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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For New York sales tax, is a single-member LLC treated as a separate entity from its sole corporate owner, so that property passed through the LLC and leased back to the owner can qualify for a resale exemption?
Yes. Even though a single-member LLC (SMLLC) may be disregarded for federal income tax purposes, New York treats it as a separate entity from its sole member for sales tax purposes -- so an intermedia…
Is a sports-event planning company's package charge, its fees for arranging athlete appearances, and its corporate-sponsorship commissions subject to New York sales tax?
No, in all three scenarios. A company's charge for planning a sports-event package (tickets, merchandise, hotel, limousine), its fee for arranging an athlete's appearance or speech, and its commission…
Are architectural building signs and their installation taxable, or exempt as a capital improvement to real property?
It depends on how permanently each sign is installed. Signs that can be removed without materially damaging the sign or the building -- surface-mounted directories, taped or screwed single signs, floo…
Which of a utility's distributions to its holding company during a PSC-mandated restructuring are excess dividends under section 186, and which are not?
The within-the-mandate test controls. Central Hudson's investment of its generation-auction proceeds into unregulated operations through the holding company, and the holding company's distribution of …
Did a timeshare developer's receivables loan, secured by previously taxed consumer notes and mortgages, owe Florida documentary stamp or nonrecurring intangible tax?
No. The loan qualified as a wholesale warehouse mortgage agreement because previously taxed consumer mortgage notes were pledged as collateral, and it created no new lien on Florida real property. The…
Two Texas banks want to outsource their 'live operator' telephone customer service reps to a third-party call center company, which will staff, train, and supervise operators who use a telephonic link into the banks' own data center to answer customer questions like account and loan balances. Is this outsourcing arrangement subject to Texas sales and use tax?
No. Providing live operators who access and relay a bank's own customer account information over the phone, under a service agreement where the call center company handles staffing, training, and supe…
Are the proceeds a utility receives from a PSC-mandated auction of its generating facilities gross earnings under section 186, and how are they treated for section 186-a gross income?
The auction proceeds are not gross earnings under section 186, but the profit is gross income under section 186-a. A utility's PSC-mandated divestiture of its fossil and hydro generating facilities by…
When a section 186 utility transfers its unregulated subsidiaries to its new holding company under a PSC restructuring, does that trigger gross earnings, gross income, or an excess dividend?
No gross earnings and no dividend; section 186-a gross income only to the extent of profit. A section 186 electric utility's transfer of its unregulated subsidiaries (Energetix and RGS) to its new hol…
When a section 186 utility buys back its parent holding company's stock on the open market and then transfers it to the parent, is the transfer an excess-dividend distribution under section 186?
It depends on the transaction. A section 186 electric utility that repurchases its parent holding company's publicly traded stock on the open market -- a stock-repurchase program done outside the PSC-…
Is a utility's PSC-mandated transfer of $100 million to its holding company to fund unregulated activities an excess dividend under section 186?
No. Rochester Gas and Electric's transfer of $100 million to its holding company, made for the express purpose of fulfilling the PSC's mandate to fund certain unregulated activities under its Competit…
Are a multi-level marketer's soy-based women's nutritional supplement sales exempt from New York sales tax as a dietary food or health supplement?
Yes. A soy-protein-based women's nutritional supplement sold to supplement the ordinary diet with vitamins, herbs, and anti-oxidants qualifies as an exempt dietary food and health supplement under Tax…
Are pre-employment background-check services performed by a licensed private investigator subject to New York sales tax?
Yes. Employee background-check services performed by a licensed private investigator fall within New York's taxable protective and detective services category, so the investigator must collect sales t…
Does a federally tax-free liquidation of a subsidiary (IRC 332/337) or a tax-free merger into the parent (IRC 368(a)(1)(A)) require any entire-net-income modification under Article 32 or Article 9-A?
No. For both Article 32 (banking corporations, section 1453) and Article 9-A (section 208.9), entire net income starts from federal taxable income, and neither article contains any modification or adj…
Does a corporation's section 1452(d) election to remain taxable under Article 9-A survive its acquisition by a bank holding company and various mergers and transfers of business into it?
Generally yes, with one limit. The corporation's section 1452(d) grandfather election to stay under Article 9-A is not revoked by Citicorp's acquisition of it, by a later transfer to Citigroup, or by …
Does a corporation's section 1452(d) election to remain taxable under Article 9-A survive its acquisition by a bank holding company and various mergers and transfers of business into it?
