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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Did Texas treat the bolted-down pulp-making and paper-making equipment at a paper mill as real property or tangible personal property?
The classifications differed. The pictured pulp-making machinery was realty, while the quarter-mile paper-making machinery and cut-size shelter were tangible personal property.
Was an exemption certificate valid when signed at the start of an exempt job and then photocopied for later use?
Yes, if the rest of the certificate was properly completed. The follow-up letter added that each certificate given to a supplier had to show the current date it was issued.
Was the full charge for retreading tires taxable, including a separately invoiced charge to repair the tire casing?
Yes. The entire retreading charge was taxable, including casing repair because it was part of the retread process. Separating or changing the invoice presentation did not change taxability.
Could a prestressed-concrete business claim manufacturing exemptions while acting as a lump-sum or separated contractor, and how was cement treated?
No manufacturing exemption applied while it acted as a contractor; only outright sales were treated as manufacturing. Lump-sum cement created no sales-tax liability, while separated-contract concrete-…
Were stationary exercise bicycles and ankle weights exempt from Texas sales tax when prescribed for rehabilitation after an injury?
Yes. The Comptroller treated exercise bicycles and ankle weights sold on a doctor's prescription for post-injury rehabilitation as exempt therapeutic devices.
Was merchandise taxable when customers redeemed ten savings stamps for a free bottle of food supplements, and what amount formed the tax base?
Yes. The Comptroller treated the program as trading-stamp redemption and the merchandise exchange as a taxable retail sale, measured by the product's suggested retail selling price.
How did Texas determine whether an installed pipeline sale involved real property or tangible personal property, and could the sale qualify as an occasional sale?
An installed pipeline generally qualified as real property, subject to a good-faith agreement or the fixture tests. If personal property, its sale could qualify as an identifiable-segment occasional s…
When did electricity qualify for exemption under the predominant-use test, and what rules applied to exemption certificates and refunds of previously collected tax?
More than 50% of metered electricity had to be exempt use, supported by a usage study. Sellers were not required to refund prior tax, and refunds required qualifying historical use, an active meter, a…
Which electricity uses of a private water and sewer utility were exempt, and how did the predominant-use test apply to a mixed-use meter?
Electricity for extracting, pre-processing transport, and water-processing equipment was exempt. Post-processing storage and delivery, incidental operations, and sewer service were taxable; a mixed me…
Did electricity used to clean, grade, sort, pack, refrigerate, and store produce qualify as electricity used directly in processing?
No. Those activities were not treated as processing, so their electricity was not exempt. More than 50% of total electricity had to be used directly in processing produce for sale to qualify.
Was a rental company's charge for damage to rented equipment taxable when the damage required replacing a destroyed part?
Yes. The Comptroller treated replacement of a destroyed part as a taxable repair, separate from later rentals. For lost or stolen items, the letter only said a new item could be a replacement rather t…
Was electricity used for lighting at a manufacturing or processing facility exempt from Texas sales tax?
It depended on location. Lighting directly in the manufacturing or processing production area was exempt use, while lighting in hallways, storage rooms, and other nonproduction areas was taxable use.
Did MTA tax apply when a common carrier bought parts inside an MTA for its own use and transported them on its own freight system to a shop outside the MTA?
Yes. The carrier possessed the goods inside the MTA even while acting as the shipper, so carrying its own purchases to a point outside the MTA did not prevent MTA tax.
Did a bowling center's new ownership end the historical sales-tax exemption for league agreements signed before October 2, 1984?
No. The old agreements remained exempt prior contracts despite the ownership change, but the letter expressly said that exemption expired on September 30, 1987.
Could a taxpayer use modified invoices obtained after completed transactions to satisfy a separate-statement requirement and change the sales-tax result?
No. Executive Counsel rejected after-acquired modified invoices because the completed transaction's form determined taxability and the later documents were obtained only to alter that result.
A private charitable foundation has federal 'unrelated business taxable income' solely because of debt-financed investment income (interest, dividends, capital gains under IRC section 514) -- does that alone make it subject to New York's unrelated business income tax, and if so, can it deduct 50% of dividends or use an investment-based allocation instead of the standard three-factor formula?
