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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A consultant reported business income on his federal Schedule C, then said it was really tax-free expense reimbursements. Could he use the lower figure for New Mexico gross receipts tax?
Denied. The consultant reported $14,958 of business income on his 1994 federal Schedule C and took the benefit of the resulting loss, but never amended the return. New Mexico law requires a taxpayer…
Can an independent-contractor agreement qualify as an employment-related contract for California's 546-consecutive-day residency safe harbor?
Yes, potentially. FTB interpreted 'employment-related contract' in Revenue and Taxation Code section 17014(d) broadly enough to include services performed as a self-employed independent contractor.…
How is Texas sales tax reported on coin-operated bulk vending machines that dispense toys, stickers, candy, or soft drinks, and is there an exemption for cheap toys sold this way?
A bulk vending machine is a coin-operated device that dispenses unsorted items randomly, in roughly equal amounts, with no customer selection of a particular item or type. Toys or similar items…
Is a personal errand service — shopping, transportation to appointments, picking up/returning videos or dry cleaning, charging a fee plus reimbursement for items bought — taxable in Texas?
No — as described, an errand service is not taxable, because it's a transportation or delivery service. Using the letter's own example: if a customer gives you a list of videos, you rent them and…
Which amounts paid to a third-party contractor counted as qualified costs for California's Manufacturers' Investment Credit?
A manufacturer had to look through the contractor's lump-sum invoice and claim only costs that would have qualified if the manufacturer had built the property itself. In the ruling's $1 million…
Does a waste transportation broker that arranges hauling of both hazardous and non-hazardous waste, and rents out roll-off boxes/tankers/vans as part of the job, need a Texas sales tax permit — and can it buy or rent that equipment tax-free?
Yes, a sales tax permit is needed — the business is a seller of a transportation service (garbage/waste collection). Charges for transporting NONHAZARDOUS waste are taxable under Rule 3.356;…
We're ESDC. Our subsidiary QWDC is developing the Queens West waterfront project in Hunters Point. A private developer will borrow from outside lenders, and QWDC will be named mortgagee -- alone or as co-mortgagee -- before assigning its interest to the real lenders, with the mortgage likely severed, refinanced, and even converted from leasehold to fee financing over many years as multiple parcels are built out in stages. Is all of that exempt from mortgage recording tax?
Exempt for mortgages naming ESDC or QWDC as mortgagee; later increases in debt remain taxable. In 1989, ESDC (then the NYS Urban Development Corporation) joined the City of New York, the city's…
If a family member with dementia or another serious illness is moved into a New York nursing home by a relative acting under power of attorney, does that make the person a New York resident for income tax purposes?
No. Because Rosa Schmitz's 1998 move into New York adult care facilities resulted from advanced Alzheimer's disease, bladder cancer, and breast cancer rather than her own voluntary intent to make…
Do membership fees at two different Manhattan health-club facilities -- one with a full range of participant sports, the other with only traditional gym equipment -- owe New York State club-dues tax or New York City's separate tax on gyms and health salons?
It depends on the facility. Membership fees at both facilities escape New York's state/local social-athletic-club dues tax, because members have no ownership interest or control over either club.…
If a pest-control company gives customers a 10% discount for paying an entire year's service contract up front instead of paying after each visit, can it exclude that discount from the receipts it charges sales tax on?
Yes. Because the 10% discount is offered at the moment the contract is signed -- in exchange for prepaying the full year rather than paying after each visit -- and isn't a reward for paying a set…
Does a newly formed golf and social club owned by a for-profit LLC have to charge sales tax on membership dues and a one-time initiation-fee deposit, when members hold no ownership stake in or control over the club?
No. Because members of the club won't own any proprietary interest in it, won't control its management or activities, and the only cap on membership is the physical capacity of the golf course and…
Are gastrostomy feeding tubes, the 'spike set' tubing kit, and feeding machines/pumps used for tube-feeding patients exempt from sales tax as prosthetic devices?
Yes. A gastrostomy tube -- which carries nourishment through the abdominal wall directly into the stomach for patients whose esophagus can no longer function -- qualifies as an exempt prosthetic aid…
When a contractor rents scaffolding to perform a construction project (including for a tax-exempt entity), is the labor to erect/assemble the scaffolding taxable, and does it matter who does that labor — the rental company, a third party, or the contractor's own employees?
It depends who does the erection work. If the scaffold rental company itself charges for labor to erect/assemble the scaffolding, that charge is taxable as part of the total rental/lease price —…
Can a retailer buy the shopping bags it hands out to customers tax-free from its bag supplier, treating them as wrapping/packaging supplies purchased for resale?
