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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Bryan R. Sullivan asked, on behalf of a nonresident commodities trader referred to as 'Client B,' whether rental income from leasing memberships ('seats') in New York commodities exchanges is New York-source income taxable to a nonresident, and whether receiving that rental income would cause New York to also tax Client B's own commodities-trading profits for his own account.
Yes for the rental income, no for the trading profits. Because Client B's leasing of extra exchange memberships is conducted with a fair measure of permanency and continuity, that leasing activity con…
Could an out-of-state printer accept an exemption certificate for direct mail sent into Texas for a customer with no Texas presence, and what if the customer was in Texas?
Yes for the no-presence customer if the certificate stated that fact and that the materials entered interstate commerce through U.S. mail in Mississippi. For a Texas customer, the printer had to colle…
We're the ground lessors under a roughly 60-year cooperative housing lease signed in 1970, before New York's Real Property Transfer Gains Tax even existed. The lessee disputes how the rent-escalation formula should work and, to settle the dispute without litigation, we're negotiating changes to the lease's rent calculation and adding a side partnership arrangement for some commercial space. Does modifying this old lease risk losing its 'grandfathered' pre-1983 status and triggering the gains tax on what's effectively a 60-year lease?
The lease keeps its pre-1983 grandfathered exemption -- because the negotiated changes clarified the parties' original intent about the rent formula (and actually LOWERED, not raised, the rent) rather…
Is the permanent installation of mirrors in homes a nontaxable capital improvement?
Yes — permanently installing the mirrors is a capital improvement, so the installation charge is not taxable. Robert Otto Inc. permanently affixes mirrors to walls in new and renovated homes with a sp…
Does an advertising agency charge sales tax on its coupon-booklet fees, and does it pay tax on the printing, mailing, and materials it buys?
The agency's fees to clients are a nontaxable advertising service, but the agency owes tax on the materials and services it buys, plus use tax on distributing the booklets in New York. Richard Martin …
Is removing contaminated soil, done as part of installing new gasoline storage tanks, a nontaxable capital improvement?
It depends on whether the tank installation is a capital improvement. Stewart's Ice Cream Co. removes old underground gasoline tanks, installs new ones, and — where a tank has leaked — also removes th…
When were Texas computer consulting, resulting reports, software support, and data-processing services taxable?
Stand-alone computer consulting and resulting reports were nontaxable. Consulting connected with the consultant's sale of hardware or software made the entire charge taxable. Support for software sold…
Did a computer remain exempt as an export when testing, software installation, foreign customs problems, and site preparation delayed its shipment from Texas?
Yes. The Comptroller accepted the computer purchase as an exempt export on the documented facts. The system was configured for Algeria, staged and tested in Houston, never used there to process seismi…
Could a direct-sales distributor claim a Texas refund for tax paid to a company manager on products bought for resale or sold below suggested retail price?
Not automatically. Managers collected tax from distributors on suggested retail price, and distributors were reimbursed as products were sold. Personal-use purchases or below-suggested-price sales req…
Could a Texas repair or remodeling contractor accept a direct-payment certificate, buy transferred materials for resale, or use the certificate on lump-sum new construction?
A contractor could accept a direct-payment exemption certificate for taxable repairs and remodeling performed for a permit holder and buy materials transferred to the customer for resale. The contract…
Did a security-services contract qualify for Texas's prior-contract exemption when the seller submitted its bid before July 21, 1987, but the parties signed later?
Yes. A seller's bid submitted on or before July 21, 1987, qualified when the resulting contract was based on that bid, regardless of the later signing date. The one-year security-services contract was…
How did Texas tax installed overhead cranes and conveyor systems when they became real-property improvements, remodeled an existing building, or remained removable equipment?
Classification controlled. A realty improvement installed in new construction followed contractor rules: separated-contract materials were bought for resale, while a lump-sum contractor paid tax on in…
Was a prescribed compressor-nebulizer exempt from Texas sales tax when sold or rented to an individual, hospital, nursing home, or home health agency?
It was exempt as a therapeutic device when sold, leased, or rented to an individual under a licensed healing-arts practitioner's prescription. The device and related supplies were taxable to hospitals…
Were stand-alone fitness evaluations, individualized nutrition programs, grocery-store instruction, and appointment-only personal training taxable Texas amusement services?