Yes -- New York's 1970 legislative history for Article 13 makes clear the Legislature intended debt-financed property income to count as an 'unrelated trade or business,' so a foundation with federal …
New York Advisory Opinion TSB-A-86 (9)I: Can a taxpayer deduct the unused portion of a New York automobile registration fee, for a personally-used car, on her New York personal income tax return?
No. The Department ruled that Sarah Bloamer, who discontinued using her car and destroyed its plates nine months before her New York registration expired, could not deduct the unused portion of the re…
New York Advisory Opinion TSB-A-86 (10)I: For a multi-series municipal bond mutual fund where each series holds only one state's bonds, should the Tax Law § 612(b)(1) addback for non-New-York-bond interest be computed using the whole fund's total exempt interest, or only the exempt interest of the specific series the shareholder owns?
Only the specific series' interest. The Department ruled that for a regulated investment company organized with separate series (each holding only one state's municipal bonds, with segregated assets a…
What happened when a coffee-vending service bought taxable and nontaxable items together for one lump-sum price?
The entire lump-sum charge was taxable. Nontaxable items had to be separately listed to be excluded from the sales-tax base.
Were paint brushes exempt as property necessary and essential to manufacturing?
No. Although the brushes otherwise met the necessary-and-essential manufacturing test, the law specifically excluded hand tools, and Rule 3.300(a)(6) included paint brushes in that definition.
Does a carpet retailer collect sales tax on installation — and does it matter what's under the carpet?
It depends on the surface underneath: carpet over a finished floor is a taxable installation, while carpet over a bare subfloor is a tax-exempt capital improvement. Brockport Carpet & Linoleum sells a…
Are a materials lab's concrete strength-test reports a taxable information service?
No — the reports are a non-taxable 'personal and individual' information service. Fortunato Sons, a contractor, buys concrete strength-and-standards testing from a lab. A written report compiling test…
Could an out-of-state bus lessor qualify for Texas's new-resident motor vehicle tax when it first leased used buses in Texas?
Yes. The Comptroller said the out-of-state lessor qualified as a new resident under § 152.023 when its previously out-of-state registered buses entered Texas for new leases. The result was the same fo…
Were hunting-lease operators required to obtain a permit or collect Texas sales tax while the Comptroller reconsidered its policy in July 1986?
Temporarily, no. This letter superseded a May 9, 1986 letter and suspended permit and collection requirements for hunting-lease operations until a final determination was reached.
When a hotel installs a lounge sound-and-light system, which parts are an exempt capital improvement and which are taxable?
It's decided component by component: the movable equipment is taxable, and the built-in pieces are a capital improvement only if permanent. A Holiday Inn installed a lounge system — DJ booth, speakers…
Can New York force out-of-state fur subsidiaries to collect tax when they share a brand and owners with New York stores?
Yes — here the New Jersey subsidiaries are the alter egos of their New York affiliate and parent, so they have nexus and must collect New York tax. Harfred / The Fur Vault planned to move their New Je…
Was a hospital's charge for providing copies of medical records to third parties subject to Texas sales tax?
No. The Comptroller treated the copies as part of the hospital's professional service and said providing them to third parties was not subject to tax.
Does a car-wash service that cleans a dealer's new, unsold vehicles have to charge sales tax?
No — not if the dealer gives a resale certificate, because the cars are held for sale. Thomas Murray plans to wash only new, unregistered cars and trucks at a dealer's premises. Washing a vehicle is n…
Could a direct-payment exemption certificate be reproduced with the controller's signature already on it?
Yes. The controller's signature could be reproduced, but the vendor's name and the certificate's issue date had to be completed when the certificate was actually issued to that vendor.
Was the service of converting an oil well from a bottom-hole pump to a gas-lift operation taxable?
Yes. The Comptroller classified the well-conversion service as taxable remodeling.
Did casing and tubing bought for use in high-pressure New Mexico wells qualify as drilling equipment under Section 151.324(b)?
No. The Comptroller classified casing and tubing as production equipment rather than drilling equipment and said they were exempt only when used offshore outside Texas's territorial limits.
Were radio transceivers sold to individual members of tax-exempt organizations exempt merely because the members belonged to those organizations?