Generally yes, with one limit. The corporation's section 1452(d) grandfather election to stay under Article 9-A is not revoked by Citicorp's acquisition of it, by a later transfer to Citigroup, or by …
If you genuinely can't afford to pay a tax bill, can New Mexico waive the interest — or the tax itself?
No. A home health worker who didn't know her self-employment income was subject to gross receipts tax was assessed the tax plus interest after an IRS data match. She didn't dispute owing the tax; she …
Is a corporation dissolved by proclamation, which only holds record title to real property as nominee, subject to the Article 9-A franchise tax before and after its dissolution?
It depends on the period. The corporation is subject to the Article 9-A franchise tax under section 209.1 for the taxable years it was incorporated, up to its dissolution by proclamation, because it h…
Is a corporation dissolved by proclamation, which only holds record title to real property as nominee, subject to the Article 9-A franchise tax before and after its dissolution?
It depends on the period. The corporation is subject to the Article 9-A franchise tax under section 209.1 for the taxable years it was incorporated, up to its dissolution by proclamation, because it h…
Is a utility's PSC-mandated transfer of a subsidiary's stock to its new holding company a dividend paid subject to the section 186 excess dividends tax?
No. Niagara Mohawk's proposed transfer of its Opinac N.A. subsidiary stock to its new holding company after the share exchange, made as part of the PSC-mandated PowerChoice restructuring, does not rep…
My company provides a menu of services to cable TV companies building or rebuilding systems — map verification, base map development, field surveying, quality control, CAD digitizing, system design, plotting, make-ready surveying, subscriber audits, and system audits. Which of these are taxable, and does it matter whether I bundle them or bill them separately?
It depends entirely on WHO creates the underlying design and what your client is really purchasing. If you collect the field data yourself and produce an original engineering design using your own exp…
Could a Texas vehicle lender recover motor vehicle sales tax as a bad-debt refund after the customer defaulted on the loan?
No. Chapter 152 contained no bad-debt or similar provision available to the lender, so the Comptroller would not refund the motor vehicle sales tax after the customer's loan default.
May a corporation that bought the assets and hired the workforce of an unrelated predecessor claim the EDZ wage tax credit and EDZ investment tax credit?
Yes, subject to meeting all the requirements. New Woerner Industries -- which acquired all the assets of the unrelated old Woerner Industries and hired its employees, then sought EDZ certification -- …
Was the rental of reusable pallets and containers tax-free when each manufacturer intended to use them only once to ship products to its customer?
Yes. The manufacturer's one-time shipping use controlled. The lease was exempt packaging even though the pallet owner retained title, recovered the pallets from distributors, and could rent them again…
Do 'leased employees' count as 'qualified business facility employees' for purposes of Kansas income-tax job-creation credits?
No. The Department ruled that 'leased employees' do not meet the definition of a 'qualified business facility employee' in K.S.A. 79-32,154(d) for purposes of the Kansas job-creation income-tax credit…
Does a roofing consultant who drills into a roof, removes a cross-section to inspect it, and then repairs the hole perform a deductible 'construction service'?
Yes. A part-time roofing consultant who physically cut a cross-section out of a customer's roof to check its layers and condition, then patched and sealed the hole, was performing a deductible constru…
A state university chartered a flight for its members. Since state agencies are exempt from Texas sales tax, does that exemption also cover the federal excise tax the airline would otherwise charge on the flight?
No. Texas does not impose any tax or fee on flights at all, so there's no Texas exemption question here in the first place — but the federal government DOES impose a 7.75% transportation excise tax on…
Our cemetery association has a federal 501(c)(13) income tax exemption and relies on donations to maintain the cemetery grounds. A firm sold us erosion-control matting tax-free and later asked for our state sales tax exemption certificate, but we don't have one. Can we get exempt status, retroactively if possible, to cover the tax on those materials?
Not for the materials. Texas has no sales tax exemption tied to a federal 501(c)(13) income tax exemption, so the association doesn't have blanket exempt status and can't retroactively wipe out tax on…
Are the proceeds of a utility's PSC-mandated generating-asset auction gross earnings under section 186, and is distributing those proceeds to its holding company an excess dividend?
No to both. Consolidated Edison's PSC-mandated divestiture of its electric and steam generating assets is a forced restructuring, not the employment of capital, so the consideration it receives is not…
How is the taxable amount figured for a contract to install tangible personal property, and can overhead and profit be deducted?
