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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Are urological catheters, incontinence devices, and ureteral stents exempt from Texas sales tax as prosthetic devices, even if they are only implanted or used on a temporary basis?
Yes. Urological catheters qualify for the Texas sales tax exemption for prosthetic devices regardless of whether they are used internally or externally, and no prescription is required. The Comptrolle…
Sidney and Freda Esikoff filed their 1987 New York return as full-year nonresidents on Form IT-203, without checking the part-year-resident box or attaching the required Form IT-360, and later filed an amended 1987 return. When the Department audited them, they asked whether the statute of limitations had already run out on assessing additional tax for that 1987 return.
The Department didn't decide the two biggest questions - whether the return was fraudulent (which would allow assessment at any time) or whether the extended six-year period for omitting more than 25%…
Business Operations Systems & Svcs., d/b/a Computerized Payrolls, a payroll preparation service in Cheektowaga, New York, asked whether it must furnish its own employer identification number (EIN) to its employer-clients so they can complete the WT-1 Return of Tax Withheld filed with New York State, and if so, whether it could instead give clients a different identification number.
Yes - the payroll service must furnish its own EIN to its clients, and no, it cannot substitute a different identification number. Because the WT-1 Return of Tax Withheld requires an employer to list …
A country club imposes a one-time mandatory assessment on its members to pay for a special county road assessment, and passes the money on to the county for use on previously dedicated and accepted roads. Is that mandatory assessment subject to Texas sales tax?
Yes. The Comptroller ruled the one-time mandatory assessment is taxable as an 'assessment or fee charged for a special privilege, status, or membership classification' in a private club under Rule 3.2…
A monument company designs, letters, and installs headstones and vaults; inscribes dates of death on existing stones; and does jobs like moving/leveling headstones or adding curbing and marble to cemetery lots. Which of these are taxable, and how does the tax apply?
It depends on the job. Designing, lettering, and installing a headstone or vault makes the company a contractor improving realty: under a lump-sum contract it pays tax to its own supplier on its cost …
A taxpayer who was long domiciled in New York City sold his co-op apartment, bought a Connecticut home he intends to make permanent, registered to vote and got a driver's license in Connecticut, moved his company's headquarters there, and will spend fewer than 183 days a year in New York - while still keeping his Montauk vacation home, New York club memberships, and relationships with New York bankers, advisers, and attorneys. Has he changed his domicile from New York to Connecticut and become a New York nonresident?
The Department declined to decide whether Taxpayer actually changed his domicile, because that is a question of fact that falls outside the scope of an Advisory Opinion - an Advisory Opinion can only …
A Texas general contractor has a written separated new construction contract with a nonprofit entity but sends monthly lump-sum progress billings (only separated into materials/labor/profit in a final summary billing). Does that billing practice turn the whole contract into a lump-sum contract for sales tax purposes?
No. Monthly lump-sum progress billings alone do not convert a written separated new construction contract into a lump-sum contract. But lump-sum progress billings without any written separated contrac…
A pipeline contractor asks about the sales tax treatment of four kinds of jobs: removing and abandoning a pipeline, abandoning a pipeline in place and filling it with concrete grout, replacing an overhead pipeline crossing with a new underground pipe tied into the old line, and removing/disposing of old pipe. How is each taxed?
It depends on the job: (1) removing and abandoning a pipeline is not taxable unless it's done as part of a repair; (2) abandoning a pipeline in place and filling it with grout was first ruled taxable …
A pawnbroker was previously told (in a March 13, 1992 letter) that it should not charge sales tax when a customer redeems their own pawned property. Is that always true, or does it depend on whether the pawnbroker already declared the goods forfeited?
It depends on timing. If the original owner redeems the pledged property before the pawnbroker has exercised its option to treat the goods as forfeited, that redemption is not a taxable sale. But once…
If a pawnshop customer gets their pledged goods back after the redemption period has passed, is that a taxable retail sale, or is it still just a loan repayment?
It depends on whether the pawnbroker has already recorded the goods as forfeited. If the pledgor redeems the goods before the pawnbroker exercises the forfeiture option and records them as forfeited, …
Once a Utah facility is certified for the pollution control sales/use tax exemption, what counts as a tax-free 'qualifying purchase' -- equipment, consumable supplies, and electricity used to run the certified equipment?