No. Section 151.310(a)(2) applied to qualifying purchases by the exempt organization itself, not purchases by its members or stockholders, so the seller had to collect tax.
Did an insurance company's gross-premiums-tax exemption also exempt its purchases from Texas sales and use tax?
No. The internal legal memo treated the insurance-language exemption as covering annual occupation, privilege, or franchise taxes—not transaction-based sales and use tax.
Did bond financing under the Regional Waste Disposal Act create the same sales-tax exemption for pollution-control equipment as the Clean Air Financing Act?
No. The Clean Air Financing Act contained an equipment tax exemption, but the Regional Waste Disposal Act did not. The corrective letter limited any exemption to qualifying purchases by the river auth…
Within a multi-tier corporate family, does New York's 90%-interest-add-back rule reach interest paid to a 'grandparent' corporation (a shareholder's own parent) or to a 'nephew' corporation (a sibling subsidiary's own subsidiary) -- or does it only reach interest paid to a DIRECT 5%-plus stockholder or that stockholder's OWN subsidiary?
No to both -- section 208.9(b)(5)'s 90% interest add-back only reaches interest paid to an entity that is itself a 5%-plus STOCKHOLDER of the paying corporation, or a SUBSIDIARY of such a stockholder.…
Is cook-to-order pizza that is sold and eaten unheated taxable, and does cooking it to order make it 'sold in a heated state'?
Cooking pizza to order does not make it 'sold in a heated state,' but the pizza is taxable unless the seller proves it is the kind of unheated food commonly sold in food stores like bakeries. This mod…
Were prepackaged mixed drinks and wine coolers subject to Texas sales tax or alcoholic-beverage gross-receipts tax?
A prepackaged mixed drink sold only under a mixed-beverage permit was subject to gross-receipts tax, not sales tax. Wine-cooler treatment depended on the seller's permit and location.
When did Texas make damage-waiver fees taxable after postponing the effective date announced in the June 1986 Sales Tax Review?
September 1, 1986. The Comptroller postponed the announced July 1 effective date by two months so lessors had time to reprogram their computers.
Was the rental of cable-signal decoders taxable, and could the lessor buy the decoders tax-free for resale?
Yes. The lessor had to collect tax on decoder rental charges and obtain a sales-tax permit. Decoders actually rented to customers could be bought for resale, but equipment kept for the lessor's own us…
Did F.O.B. terms or purchaser-paid shipping insurance determine title passage for goods delivered by UPS?
No. The June 30 correction said UPS did not issue the bills of lading underlying Rule 3.303(b)(2), so F.O.B. terms were irrelevant; purchaser-paid insurance also did not make title pass at the seller'…
Could a restaurant calculate its clearly stated 15% gratuity on food plus sales tax, or did it have to calculate the gratuity only on food sales?
Either method was acceptable on the stated facts. The entire gratuity went directly to the waiter and was clearly identified on the guest's check.
Was a minimum utility bill taxable when an apartment was vacant and the bill showed zero consumption?
Yes. A zero-consumption minimum bill was a taxable sale whether charged to the individual utility customer or to the apartment owner or managing company.
Is a CAD/CAM computer used to design custom manufactured products exempt as production machinery?
Mostly no — designing isn't 'production,' so the CAD/CAM computer isn't exempt production machinery, with one exception. Buffalo Forge uses its CAD/CAM system to create individualized drawings that le…
Did communication and storage buildings qualify for the exemption for tangible property used in offshore mineral exploration or production?
No. Property had to be used directly and exclusively in the exploration or production activity itself, and communication and storage buildings did not meet that test.
Did an equipment seller include a manufacturer rebate assigned by the purchaser when computing the amount subject to sales tax?
Yes. The taxable amount included everything the seller received for the equipment, including a manufacturer rebate that the purchaser assigned to the seller.
Was MLO Instant Milk and Egg Protein subject to Texas sales tax?
No. The Comptroller classified MLO as a food supplement and said it was exempt from tax.
My company plans to transfer real property to its wholly-owned subsidiary, and then transfer all of that subsidiary's stock up to its own parent corporation. Are both transfers exempt from New York's Real Property Transfer Gains Tax as a mere change of form?