The taxable base is the contract price minus the cost of materials, supplies, and payments to subcontractors (including tax the contractor paid on those) and excavation charges bought to complete the …
Are purchases a public school club pays for out of its activity fund exempt from Kansas sales tax, even when students supplied the money?
Yes, if it is truly the school's purchase. Kansas exempts direct purchases by a public school under K.S.A. 79-3606(b). When a school club or organization (such as cheerleaders or a drama club) collect…
How did Texas distinguish a vehicle lease over 180 days from a rental under 180 days, and could a federal credit union buy the vehicle exempt?
For a single contract exceeding 180 days, the vehicle purchase was normally taxed and the lease contract was not. For a rental under 180 days, tax applied to the rental and the rental company could bu…
If a janitorial company uses cleaning supplies and equipment while cleaning but doesn't itemize them on the invoice, is it reselling those supplies tax-free or just providing a taxable service?
It is providing a taxable service, so the supplies are not resold and the tax-free purchase certificates were used improperly. A janitorial company that bought cleaning supplies and equipment with typ…
Was a monthly in-house copy-center fee exempt as a personal service when it included a fixed number of copies plus mail, fax, courier, and facilities work?
No. Copies were the essence of the agreement, not an inconsequential part of a personal service. Because the contract used one monthly charge and did not allocate fax, mail, delivery, or courier servi…
Does installing a new ice-cream/frozen-yogurt production machine that adds capacity -- while also requiring some existing equipment to be upgraded -- qualify for Utah's manufacturing sales tax exemption?
Split answer, machine by machine. The new glacier machine itself qualifies for a FULL 100% manufacturing sales tax exemption, because it added new production capacity (a new product -- hockey-puck-sha…
Is a local video production company's editing/assembly work taxable when it's producing a highlight tape that gets distributed free to TV stations for broadcast?
No, it's exempt. A local video production facility hired to digitize, assemble, and add music to college football footage into a single tape -- which the organization then distributes free to TV stati…
Is a residential paper-waste removal and recycling service subject to Kansas sales tax?
No. The Department ruled that a service consisting of the removal and recycling of residential paper waste is 'essentially recycling and trash removal,' and 'Kansas does not tax trash removal services…
Do individual 4-H programs qualify for a Kansas sales-tax exemption?
Yes. Following Revenue Ruling 19-1998-2, the Department ruled that the exemption in K.S.A. 79-3606(ii) applies to individual 4-H programs authorized by the 4-H Cooperative Extension Service to operate…
Does New York compensating use tax apply when a New York resident brings goods bought abroad through New York customs and then reships them out of state as a gift, and can foreign tax paid offset it?
Yes, New York use tax applies. Declaring foreign-bought goods to U.S. customs in New York and then arranging to ship them out of state as a gift is enough exercise of control over the property to coun…
Does a construction-logistics company that arranges warehousing and delivery of building materials for its customers have to register as a New York sales tax vendor?
Yes. A construction-logistics company that buys warehousing services from local warehouse companies and resells that storage, along with receiving, inspection, staging, and delivery services, to its o…
Does a volunteer nonprofit water-quality corporation qualify for a Kansas sales-tax exemption on its purchases?
No. The Department ruled that a volunteer, not-for-profit corporation organized to protect a lake's water quality does not qualify for any Kansas sales-tax exemption and must pay sales tax to its vend…
Were Texas electric cooperatives exempt from motor vehicle sales tax without using a particular type of license plate?
Yes. Cooperatives formed under the Electric Cooperative Corporation Act were exempt from motor vehicle sales tax, and no particular license plate was required. The 1999 letter also allowed recovery of…
Are internet access charges taxable in Kansas, and how should a phone company bill bundled internet and telephone charges?
Internet access charges are not subject to Kansas sales tax — Kansas never enumerated internet access as taxable, and federal law bars new state taxes on it. But telephone transmission services billed…
Were household chlorine bleach used on clothing and ammonia cleaner used on kitchen surfaces subject to Florida pollutants tax?
No. The chlorine bleach was intended to clean fabrics in close contact with the body, and the ammonia cleaner was intended for food-contact surfaces; both uses fell within the cited pollutants-tax exc…
How did Florida tax sales, installation, rental, repair, supplies, warranties, and bottled water involving water-conditioning systems?