No. Texas sales tax law does not exempt wrapping and packaging supplies for retailers, and the resale exemption does NOT apply to shopping bags a retailer provides to customers who are buying other…
When repairing property damaged in a governor- or president-declared disaster area (like tornado damage), does the Texas labor-to-restore-property exemption cover the cost of scaffolding or other equipment rented to do the repair work?
No — the exemption does not extend to rented scaffolding or other equipment. Tex. Tax Code § 151.350 exempts separately itemized LABOR ONLY to restore real or tangible personal property damaged by…
When a software consultant charges for a business 'assessment or discovery service' that may (or may not) lead a customer to later buy software, is that assessment charge taxable, and what does it mean for the charge to be 'unrelated' to a taxable sale?
Software installation, modification, and technical support charges on software you sold, leased, or licensed are taxable; a separately stated training charge is not (Rule 3.308(b)(3)). For a broader…
Could a group stop consolidated filing after Florida changed its treatment of a disregarded LLC?
Yes. Florida allowed separate returns for years ending on or after December 31, 1999, after a law change required the parent to combine a disregarded single-member LLC's income and apportionment…
When two corporations consolidate portions of their businesses into a joint venture through a multi-step reorganization — forming and merging several single-member LLCs and a limited partnership along the way — does any step trigger Texas sales or use tax?
No Texas sales or use tax applies to any step of the described reorganization. Two corporations consolidating parts of their businesses into a joint venture — through forming wholly-owned LLCs,…
Can a jewelry retailer buy the gift boxes it delivers merchandise in tax-free, on the theory the box cost is baked into the item's sales price and the box is effectively purchased for resale?
No. A retailer that buys boxes to deliver jewelry or other items to customers cannot buy those boxes tax-free, even though the box cost is effectively included in the item's sales price. Prior to…
Which of the many services and fees a hotel or motel charges its guests are subject to Kansas sales tax, and which are exempt?
It depends on the charge. The Department provided a chart of common hotel and motel charges. Guest room rental (taxable as sales tax plus transient guest tax), food and catering, alcohol, car…
Is a fee paid to a contract draftsman who is hired only to review/check the work of a company's own staff draftsmen, without producing any drawings themselves, taxable in Texas?
No. A charge for a contract draftsman hired solely to check the work of a company's staff draftsmen — where the contract draftsman does not produce any drawings or other tangible personal property —…
Were separately stated service charges taxable when the club kept part for payroll costs?
The fully distributed service fee was not taxable, but the two charges from which the club retained about 10% were taxable. Using part of a mandatory service charge for the employer's payroll taxes…
If a customer sends its own trucking company (common carrier) to pick up an order at a Utah distribution center and haul it out of state, is that sale exempt from Utah sales tax as interstate commerce?
Yes, this qualifies as an exempt interstate commerce sale, not subject to Utah sales tax -- as long as three conditions in Utah Admin. Rule R865-19S-44 are all met: (1) the property actually and…
Can a large automotive finance company title all its leased vehicles in the name of a purpose-built, business-activity-free titling trust for a lease securitization program, and does the trust itself bear licensing and tax responsibilities, or do the trust's beneficiaries?
Yes to titling, and licensing/tax duties shift to the trustees/beneficiaries. A large automotive finance company can title all its leased vehicles in the name of a specially created titling trust…
Is renting reusable/returnable pallets and containers in Utah exempt from sales and use tax, the way one-time-use packaging is exempt?
No, rentals of reusable/returnable pallets and containers are taxable, and only the Legislature — not the Commission administratively — could change that. Utah's packaging exemption under §…
Were dog and cat grooming services exempt from Utah sales tax because pets should not be treated as tangible personal property or because they benefit disabled and elderly people?
No. The Commission said dogs and cats fell within Utah's broad statutory definition of tangible personal property, so charges to clean or wash them were taxable services. It also rejected the…
Did the original May 2000 advisement tax nonprofit gifts of unencumbered property?
No, but this May 22, 2000 advisement was later revised. It found no documentary stamp tax on gifts of three unencumbered properties between nonprofit nonstock corporations because no consideration…
Did a disregarded LLC's sales to its owner enter Florida's corporate sales factor?
Only if the related income was reported. Because the single-member LLC was treated as a division of its owner, its sales to the owner entered Florida's sales apportionment factor when the income…
Can a retailer buy decorative wrapping items like colored tissue and ribbon tax-free for resale on the theory that they're 'part of the gift,' and does the same rule apply to the wicker or straw baskets the gift is arranged in?
Decorative wrapping items (colored tissue, ribbon, etc.) may NOT be purchased tax-free for resale — the Tax Code makes no distinction between 'decorative' and 'common' wrapping/packaging supplies,…
Were charges for personalized billing statements and notices subject to Florida sales tax?
