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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Does an off-campus pizzeria owe sales tax on food it delivers to college students under a campus meal-plan voucher system?
Yes. The student meal-plan exclusion only covers food sold at a restaurant located on the college's premises. An off-campus pizzeria delivering to students — even under the campus voucher plan — isn't…
Texas Letter Ruling 9209L1239D03: Tax Refund Check/Warrant — Is A Decision Of The Comptroller And Is Not Equivalent To 'Notice Of Determination'
No. The Texas Comptroller ruled that a refund check or warrant is simply a decision of the Comptroller, not a 'notice of determination' under Tax Code Section 111.104(c)(3). If no notice of determinat…
Texas Letter Ruling 9209L1195D07: Self — Insured Or Self — Funded Plans
No. The Texas Comptroller ruled that a self-funded employee benefit plan owes no sales tax on utilization review (cost-containment) services or on a third-party administrator's fund handling and distr…
Texas Letter Ruling 9209L1195D01: Financing Lease Vs. Operating Lease — Nominal Purchase Option And Fair Market Value
It depends on the purchase option. Texas doesn't require the end-of-lease purchase price to equal fair market value, but if a 10% deposit clearly exceeds the equipment's fair market value at lease-end…
Texas Letter Ruling 9209L1195A01: Airlines/Licensed Carrier — Complimentary/Noncomplimentary Alcoholic/Nonalcoholic Beverages Served To Passengers — Nonreusable Items Used (Cups/Stir Sticks/Napkins)
No. The Comptroller ruled that plastic cups, paper napkins, and stir sticks used by an airline to serve alcoholic and non-alcoholic beverages are not exempt from Texas sales/use tax. The exemption for…
Is a manufacturer's waste-removal bill exempt as 'industrial solid waste' under Texas Rule 3.356?
No, not automatically. Texas taxed the waste-removal charges here because most of the plant's trash was empty paint/glue/varnish containers and shipping refuse, not waste from the actual manufacturing…
For privacy, my husband and I formed a corporation to hold title to our residence, which we occupy exclusively as our home -- we've never rented it or claimed depreciation on it. If we later sell the property, does New York's Real Property Transfer Gains Tax's personal residence exemption apply, even though a corporation technically owns it?
The exemption MAY apply, but it has to be earned on the specific facts -- a corporation can't automatically claim the residence exemption just because its shareholders live in the house, but it can qu…
Can a Texas construction contract be changed from lump-sum to separated (or vice versa) by an addendum or change order, and how are cost-plus contracts and profit percentages treated for sales tax?
Yes — a contract amendment, addendum, or change order can convert a lump-sum construction contract into a separated contract (or vice versa) for Texas sales tax purposes, but only if it is made before…
Texas Letter Ruling 9209L1195G12: Military Base — Federal Contract For Both New Construction And Repair/Remodeling Of Real Property
A contractor on an Air Force base job covering both new construction and repair must pay tax on consumable materials and equipment used for either part of the work. Materials incorporated into the rea…
If an unpermitted company sells a third airplane within 12 months of two earlier sales, is the third sale taxable in Texas, and are the first two sales retroactively taxed?
Yes, the third airplane sale within the same 12-month period is taxable under Rule 3.316(b)(2). The first two sales won't be retroactively taxed as long as the company wasn't in the business of sellin…
Texas Letter Ruling 9209467L: Chamber Of Commerce — Contract From 10/1/91 — 10/1/93 To Build Building To Be Donated To City
A Chamber of Commerce that qualifies as a tax-exempt organization can issue an exemption certificate to its prime contractors, who can in turn issue resale certificates to subcontractors and suppliers…
Is a subcontractor's concrete sawing, breaking, and lifting for a road repair job taxable in Texas, and can the general contractor take a tax credit for it?
Yes. A subcontractor who saws, breaks, and lifts out concrete as part of repairing a road patch is performing a taxable nonresidential repair service. The subcontractor must collect Texas sales and us…
Is electricity used to power tanning beds at a tanning salon taxable in Texas?
Yes. The Texas Comptroller ruled that electricity used by a tanning salon to power its tanning beds is taxable. The taxpayer argued it should be exempt by analogy to the exemption for electricity used…
Texas Letter Ruling 9209434L: Tours — Package Includes Transportation, Catered Meals, Prepaid Fees To Exhibits
It depends on the tour's essence. If the tour is primarily a guided, scenic tour of Texas attractions, the total charge (including transportation) is taxable as an amusement service. If the company is…
Is encoding machinery a satellite broadcaster uses to make its own broadcast disks exempt Connecticut manufacturing machinery?