Installed systems that became plumbing fixtures were real-property improvements, making the contractor the taxable consumer. Countertop and leased units remained taxable personal property. Repair, war…
An online textbook company (Varsitybooks.com) doesn't have a Texas office, but sends employees to visit a university co-op regularly, and also pays Texas college students on commission to recommend the site to friends. Does the company have to collect Texas sales tax on its sales to Texas customers?
Yes. Using the commissioned student representatives alone is enough to make the company "engaged in business" in Texas under Rule 3.286(G), which covers conducting business in the state through employ…
Did modifying a motorhome to restrain and carry a heart patient's oxygen equipment qualify for Texas's disability vehicle exemption?
No. The 1999 letter defined an orthopedically handicapped person as someone with limited movement of body extremities. It said the buyer did not appear to meet that definition and that modifying the m…
Our veterinary hospital buys large quantities of Dulbecco's Phosphate Buffered Saline to flush and transfer 7-day equine embryos from a donor mare to a surrogate mare (a well-established procedure called Equine Embryo Transfer). Is this product exempt from Texas sales tax?
Yes. Because the saline is used as a medium to transfer embryos between mares in a way that reduces disease transmission, it qualifies as a drug or medicine. Drugs and medicines dispensed by a license…
Are drain cleaning services subject to Kansas sales tax?
No, the service itself is not taxed. The Department ruled that drain cleaning services 'are not currently subject to sales tax in the state of Kansas,' because Kansas taxes services only when they are…
Which infrastructure costs qualified for South Carolina's utility license-tax credit under RR 99-6?
The historical credit covered cash paid for specified public-serving water, sewer, utility, communications, and fixed transportation infrastructure for an eligible project, but not facilities the payi…
How did South Carolina Revenue Ruling 99-5 compute and claim the job tax credit?
The ruling compared the taxpayer's monthly average full-time employment with the prior year, rounded the increase down to whole jobs, applied the county's historical per-job amount, and allowed qualif…
Under South Carolina's 1999 guidance, who qualified for the refundable college tuition tax credit and how was it calculated?
An eligible student or qualifying dependent claimant could receive 25% of qualifying tuition after scholarship grants, capped under the ruling at $850 for four-year study or $350 for two-year study. T…
When did South Carolina Revenue Ruling 99-3 exempt a farm trailer from sales and use tax?
A flatbed or stock trailer qualified only when used substantially, not merely incidentally, to plant, cultivate, or harvest farm crops sold in their original state. Use only for cattle, equipment, or …
Does an IRC Section 1031 real-estate exchange avoid South Carolina's deed recording fee?
No. A Section 1031 exchange is still a transfer for consideration subject to South Carolina's deed recording fee unless a statutory exemption applies. Each deed is tested separately, including deeds t…
Are over-the-counter nasal sprays and similar non-prescription drugs subject to Kansas sales tax?
They are taxable. Kansas imposes sales tax on the gross receipts from retail sales of tangible personal property under K.S.A. 79-3603(a), and the Department ruled that Kansas law provides no exemption…
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…
Could a qualified subchapter S subsidiary elect the federal-income-tax method for taxable capital even if it was not a close corporation and exceeded $1 million?
Yes. Section 171.113 allowed certain close corporations and S corporations to use the federal-income-tax accounting method instead of GAAP for taxable capital. Because the Comptroller already treated …
Who collected Texas motor vehicle tax when a business sold high-pressure cleaning equipment mounted on flatbed utility trailers?
The entire trailer-plus-equipment charge was subject to motor vehicle sales tax even when separately stated. Under the 1999 rules, a seller of at least five motor vehicles in 12 months needed a dealer…
How much credit does Kansas give a resident for income taxes paid to another state?
It is limited to the net tax you actually paid the other state. Kansas allows a resident individual, estate, or trust a credit for income tax paid to another state on income from sources there. In thi…
How did South Carolina Revenue Ruling 99-1 compute a school district's index of taxpaying ability?
The Department converted each district's taxable property and retained fee payments into fiscal capacity, adjusted specified real-property values through sales ratio studies, and divided that district…
Did trusts administered by a Florida-headquartered bank through out-of-state trustee offices have a Florida taxable situs for intangible tax?
No. The out-of-state agency offices were named trustees; the trusts originated and were managed outside Florida under other states' law; and their books and records stayed outside Florida.
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