It depends on the category. Purchases of certified pollution control equipment, and replacement equipment/parts to repair it, qualify for the exemption. Consumable supplies, chemicals, and cleaning ma…
When a financed vehicle is repossessed, which lender is entitled to a sales tax refund on the unpaid purchase price -- and does it matter whether the loan came directly from a bank or was assigned to the bank by the selling dealer?
It depends on how the loan originated. Utah Code § 59-12-107(8) lets the SELLING DEALER get a refund of sales tax paid on the unpaid purchase price when a financed item is repossessed, and Rule R865-1…
When a manufacturer submits a list of capital equipment purchases for a plant expansion, how does the Utah Tax Commission decide project-by-project (and even unit-by-unit within the same purchase order) which items qualify for the manufacturing sales tax exemption?
It depends item by item, and even unit by unit within the same purchase. Equipment that creates new capacity, launches a new product line, or expands production qualifies for Utah's manufacturing exem…
A company already owns and has paid tax on computer equipment. It then transfers title to a lender for cash (roughly 10 times the equipment's fair market value) and simultaneously leases the same equipment back, keeping possession, depreciation for federal income tax purposes, and all the risks and costs of ownership. Are the lease payments subject to Texas limited sales tax?
No. Because the borrower never gave up possession, risk of loss, or (for federal income tax purposes) title, and the sale price and buyback price were tied to the amount of funds advanced rather than …
A blood/plasma products company asked which supplies used to collect blood and process it into blood products — collection bags, pooling bags/bottles, saline, separation-device disposable sets, reagents, and related machinery — are taxable versus exempt for Texas sales and use tax purposes.
Supplies used before processing begins to collect blood — Y-sets and 500 ML/600 ML collection bags — are taxable. Pooling bags and pooling bottles are exempt as containers under Rule 3.314 only when t…
A company is bidding on a multimillion-dollar heavy equipment job that will be exported to Latin America over about nine months, billed through progress payments, with a contract clause transferring title of designated goods to the customer at each progress payment. Should sales tax be charged/accrued on each progress payment and then refunded after export documentation is obtained?
Yes, tax is due on each progress payment as billed, because the sale is legally completed for tax purposes when title or possession transfers to the customer for consideration — here, that happens at …
A landlord leases office space in a multi-story building to a computer software manufacturer, and the electricity (partially sub-metered to cool the tenant's mainframe computers) is purchased by the landlord and passed through as part of the lease. Is that electricity exempt from sales tax as manufacturing-related use, and can the landlord get a refund?
No. The landlord's purchase of electricity and gas to supply leased office space is a commercial use, taxable under Tax Code 151.318 and Rule 3.295, regardless of what the tenant does with the space (…
Are Gore-Tex and GTAM periodontal materials, which are temporarily implanted to help regenerate gum and bone tissue lost to periodontal disease but are later removed, exempt from Texas sales tax as items that remain in the patient's body?
No. Even though these periodontal and bone-augmentation materials aid the healing process, they do not qualify for exemption because they are removed after one to nine months and do not remain permane…
If an optometrist duplicates a patient's prescription from their existing glasses (by neutralizing/measuring the old lenses) rather than performing a new refraction or receiving a written prescription, does the optometrist have to charge sales tax on the new glasses?
No. Texas Tax Code sec. 151.313(a)(6) exempts corrective lenses dispensed or prescribed by an ophthalmologist or optometrist, and the Comptroller ruled that an optometrist who duplicates a patient's p…
A medical equipment seller asked how Texas sales tax applies to four products: therapy mattress replacements/overlays, sequential compression devices, patient weighing systems (scales), and incontinence pads used with hospital/nursing home beds. Are incontinence pads exempt from sales tax?
No, not automatically. The Comptroller classified incontinence pads as therapeutic appliances, which are exempt from Texas sales tax only when sold to an individual under a doctor's prescription; when…
When did Texas start applying the agricultural exemption to ostriches, emus, rheas, and cassowaries, and does it matter whether these birds are commonly thought of as food?
The Comptroller's office began applying the agricultural exemption to ostriches in March 1990, after the Texas Department of Agriculture published information that ostriches were being raised as food …
A company runs hydrostatic tests on underground storage tanks (USTs) and drills monitor wells/test holes to check for soil contamination, sometimes breaking concrete or restoring it afterward as part of the job. Which of these charges are taxable real property/repair services, and which are nontaxable testing?