No under the clarified facts in the May 23 letter. The stand-alone evaluation was instructional, both nutrition components were nontaxable personal services, and appointment-only one-on-one training w…
Was rebuilding a pedestrian area on the same site new construction or remodeling when the existing area was completely demolished and some dirt removed?
It was new construction. The existing pedestrian area between two buildings would be completely demolished, including removal of some dirt, and a new pedestrian area would be built on the same site. T…
Was interest on promissory notes issued by a Connecticut district excluded from Connecticut's former dividend and interest income tax?
Yes under the former tax. DRS treated promissory notes issued by a district organized under Conn. Gen. Stat. § 7-325 as obligations of a district created under Connecticut law. Interest paid on those …
Who had to collect Texas tax on taxable property and services sold through 900-number calls, and were the carrier's separately stated telecom charges to sponsors taxable?
The 900 sponsors had Texas nexus through the carrier's sales and collection role, and tax was due on their taxable property and service sales. Because the carrier billed and collected from Texas custo…
Were on-site waste processing and sales of the microorganisms, nutrients, and aerator systems used in that process taxable in Texas?
The on-site waste-processing charge was nontaxable because no waste was removed, but the service provider owed tax on its equipment and inputs. Separate sales of microorganisms, nutrients, and aerator…
Were charges taxable when a firm processed hazardous waste until it became nonhazardous and hired a third party to dispose of the remaining ashes?
No. The firm's customer charges for processing and removing hazardous waste were nontaxable. The third-party contractor's charge for disposing of the resulting nonhazardous ashes was also nontaxable b…
Could a manufacturer buy clean-room air-purification machinery tax-free when the system was essential to growing gallium arsenide wafers?
Yes on the stated facts. DRS ruled that the air-purification machinery was used directly in the production process for growing gallium arsenide wafers. Because the clean room trapped particles and pol…
Can a petroleum wholesaler form a separate corporation (NEWCO) to handle fuel imports, so that the wholesaler itself avoids Article 13-A importer status and its associated Article 9-A tax add-back, and under what specific delivery/title arrangements does a purchase count as 'importing'?
Yes, a separate corporate structure works, subject to real operational separation and detailed title/delivery rules. Petroleum Sales and Service, Inc., a vertically integrated Buffalo motor-fuel whole…
Were books, pamphlets, and other writings published and distributed by a charitable nonprofit exempt from Texas sales tax, and could previously collected tax be refunded?
Yes. The charitable nonprofit's own books, pamphlets, and other writings were exempt under a new exemption effective August 28, 1989. Other taxable property it sold, leased, or rented remained taxable…
Was a property manager's payroll reimbursement nontaxable when it included fringe costs and an extra 1% that could become profit, and could prior invoices be refunded?
No. The charge was not a dollar-for-dollar reimbursement because it included an extra 1% the manager could retain, so charges for taxable employee services were taxable. Completed prior invoices could…
Did Texas's intercorporate-services exemption cover landscaping and hardscaping performed for affiliates, and how were separated and lump-sum hardscaping contracts taxed?
The exemption covered labor to plant trees, shrubs, or grass and apply soil or additives for the affiliated customer described. It did not cover hardscaping contractors building sprinklers, ponds, poo…
Are an ad agency's color separations taxable when sent to an out-of-state printer, and does the client owe use tax on catalogues distributed in New York?
The color separations are not taxable when delivered out of state, but the client owes New York use tax on catalogues it distributes in New York. Morten L. Coren, P.C. asked about a New York client wh…
Were event tour packages combining tickets and bus or charter-air transportation subject to Connecticut sales and use tax?
No under the stated arrangement. X Corporation bought every package component at retail and paid applicable sales and admissions taxes. DRS treated the event ticket as an intangible right and ruled th…
When did motel electricity and natural gas qualify as exempt residential use, and could the motel claim prospective exemption or past refunds?
Only utilities consumed in rooms rented to the same person for at least 30 consecutive days counted as residential use, and only during that stay. Short-term rooms and common, office, and restaurant a…
Was labor to repair and repave privately owned streets and parking areas in deed-restricted residential subdivisions taxable in Texas?
No. The Comptroller's Policy Committee treated the labor as exempt repairs to residential real property where homeowners associations paid for work on private subdivision roads that had not been dedic…
Our corporation, owned 50/50 by two shareholder groups who now want to go their separate ways, is planning a federal tax-free 'split-up' or 'split-off' reorganization: dividing our real estate between two new subsidiaries, then distributing all the stock of one subsidiary to each shareholder group (in a split-up, with our original corporation then liquidating; or, in a split-off, exchanging one group's original shares for the new subsidiary's shares). Does any step of this trigger New York's Real Property Transfer Gains Tax?