No -- it's taxable. A satellite broadcaster ran about 80 channels from a Connecticut facility. To beam a movie, it first used high-speed 'encoding' machinery to convert the movie from analog videotape…
Texas Letter Ruling 9209L1198D05: Donation/Gift Of Printed Book Covers/Brochures/Posters To Schools
The business selling advertising space on posters donated free to a school may give the printer an exemption certificate instead of paying tax on the posters, but owes tax as the consumer of other ite…
Is a company's service of testing computer circuits taxable when the circuits will be assembled into products held for resale?
No — not taxable here. Testing computer circuits is a taxable service on tangible personal property, but because the circuits will be assembled into products held for resale, the testing isn't taxed, …
Texas Letter Ruling 9209L1209E03: Property Management Company — Services Performed At Bank That Uses Building For Own Operations And For Rental
No. Because the bank uses the building for its own operations in addition to renting it out, the bank is not holding the property solely for rental. That means the company managing the building does n…
Texas Letter Ruling 9209L1196G11: Hot Air Balloon Services — Used For Promotional/Advertising Purposes — Nontaxable Services
The charges billed to the client for travel, equipment, and operating the hot air balloon are not subject to Texas sales tax, because providing the balloon and crew for another company's advertising i…
Texas Letter Ruling 9209L1195G05: Grounds Cleaning — Around Structures/Units That Are Not Buildings — Taxable Cleaning Services
Yes. Texas ruled that a contractor's service of picking up used materials (like spent welding rods and rags) around a chemical plant's manufacturing units is a taxable real property service, fitting u…
Texas Letter Ruling 9209L1193A01: Speed Bumps/'No Parking' Signs — Installed By City And Charges Billed To Citizens — Treated As Reimbursement To City
It depends on ownership and installation. If the sign stays city property and the citizen's charge is pure reimbursement, it's not taxable. If the sign becomes the citizen's property, the charge can b…
Texas Letter Ruling 9209L1192G09: Heating Manufacturing/Processing Areas — Gas/Electricity Used
When a shop area is used partly for taxable repair work and partly for exempt re-manufacturing, the natural gas used to heat and cool that area must be allocated. First separate production/repair area…
Texas Letter Ruling 9209L1197E02: Partnership — Dissolution/Liquidation/Termination — Liability Of Individual Partners
No. The Comptroller advised that, based on the facts described, individual partners could liquidate their partnership without fear the Comptroller would pursue them personally for sales tax that a ven…
Is a publication sold by the State Bar of Texas exempt from Texas sales tax under Tax Code Section 151.312?
No. The Comptroller found the State Bar of Texas to be an exempt governmental entity, and publications sold by a governmental entity do not qualify for the Tax Code Section 151.312 exemption, which ap…
Is a warehouse club's annual membership fee subject to sales tax when it buys members access to lower merchandise prices?
Yes. Because the club's low prices are funded by the membership fee, the fee is in substance a prepayment for the merchandise members buy, so it's taxable under Tax Law 1105(a) — not treated as tax-fr…
Texas Letter Ruling 9209L1196D11: Municipal Franchise Fee/Access Fee — Cable Television Services — To Use City Rights — Of — Way/Easements
Yes. The Comptroller ruled that an access fee for local government programming, when passed on to cable television customers, is taxable — even if the fee is separately stated on the customer's bill —…
Texas Letter Ruling 9209L1194E11: Change Orders To Contracts — Rule Amendment — Being Applied Prospectively To Contracts Executed On And After 7/23/92
The Comptroller told this trade association that whether a change order is taxed as part of the original contract now depends on the date of the original contract, not the date of the change order. Ch…
Does a company owe sales tax on a computer lease it shares with two other companies through time sharing?
Yes, in most cases. If one company leases a computer system and separately charges two other companies for time sharing, sales tax applies to the lease and the time-sharing charges are a taxable data …
Texas Letter Ruling 9209439L: Change Orders To Contracts — Rule Amendment — Being Applied Prospectively To Contracts Executed On And After 7/23/92
The Comptroller changed how it applies Rule 3.291(b)(5) to construction change orders: instead of taxing all change orders issued on or after July 23, 1992 the same way regardless of when the original…
Texas Letter Ruling 9209424L: Software — Contract Programmer Develops For A Specific Customer — If Exclusive Legal Rights Are Retained By Customer And Program Created From Scratch — Exclusion Applies
It depends on who keeps the right to sell or license the software. If the programmer keeps that right, the sale is taxable, even for a program's first sale. If the customer alone gets the right to sel…
Texas Letter Ruling 9209193L: Are subrogation services taxable as security services, debt collection, or insurance claims adjustment?