A standalone charge for running a test (leak test, contaminated-soil test hole) is not taxable. But once the job moves into breaking concrete, repouring/restoring concrete, capping a hole, or installi…
How did Texas apply use tax and minimum rental tax to out-of-state buses later placed in Texas rental service?
Generally, a tax-free registered bus brought into Texas for short-term rental carried minimum rental liability equal to use tax on the owner's purchase price. A bus operated interstate for at least on…
Which supplies and materials that a restaurant or cafe buys are exempt from Texas sales tax as resale items, and which ones are taxable?
Disposable items a restaurant provides to customers as part of the food service — like paper cups, straws, napkins, to-go containers, foam containers, and food/beverages themselves — can be purchased …
Are retailers required to collect sales tax when they gift wrap a product for a customer, and can retailers buy gift wrapping supplies (paper, ribbons, boxes, bows) tax-exempt for resale?
A retailer that sells a product and charges extra to gift wrap it must collect sales tax on that gift wrapping charge, because the Comptroller treats gift wrapping as a taxable service connected with …
Does the owner of an aircraft owe sales tax on the monthly rent it charges a lessee, when the owner did not obtain a resale certificate showing the lessee re-rented the plane?
The owner owes the tax unless it can prove otherwise. Leasing an aircraft is a retail sale of tangible personal property, taxable under Tax Law § 1105(a). The rent is exempt only if the owner obtained…
Is a New York vendor relieved of its duty to collect sales tax if it accepts, in good faith, a properly completed exemption certificate from the customer?
Yes. A New York vendor that takes a properly completed exemption certificate from its customer in good faith — with no knowledge it is false — is relieved of the duty to collect sales tax on that tran…
How did Kansas define a disruption of oil or gas production for mineral severance tax?
For Kansas mineral severance tax, 1992 Senate Bill 216 defined an oil production disruption as a continuous 24-hour period when a well did not produce, and a gas disruption as a continuous one-hour pe…
A precast concrete contractor asked how Texas sales and use tax applies to lump-sum vs. separated contracts, to precasters who don't erect their products on site, and to hauling/delivery charges for the concrete components.
A contractor who improves real property is the consumer (not seller) of materials under a lump-sum contract, and pays tax on the materials' purchase price (including in-bound freight) but doesn't coll…
A hotel or motel buys telecommunications trunk line service partly to resell to guests and partly for its own business calls. Can it issue a resale certificate for that service, and if it already paid sales tax on services it resold, can it get a credit?
A hotel cannot in good faith issue a resale certificate for trunk line service that it also uses for its own business calls — resale certificates may only be issued for lines dedicated to reselling te…
A taxpayer sought a refund of Texas sales tax paid on a VCR that was allegedly exported to Canada, but the formal Canadian customs entry document listed a video camera instead of a VCR. Can an affidavit or statement from the purchaser take the place of the formal export document to prove the export and support a refund?
No. Affidavits, statements, or exemption certificates given by purchasers are not acceptable proof of export. The only acceptable proof is the formal entry document from the foreign country (here, Can…
Does a detective agency's shopping service owe sales tax on merchandise returned for full reimbursement and on the shipping charges for those returns?
The reimbursement for returned merchandise is not taxable — it's treated as a cancelled sale. The shopping service itself is a taxable protective and detective service under Tax Law § 1105(c)(8), and …
How did South Carolina Revenue Ruling 92-5 apply sales and use tax to vending-only businesses and businesses also making counter sales?
A vending-only operator generally paid tax when buying inventory. A business also making counter sales could buy common inventory for resale, then report vending withdrawals and counter sales separate…
When a manufacturer sells to an out-of-state wholesaler who then has the goods drop-shipped directly to a Utah customer, is the manufacturer's sale to the wholesaler taxable, and what documentation does Utah accept to exempt it?
The manufacturer's sale to the wholesaler is not taxable -- it's a sale for resale, so long as the manufacturer holds a sales tax exemption certificate from the wholesaler. Utah will accept an exempti…
When an out-of-state distributor drop-ships goods directly to a Utah customer on behalf of a reseller who has no Utah nexus, what paperwork satisfies Utah sales and use tax law?