No. Florida treated the customized billing statements, letters, and notices as nontaxable data-processing services because each report was personal to one customer's account and the printed material…
Do stickers sold through a bulk vending machine qualify for the same sales tax exemption as candy and toys, and does it matter whether the customer can choose which sticker they get?
Stickers qualify for the bulk vending machine exemption (50 cents or less, effective July 1, 1999, up from the prior 25-cent threshold) ONLY if the sticker machine dispenses stickers randomly, with…
When a 501(c)(7) social/country club merges into an IRC Section 528 nonprofit homeowners association (with the homeowners association as the surviving entity), does the surviving entity have to collect sales tax on green fees, swimming pool fees, dues, and similar amusement charges?
No sales tax collection is required — but only because the 501(c)(7) social club entity ceases to exist after the merger. If, after the merger, only the IRC Section 528 nonprofit homeowners…
Is natural gas and electricity used to perform failure-analysis testing on metals, plastics, coatings, and other materials exempt as utilities used in manufacturing or processing?
No. The sales tax law exempts utilities (gas and electricity) used in manufacturing or processing tangible personal property FOR SALE as tangible personal property — but a failure-analysis testing…
Is landscaping a taxable real property service in Texas, and is hardscape work like retaining walls, ponds, or sprinkler systems taxed the same way?
No, not the same way. Landscaping and lawn/yard maintenance (planting, mowing, pruning, fertilizing) are taxable real property services on which you collect tax from the customer. Hardscape work…
Are herbal dietary supplements taken for weight loss or other medicinal purposes exempt from Texas sales tax as over-the-counter drugs and medicines?
Yes. Effective April 1, 2000, Texas exempts over-the-counter drugs and medicines, vitamins, minerals, and nutritional supplements — including herbal dietary supplements taken for weight loss or…
Is a multi-level marketing company required to hold a Texas sales tax permit and collect state and local sales tax on the sales its distributors make, and how should it account for local tax across different jurisdictions?
Yes. A direct sales organization (including a multi-level marketing company) is responsible for collecting and remitting Texas sales and use tax — state and all applicable local taxes — on taxable…
Were 99-year co-op leases issued to the original bankruptcy-plan purchasers subject to deed tax?
No, for the original purchasers who funded or became obligated for the acquisition before closing. Florida treated the co-op's later issuance of their 99-year proprietary leases as an…
Did two out-of-state merger steps trigger Florida documentary stamp tax on real property?
No, if title vested by operation of law. The revised advisement found no documentary stamp tax when a Florida corporation merged into a Delaware corporation and the Delaware corporation then merged…
Were payments under the synthetic lease taxable as real- or personal-property rent?
No. Florida treated the arrangement as a mortgage substitute rather than a lease of real or tangible personal property. The bank trust held bare legal title as part of a financing mechanism, and the…
Were returnable crates used to deliver packaged milk products exempt packaging, or did a Tennessee dairy owe tax on the crates?
The crates were taxable. Tennessee found they were reusable secondary containers mainly used to expedite delivery, not packaging that held the milk sold to the consumer or remained with the product…
Can I get a negligence penalty refunded if I underpaid tax because I misunderstood a general answer a state employee gave me?
No — the protest was DENIED. R&R Professional Pharmacy did not pay gross receipts tax on sales to Medicare patients because its treasurer believed Medicare sales were tax-exempt sales to the federal…
In a Section 338(h)(10) deemed asset sale of an S corporation holding QSSSs, which entities recognize gain for Texas franchise tax, and how is the goodwill gain sourced?
The QSSS subsidiaries recognize the deemed-asset-sale gain, the holding parent recognizes none, and goodwill is sourced to the payor's legal domicile. In a proposed sale of a Texas S corporation…
Is a computer vendor's 'price update service' — reformatting a manufacturer's electronic price/part-number data and selling it to dealers on tape or diskette — a taxable data processing service, an information service, or exempt, and does the 20% partial exemption apply?
It's a taxable information service (not data processing), but that distinction doesn't matter here: the update service qualifies for the 20% partial exemption that applies to both data processing…
When an engineering and design firm creates original plans for a client and also produces a prototype, is the prototype production taxable, and does it matter whether the client later requests identical or altered copies?
It depends on what's being produced. The original prototype tied to the firm's nontaxable engineering/design service (even if separately invoiced) is not taxable — but once the client asks for…
If a corporation files the No Tax Due Information Report, does it keep its business-loss carryover, and what is the difference between franchise-tax extension forms 05-141 and 05-110?