The Comptroller confirmed that the firm's subrogation activities are taxable as security services (not merely as debt collection or insurance claims adjustment), because performing them requires a lic…
Were dealer-preparation or make-ready charges included in the Texas motor vehicle sales-tax base?
Yes. The Tax Administration Division said dealer-preparation and make-ready charges were subject to motor vehicle sales tax because § 152.002(a) included labor or service costs in total consideration.
In a corporate restructuring, is a subsidiary doing business in Texas, how are dividends and interest allocated, and is a partnership subject to franchise tax?
A partnership is not subject to the pre-2008 Texas franchise tax, even if it is characterized as a corporation for federal income tax purposes. In a corporate restructuring, the Comptroller also advis…
Do insurance companies in receivership have to pay Texas sales tax on goods and services bought to wind down and liquidate the company?
It depends on who is making the purchase. If purchases to liquidate an insolvent insurance company's receivership are made by, on behalf of, or paid for by the Texas Department of Insurance (or its au…
After Texas amended its rule on construction contracts, do change orders on contracts signed before the amendment have to be redone under the new rule?
No. This internal Comptroller memo confirms that Texas's amended rule on how change orders are taxed applies only prospectively — to contracts executed on and after July 23, 1992. Change orders on con…
Texas Letter Ruling 9209L1192A07: Can a mail-order seller cancel its Texas sales tax permit after the Quill Corp. v. North Dakota Supreme Court decision?
Yes. The Comptroller's office agreed to cancel this seller's Texas sales and use tax permit, effective October 1, 1992, based on the seller's representation that it was not engaged in any of the nexus…
Can a mail-order business get its Texas sales and use tax permit cancelled by showing it no longer has nexus in Texas after Quill Corp. v. North Dakota?
Yes, in this case. The Comptroller cancelled the taxpayer's Texas sales and use tax permit after the taxpayer represented, following the U.S. Supreme Court's Quill Corp. v. North Dakota decision, that…
Does a Texas soil remediation company owe sales tax on its cleanup service, on materials it uses, or on remediated soil it later sells?
The remediation service itself is not taxable, and soil cleaned and left on-site isn't a taxable sale of tangible personal property. But if the taxpayer removes contaminated soil, treats it, and sells…
Are a risk management consultant's services taxable as insurance services under Texas sales and use tax?
Yes. The Comptroller confirmed that a risk manager's services are taxable as insurance inspection and/or insurance loss prevention services under Rule 3.355(a)(2) and (a)(6), reaffirming a 1988 policy…
Does a Texas risk management consultant have to charge sales tax on services performed for insurance carriers, insureds, or policyholders?
Yes. The Comptroller confirmed that a risk management consultant's services are taxable insurance services in Texas -- specifically insurance inspection services under Rule 3.355(a)(2) and loss preven…
Does a Texas electric utility have to charge sales tax on the $8.00 monthly bill credit it gives residential customers for participating in a peak-demand program?
No. The Comptroller ruled that the $8.00 monthly bill credit given to residential customers for taking part in an electricity peak-demand program is a cash discount under Rule 3.301(d), so it is exclu…
If an advertising agency processes phone/mail orders and ships merchandise for an out-of-state manufacturer, who owes Texas sales tax, and what proof is needed that out-of-state shipments are tax-free?
The manufacturer, not the advertising agency acting as its order-processing agent, is responsible for collecting and remitting the 6.25% state tax plus local city tax on sales from the agency's Texas …
Are spinal needles used by a physician during a diagnostic procedure exempt from Texas sales tax as hypodermic needles?
No. The Comptroller ruled that spinal needles used by a physician to perform a diagnostic procedure are not exempt hypodermic needles under Tax Code Section 151.313, because the physician uses the nee…
Does a trackmobile railcar mover lose its Texas rolling-stock sales tax exemption because it has rubber tires and can move under its own power on a highway?
No. The Texas Comptroller ruled that a trackmobile railcar mover is exempt rolling stock under Tex. Tax Code § 151.331, even though it has rubber tires that let it move over the highway from one set o…
When did sweeping and pressure-washing services for parking garages and parking lots become subject to Texas sales tax, and as of what date must a provider start collecting it?
Sweeping and cleaning parking lots has been taxable since October 1, 1987. Sweeping and cleaning parking garages became taxable under a December 6, 1991 revision to Rule 3.356 (Real Property Services)…
Is a consulting firm's software design and implementation work for an insurance fund taxable data processing/software licensing, or nontaxable custom programming?