The initial division of real property into wholly-owned subsidiaries is exempt as a mere change of identity, but distributing the subsidiaries' stock out to the separate shareholder groups is a taxabl…
Could a dealer take title tax-free when federal odometer rules required title to a vehicle held for resale?
Yes, when federal Truth in Mileage Act procedures required the dealer to take title to a vehicle held exclusively for resale and not sold to a Texas retail customer. Tax applied if the titled vehicle …
How did Texas tax a property manager's accounting work, installed replacement light bulbs, and tenant charges for nonresidential remodeling including overhead?
Some accounting work, including accounts-payable checks and accounts-receivable billings, was taxable data processing. The total tenant charge to install a replacement light bulb was taxable. The tota…
Did exclusion from Texas's 2.42% miscellaneous occupation tax make services for converting a production well to a saltwater-disposal well exempt from sales tax?
No automatic sales-tax exemption followed. Conversion activities could be taxable or nontaxable depending on the work. Replacing the production wellhead with disposal-well equipment was a taxable sale…
Was removing and draining an underground fuel tank and replacing it with another tank taxable, and what if the same tank was repaired and reinstalled?
Removing an underground fuel tank, draining it, and replacing it with another tank was nontaxable. Repairing the same tank and placing it back was taxable.
Could a nonprofit business association's payroll processing and other taxable services for member corporations qualify for Texas's affiliated-entity exemption?
Yes, conditionally. If the association and its members were affiliated entities under 26 U.S.C. section 1504 and met the consolidated-return requirements referenced by Tax Code section 151.346, the se…
Was towing a car from the owner's home directly to a repair shop taxable, and what if the wrecker stored the car first?
Direct towing from the home to the repair shop was nontaxable. Towing related to vehicle storage was taxable if the wrecker stored the car before delivery, unless the towing fee was separately stated …
Did wild-game-bird feeders qualify as exempt agricultural machinery or equipment when sold for use on a Texas farm or ranch?
No. The agricultural exemption covered machinery and equipment used exclusively on a farm or ranch to produce agricultural products sold in the regular course of business, and the wild-game-bird feede…
Did gas and electricity used at a container division and brewing operation qualify for Texas's manufacturing-utility exemption under the predominant-use test?
Yes on the submitted usage study. Manufacturing was exempt use, and more than half of utility use measured by each single meter was for exempt purposes, making all use through that meter exempt. Batte…
Did lawyers, CPAs, and other professionals need a Texas sales-tax permit and have to charge tax on photocopies made while providing professional services?
No. The Comptroller did not require professionals such as lawyers and CPAs to hold a sales-tax permit or charge sales tax on photocopies made in the course of providing professional services to client…
Were artwork, typesetting, photographs, and separate image-licensing fees taxable when used to print books, calendars, cards, and posters for sale?
The artwork, typesetting, and photographs qualified as exempt materials necessary and essential to manufacturing printed goods for sale. Separate payments for the right to use an image or illustration…
How did Texas tax demolition, debris removal, site preparation, tank work, and equipment supplied with an operator, and what earlier answer did the Comptroller correct?
Demolition alone was generally nontaxable, while debris removal was taxable and could tax a bundled charge when it exceeded 5%. Site preparation, fill dirt, and excess-dirt hauling tied to new constru…
Were asbestos-abatement consulting services excluded from Connecticut sales and use tax as services for voluntarily containing or removing hazardous waste?
Yes under this historical ruling. DRS treated asbestos as hazardous waste and excluded the listed assessment, bid, monitoring, clearance, and documentation services from tax as services for voluntary …
Was a membership fee taxable when membership entitled customers to merchandise discounts at a retail outlet that also sold to nonmembers?
No. The retail membership, whose purpose was to give members merchandise discounts unavailable to nonmembers shopping at the same store, was not taxable at the time of the letter.
How should a telex reseller that can't tell where messages are delivered figure and document the sales tax on its charges?
The Department did not prescribe a method — the vendor must propose one that meets the recordkeeping rules, and the Department will then approve or reject it. Taft Consulting Corporation resells telex…
Were mortgage-servicing and related management services performed in Connecticut taxable when the mortgage holders were outside Connecticut?