The out-of-state seller needs only a sales tax exemption certificate signed by its reseller customer showing that customer's home-state resale number -- not a Utah certificate. Because the reseller ha…
Is a nonprofit student store at a Job Corps Center required to collect Texas sales tax when it sells packaged snack food items to enrolled students?
No. Items sold in the nonprofit student store at the Job Corps Center are exempt from Texas sales tax under 29 U.S.C. § 1707(c), even though proceeds go into a student welfare fund supporting center p…
Is a Utah limited liability company (LLC) organized under the Utah Limited Liability Company Act taxed as a partnership or as a corporation for Utah state tax purposes?
Yes, as a partnership. The Utah State Tax Commission ruled that companies organized under the Utah Limited Liability Company Act (Utah Code Ann. § 48-2b-101 et seq.) get the same state income tax trea…
A business selling exercise, therapy, and orthopedic items asked which of its products are exempt from Texas sales tax as medical/therapeutic items and which are taxable general merchandise. A related, earlier letter also asked about orthopedic supports and an electronic monitoring device called Back Alert. Which items qualify for exemption?
It depends on the item. Soft/moldable lumbar support inserts, compression shorts, and orthopedic braces (lumbar, carpal tunnel, knee, ankle, tennis elbow supports) are exempt as braces. The AcuTemp Ho…
House Bill 11 let telephone utilities pass through an increase in their own tax liability to customers as a billing adjustment. Is that pass-through adjustment itself subject to Texas sales tax?
Yes. The tax increase from House Bill 11 was levied on the telephone carrier, not directly on the customer, so even though the carrier visibly passes it through as a billing adjustment, it's still par…
Are sales of a licensed software product taxable when the maker embeds each customer's settings and identity into an otherwise standard program?
Yes, and generally the whole charge is taxable. The Fenics option-pricing program is pre-written software that the maker modifies to each purchaser (embedding time zone, base currency, and the custome…
A shareholder of our corporation, which owns real property, acquired 44% of our stock back in 1981 -- before either the gains tax or the transfer tax's entity-transfer rules existed. He now wants to acquire another 49% now, and the remaining 7% at some future point. Does his old 1981 stake count toward triggering a taxable 'controlling interest' acquisition when he buys the rest?
The pre-existing 44% stake does not count. A shareholder's acquisition of a 44% stock interest in a corporation before the effective dates of the gains tax (March 28, 1983) and the transfer tax's enti…
A contractor's job was bid and included in the original new-construction contract, but the work wasn't actually performed until after the building was already occupied. Is that job taxable repair/remodeling labor, or nontaxable new-construction labor?
Generally, remodeling work done after a building is first occupied is taxable repair and remodeling under Rule 3.357. But if the work was already part of the original new-construction contract, was bi…
If a contractor doing taxable asbestos abatement work on nonresidential real property separately states a charge for air monitoring, does the contractor have to collect sales tax on that air monitoring charge?
No. Air monitoring is direct scientific observation of physical phenomena, not a taxable service, and it is commonly provided as a distinct, stand-alone service. So a contractor performing taxable asb…
Is a 'continuous passive motion' (CPM) device an exempt orthopedic device or a taxable therapeutic appliance under Texas sales tax rules, and when is it exempt when sold, leased, or rented?
The Comptroller reclassified the CPM device from a therapeutic appliance to an orthopedic device under Rule 3.284(a)(9) after new facts showed it works on joints (not muscles) and doesn't function as …
A retailer of new and used manufactured homes repairs/renovates used units before resale, moves and installs units for customers, and a real estate lessor repairs and adds on to rental property — how does Texas sales tax apply to the labor and materials in each of these situations?
It depends on the scenario. Repair/renovation labor on a used manufactured home (treated as residential real property) is not taxable, but the materials generally are. Labor to move and install a manu…
Are public relations services subject to New York sales or use tax?
No. Public relations services are not on New York's list of taxable enumerated services under Tax Law § 1105(c), so a PR firm's charges are not subject to sales or use tax — as long as no tangible per…
Is a custom telephone-survey marketing research report a taxable information service, or is it exempt as personal or individual to the client?