A no-tax-due filer keeps its remaining loss years but still must apply the loss against earned surplus, and the two extension forms are interchangeable. On the business-loss questions, Tax Code Sec.…
When a city secures vacant buildings from unauthorized entry or demolishes them under its police powers (as opposed to hiring an outside security company), does it owe sales tax on those charges?
No. A city's charge for securing vacant buildings from unauthorized entry, exercised under its police powers, is not a taxable security service — the same reasoning that made a city's mowing of…
Are nutritional supplement drinks and dietary products sold to hospitals and nursing homes for their patients exempt from Texas sales tax?
Yes. Texas exempts food products, meals, soft drinks, and candy served to a patient or inmate of a state-licensed hospital or care institution, or to a permanent resident of a retirement facility…
For the franchise-tax throwback rule on partnership sales, do you look at whether the corporation or the partnership is taxable in the destination state, and does general- versus limited-partner status matter?
You look at whether the corporation, not the partnership, is subject to tax in the destination state, and general- versus limited-partner status changes the answer. Addressing the throwback rule for…
Must a non-licensed captive insurer that pays the Texas insurance premium tax also pay Texas franchise tax, or is it exempt?
The insurer is exempt from franchise tax, and its franchise-tax payments are credited against the premium-tax assessment. Following an audit, the Comptroller assessed a non-licensed Vermont captive…
If a company leases its employees to an affiliated business partnership through a staff leasing arrangement, are the otherwise-taxable services performed by those leased employees exempt from Texas sales tax — even if the leasing company turns out to be exempt from state licensing because of common ownership?
Yes, either way. Whether the leasing company (Lessor) is licensed as a staff leasing company under Labor Code Chapter 91, or is exempt from that licensing requirement under the Labor Code §…
Does a company that collects and processes human blood plasma for sale to out-of-state pharmaceutical manufacturers qualify for Texas's manufacturing exemption on its equipment, packaging, and utilities purchases?
Yes. A company that processes human blood plasma for sale to pharmaceutical manufacturers qualifies for Texas's manufacturing exemption (Tax Code § 151.318) on machinery and equipment that…
Could an expanded and diversified corporate group stop filing Florida consolidated returns?
Yes. Florida permitted the affiliated group to stop consolidated filing because its size and operations had changed substantially since the election, even though continued filing did not cause a…
Are semi-trailers sold to farmers and ranchers exempt from Kansas sales tax as farm machinery and equipment?
Yes, if they qualify as farm trailers. The Department ruled that semi-trailers (grain, flatbed, dump, tank, van) are exempt from Kansas sales and compensating tax when they are designed for farm or…
A Gallup jewelry partnership's bank account mixed loan money, out-of-state sales, and taxable sales. With records in disarray, how much of it owed New Mexico gross receipts tax?
Partially granted. The Department may assess tax on all business deposits when a taxpayer's records can't show what's taxable, because an assessment is presumed correct and all receipts are presumed…
When a Texas racetrack pays a totalisator company to process betting data for simulcast races, is that charge taxable, and does it matter whether the race is hosted in Texas or out of state?
Yes, taxable either way. A Texas guest track owes tax on the service charge a totalisator company assesses for processing wagering data, whether the race is hosted at another Texas track or an…
Are private sports lesson fees — for example, ice skating, swimming, gymnastics, golf, or tennis instruction — taxable as amusement services in Texas?
No. Lessons and classes are not amusement services under Rule 3.298. Neither private ice skating lessons taught by independent contractors nor group lessons/skating school taught by the rink's own…
Is stress testing of metal, plastic, or concrete taxable as an insurance service in Texas, and does it matter whether the client is an insurance company, a policyholder, or an unrelated third party like a law firm?
It depends on whether an insurance policy is involved, not on who hires the tester. Stress testing metal, plastic, or concrete on behalf of an insurance carrier, its insured, or others in connection…
Does an internet company that markets vehicles for licensed dealers, and earns a per-sale fee from those dealers, need its own Utah motor vehicle dealer license?
Yes -- the internet company needed a Utah motor vehicle dealer license. Even though the Website argued it was merely providing e-commerce marketing technology with no agency relationship, no pricing…
Does Utah's sales tax exemption for 'locally grown' seasonal crops apply to an out-of-state farm's sales into Utah?
No. The Utah State Tax Commission interprets 'locally grown' in the seasonal-crop exemption to mean grown within Utah's state boundaries, not merely nearby or within some reasonable radius. An…
Is a separately labeled 'surcharge' for water delivery subject to Kansas sales tax, or does calling it a surcharge keep it out of the tax base?
Yes, it's taxable. The Department ruled that a water-delivery surcharge is subject to Kansas sales or use tax because it is part of the 'selling price' under K.S.A. 79-3602(g), which includes…
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