July 1, 2000?
Effective July 1, 2000, House Bill 2011 broadened the Kansas sales and use tax exemption at K.S.A. 79-3606(kk) by adopting an 'integrated production operation' (integrated-plant) concept. A manufactur…
Is a building owner's payment to a property management company for supervising a construction contractor taxable, and if the owner mistakenly paid sales tax on that service in the past, how does the owner get it back?
A property management company's construction-supervision services for a building owner are NOT subject to Texas sales and use tax, when the manager only oversees a third-party contractor's renovation …
Does the sale tax manufacturing exemption cover a coin-operated coffee vending machine, the exemption certificate needed to buy it tax-free, and its repair parts?
Yes, on all three points confirmed. A coin-operated coffee machine that causes a physical or chemical change in the coffee product being processed for sale qualifies for the manufacturing exemption un…
Is the severance pay a nonresident receives after leaving a New York job subject to New York State personal income tax?
It depends on what the severance pay is for. If it compensates the former employee for past services performed in New York, it is New York source income and taxable, allocated using the same working-d…
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