It is exempt. Collecting, compiling, and analyzing information and furnishing reports is normally a taxable information service under Tax Law § 1105(c)(1). But this marketing research qualifies for th…
Are a golf and country club's dues taxable when members have no proprietary interest or control and membership is limited only by facility size, and what about locker and food charges?
The dues are not taxable. Because members have no proprietary interest, no control over the club's activities or management, and membership is limited only by the size of the facilities (not by exclus…
How is use tax computed on custom cabinets a manufacturer builds and installs, and does its production machinery qualify for the manufacturer's exemption?
Because the cabinets are custom-built to each job's specifications, they are not 'items of the same kind' as any catalog or inventory product, so the maker's use tax on cabinets it installs is compute…
Are payments by a corporation to independent sales corporations excluded from both the numerator and denominator of its Article 9-A payroll factor?
Yes -- payments to genuinely independent sales corporations are left out of the payroll factor entirely. Generra, an out-of-state apparel company with New York nexus, markets through three independent…
Is sales tax due when a corporation completely liquidates and distributes its vehicles to shareholders in exchange for their stock?
Yes, taxable here. When a corporation completely liquidates under IRC § 331 and distributes its vehicles to shareholders in exchange for their stock, that's a taxable "sale" for Utah sales tax purpose…
If a retailer gives away merchandise for free as a promotion — like a shirt to the first ten customers, or a prize in a drawing — or sells items on a 'buy one get one free' basis, how is Texas sales tax handled?
It depends on whether the customer pays anything. On a 'buy one get one free' deal (or two-for-one pricing), the retailer only owes tax on the amount actually charged to the customer — not on the cost…
Are marketing consultation services subject to New York sales or use tax?
No. Marketing consultation — advising a company on its marketing efforts, writing a marketing plan, drafting questionnaires and scripts, and reviewing sales literature — is not one of New York's taxab…
A company repairs and restores motor vehicles/trucks that it owns and holds for rental, using gas and electricity in the process. Is that gas and electricity exempt from tax the way it would be for a manufacturer, or is it taxable because it's being used on the company's own rental property rather than in manufacturing property for sale?
Yes, with a line drawn at what counts as "repair." A company that owns property it holds for rental can claim the manufacturing-type exemption for gas and electricity used directly in repairing or res…
Is mobile radio data two-way (packet radio) transmission service taxable the same way as traditional cellular telephone service in Texas?
Yes. Both mobile radio data two-way transmission service (packet radio) and traditional cellular telephone service are taxable as telecommunications services if the communication originates in Texas a…
Our organization is exempt from federal income tax under Section 401(a) of the Internal Revenue Code (a qualified pension/employee benefit trust). Does that also make us an exempt organization for Texas sales and use tax purposes?
No. Being exempt from federal taxation under IRC Section 401(a) does not make an organization exempt from Texas sales and use tax. Texas Tax Code 151.310(a)(2) only exempts organizations that qualify …
Is a 'marking service' — attaching price tickets to merchandise — a taxable enumerated service, and is it exempt as work on goods held for sale?
It is taxable. A 'marking service' — attaching price-ticket labels to garments and other merchandise — is one of the enumerated services taxed under Tax Law § 1105(c). And it can't be purchased for re…
A company leases a private telephone line to connect to its remote construction sites. The line is billed on a per-call basis, and only 12% of the calls originate in Texas (the rest originate in California, New Mexico, and New Jersey). Is any portion of the private line charge subject to Texas sales tax?
Yes, but only the Texas-connected portion. Long-distance telecommunications that originate in Texas and are billed to a Texas telephone number or billing/service address are subject to Texas sales tax…
A leasing company leases computer hardware to a client and collects tax on the lease payments. Because its lease agreement doesn't allow resale of software, the leasing company instead gives the client funds to buy the software directly from a vendor, and never takes title or possession of the software. Is that software funding a taxable financing lease, and can the software and hardware be scheduled together?
No — the funds provided for the software are a loan, not a financing lease, so the leasing company doesn't have to add tax to the client's repayment of principal and interest on it. The software loan …
Can a business use measured kilowatt (KW) demand — the peak-usage figure a utility uses for billing — as the determining factor for the predominant-use sales tax exemption on electricity, instead of the method set out in the Comptroller's rules?
No. Kilowatt demand only measures the electricity used during peak billing periods, not total usage, and is merely a utility billing cost factor. It is not a determining factor for predominant use und…
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