No under the historical sourcing rule. Mortgage servicing was a taxable management service, but it was accepted or received where the mortgage holder was located, so services for out-of-state holders …
Could multiple vehicles, including destroyed or stolen vehicles, support a fair-market-value deduction?
Multiple vehicles could support deductions against one replacement with no numerical limit, but tax could not become negative. Destroyed or stolen vehicles did not qualify because they were not sold o…
Was a properly completed Mexican Manifesto acceptable proof for a Texas sales-tax refund on exported goods worth less than $1,000?
Yes. A properly completed Manifesto was acceptable proof for goods valued below $1,000 if it specifically described the quantity and merchandise purchased in Texas. The purchaser had to give the selle…
Was a bus excursion that began and ended in Texas but traveled to the East Coast and Canada taxable as an amusement service?
No. Although the excursion included sightseeing, its primary element was transportation between Texas and the East Coast and Canada. The Comptroller treated it as a trip rather than a taxable amusemen…
Were materials for an out-of-state lump-sum construction contract taxable when a Texas seller delivered them to a Texas fabricator that then sent the assembled product out of state by common carrier?
No. The May 1990 letter corrected an earlier answer and held the materials nontaxable when the seller delivered them to a Texas third-party fabricator and the fabricator delivered the assembled produc…
For Texas franchise-tax purposes, could a trust, partnership, association, corporation, or employee stock-plan trust count as one shareholder of a close corporation?
Yes. Each qualifying entity could count as one shareholder if it was not created primarily to hold the close corporation's stock. An employee stock-plan trust generally counted as one shareholder, sub…
Did replacing an old building's entire internal structure count as new construction when two historic exterior brick facades remained?
Yes under the historical rule. The project created a new four-story building with new floors, support columns, walls, and internal materials; only two historic brick facades remained and were reanchor…
Was labor taxable when a cable television operator completely replaced its distribution plant by hanging a new plant and then tearing out the old one?
No. The Comptroller treated the complete cable-plant replacement as new construction, so the installation labor was not taxable, and treated removal of the old plant as nontaxable demolition.
Were engineering design services taxable for plant equipment shelters and for a small mobile, easily disassembled control building?
Building-design services for private clients were taxable regardless of the building's use, including shelters for equipment at wastewater, solid-waste, or waste-treatment plants; municipal projects w…
How did Texas tax broadcast-receiving equipment, its installation in new or existing buildings, and charges to receive broadcast signals?
The equipment and seller-installed tangible-personal-property installations were taxable. Permanent installation in existing nonresidential realty made the full charge taxable repair or remodeling; ne…
Were natural gas and electricity exempt when a Texas food business used them to prepare food sold to mobile vendors for resale?
Yes, for utilities directly used to prepare food for resale, because the business was acting as a food processor rather than preparing food for immediate consumption. Utilities for storage, lighting, …
Could a Texas tax-exempt hospital buy tickets to taxable amusement services tax-free for its members, and what happened if it resold the tickets to employees?
The exempt hospital could buy amusement services tax-free for itself or its members, but it had to collect sales tax if it bought taxable tickets and then sold them to employees.
Which fees charged at a dealer-to-dealer motor vehicle auction were taxable as services of a seller's agent?
Under this historical ruling, the selling commission, vehicle entry fee, and delayed title-work fee were taxable seller-agent services. The dealer registration fee, buyer's commission, and genuine veh…
Did Texas's agricultural sales-tax exemption cover equipment used in a commercial crab-fishing operation?
No. Texas treated commercial crabbing as fishing rather than agriculture because the crabs were not animals in captivity, so the operation's equipment did not qualify for the farm-and-ranch equipment …
How did Texas tax fundraising products, video yearbooks, and advertising sold through schools and organizations?
Cookies and summer sausage were exempt food, while candy was exempt only in specified circumstances. Schools could buy taxable video yearbooks for resale, with tax due on the student selling price, bu…
Was labor subject to Texas sales tax when it was performed at a twin plant in Mexico, with or without Maquiladora export documents?
No. Labor performed in Mexico was not subject to Texas sales tax whether billed to a twin plant with valid Maquiladora documents or to a Mexican company without them. When the documents were absent, t…
Were charges taxable when the City of Huntsville operated a central burglar-alarm monitoring facility in its police station?
No. The Comptroller ruled that the city's alarm-monitoring charges were not subject to sales tax because Texas political subdivisions were exempt from licensing under the Private Investigators and Pri…
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