It depends on who ends up owning the software. If the consulting firm keeps the rights to the software it develops, its fees are a taxable software license/lease. If the client (the Fund) owns the res…
Is dog food, fertilizer, and other feed-store merchandise taxable in Texas, and when is feed for dogs and cats exempt from sales tax?
Generally taxable. Feed and supplies at a feed and grain store are exempt from Texas sales tax only when used exclusively on a farm or ranch for agricultural production, or for animals held for sale i…
Are an asbestos-removal contractor's purchases of plastic disposal bags and plastic wall/floor poly taxable when the work is done for tax-exempt property owners?
The plastic disposal bags are 'actually transferred' to the customer along with the asbestos, so buying them isn't taxable; but the plastic poly used to seal walls and floors is consumed by the contra…
In a paperless electronic-coupon system, how must a grocer disclose a manufacturer's coupon so tax is figured on the reduced price?
The grocer must show the item is a manufacturer's coupon item by marking 'MFG'/'M' on manufacturer coupons in its in-store circulars and newspaper inserts. An 'MFG'/'M' code on the shelf label alone d…
Does a Texas private investigator have to charge sales tax on reimbursed expenses like mileage, hotel bills, and photographs billed to a client?
Yes, in most cases. Mileage, hotel bills, cassette tapes, photographs, film, and report-purchase costs billed by a private investigator are part of the taxable sales price of security/investigative se…
When a bankruptcy trustee sells a debtor's vessel, gaming equipment, inventory, and other assets by sealed bid, does Texas sales tax apply, or is the sale an exempt 'occasional sale'?
No exemption. Because title to the bankruptcy estate's assets legally vests in the trustee once the estate files for bankruptcy, a trustee-run sale can't meet the occasional sale exemption's ownership…
When a Texas gas company passes its municipal franchise fee on to customers as part of the gas bill, does sales tax apply to that fee?
Yes. When a natural gas company passes along its municipal franchise fee as part of what it charges customers for gas, that fee is part of the taxable sales price, so the gas company must charge sales…
Does the prior contract exemption from a state sales tax rate increase apply to a contract to simply buy electricity (or other goods), or only to a contract/bid to perform work for a third party?
No. The prior contract exemption from a sales tax rate increase only protects contracts or bids in which the purchaser agreed to perform a contract for a third party using the purchased items. A simpl…
Does a contractor building a new golf course owe Texas sales or use tax on site preparation work like clearing, grading, excavation, and earthmoving for tee boxes, greens, and bunkers?
No tax applies to the contractor's own new-construction labor for site preparation, because building a new golf course is new construction and new construction labor isn't taxed. But the contractor ma…
Is a caterer's separately stated 18% 'service charge' taxable, or is it an exempt gratuity?
Taxable. A caterer's 18% 'service charge' is part of the taxable receipt because it isn't designated a gratuity (the menu even says it isn't) and it's really the staff's wages — and wages can't be ded…
Is enclosing and finishing out an existing open-air pavilion structure taxed as remodeling or as new construction under Texas sales tax rules?
It's taxable remodeling, not new construction. The Comptroller ruled that adding a concrete slab, walls, and plumbing/wiring/AC to an existing occupied pavilion is remodeling because no new square foo…
If a Texas oil field well service company passes on its fuel costs and over-the-road trip permit costs to customers, is that reimbursed amount subject to Texas sales tax?
Yes. When an oil field well service is taxable under Rule 3.324, the fuel costs and over-the-road (trip) permit costs a company passes on to its customers are part of the company's overhead and must b…
Does an out-of-state company owe Texas use tax on catalogs it directs to be mailed to Texas customers, even though the catalogs are printed and mailed from outside Texas?
Yes. The Comptroller ruled that a company with Texas sales representatives owes Texas use tax on catalogs mailed to Texas consumers on its behalf, because choosing which Texas addresses receive the ca…
Does a Texas shop that sprays a protective polyurethane coating on pickup truck beds have to charge sales tax on the job?
The Comptroller treated spraying a protective polyurethane coating onto a pickup truck bed as motor vehicle maintenance. The coating material itself is taxable, but the labor and skill to apply it is …
Is the sale of two land drilling rigs, along with their associated equipment, an exempt occasional sale when the rigs are only part of the seller's business but each rig is separately tracked as its own identifiable segment?
Yes. The Comptroller ruled that selling two land drilling rigs (and their associated equipment) qualified as an exempt occasional sale, even though the rigs were not the seller's entire business, beca…
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