Yes. Philip Morris Incorporated planned to transfer New York real property (in Cayuga County) to its wholly-owned subsidiary Miller Brewing Company, and then separately transfer all of its Miller Brew…
During a franchise-tax audit, is the Department required to actually consider evidence a company offers showing it was NOT 'principally engaged' in a transportation-type business (so it should be taxed under Article 9-A rather than Article 9's sections 183/184) -- or can auditors classify a company's tax status without weighing that evidence?
Yes -- whether a corporation is taxable under Article 9's sections 183/184 (transportation/transmission franchise tax) or under Article 9-A depends entirely on what activity the corporation is 'princi…
How is an advertising agency's work taxed in New York — its services, the property it produces, and purchases it makes for clients?
It depends on the activity — advertising services are exempt, but selling finished property is taxable, and buying tax-free as a client's agent requires a strict test. Advantage Concepts, an advertisi…
If a company builds an entire dedicated research-and-development building -- including labs, offices for researchers and managers, flexible 'shell space' for future expansion, and support/mechanical space -- does the WHOLE building qualify for New York's 10% research and development credit, or only the portions used directly for lab work?
Yes -- for a purpose-built facility genuinely dedicated to research and development, the ENTIRE building can qualify for the 10% research and development credit under section 210.18, not just the labo…
Could a software-maintenance provider buy computer dial-up line service tax-free for resale when it used the lines to diagnose and adjust customer systems?
No. The line was a taxable tool consumed in providing taxable maintenance, not a resold telecommunications service. The provider owed tax on the line and charged tax on its total maintenance fee.
What certificates, meter-by-meter studies, records, refund proof, and ongoing monitoring were required for customers claiming a utility sales-tax exemption?
Each meter had to qualify separately, with account-specific certificates and a valid study showing over 50% exempt use where uses were mixed. Claimants kept proof, updated changes, and withdrew certif…
Were custom poems taxable when recited as entertainment, sold in written form, or given away as gifts?
A delivered and recited poem was a nontaxable service; a written poem was taxable tangible property. Gifts were not taxed to the recipient, but the poet owed tax on materials used for services and gif…
Could a private snack-bar operator at a state school make tax-free sales to students or inmates while also selling to staff and visitors?
Yes, if the operation primarily benefited students or inmates and kept records separating those sales. Sales to staff, guests, and visitors were taxable; failure to distinguish them made all sales tax…
Is a perpetual license to computer software that the vendor analyzes and customizes for each customer subject to New York sales tax?
Not under the law in effect in 1986 — the customized software is treated as a non-taxable intangible. Financial Decision Systems sold perpetual licenses to CORPTAX, a mainframe corporate-tax product. …
Did the value paid under the submitted contract's price, billing, and tax provisions include tax reimbursement?
No. After reviewing the submitted contract sections, the Comptroller concluded that the value being paid did not include tax reimbursement.
Could a retailer use store-level sales ratios to estimate the sales tax embedded in uncollectible hot checks covering cash, gasoline, taxable goods, and exempt goods?
Yes. The Comptroller accepted the proposed ratio method: subtract estimated cash, allocate the balance between gasoline and merchandise, apply the taxable-merchandise ratio, and back out the tax.
Does a customer's capital improvement certificate relieve an equipment supplier of the duty to collect New York sales tax, and who is liable if the customer won't pay?
No — a capital improvement certificate does not relieve the supplier, and both the supplier and the customer are liable if tax goes uncollected. Superior Restaurant Equipment sells commercial kitchen …
An out-of-state company leases trucks WITHOUT drivers and merely drives them through New York on the highways (paying highway use tax) -- does that make it a 'transportation business' subject to New York's Article 9 franchise tax on trucking companies, or could it instead owe Article 9-A tax if it also leases trucks TO New York customers?
No -- a company principally engaged in leasing trucks WITHOUT drivers (as opposed to leasing vehicles WITH drivers, which does count as a transportation business under prior case law) is NOT 'principa…
Does a New York mutual savings bank's conversion to stock form -- a federal tax-free 'F reorganization' -- also qualify as a tax-free reorganization for New York's bank franchise tax under Article 32?
Yes -- because Article 32 has no modification provision addressing an IRC section 368(a)(1)(F) reorganization, a mutual-to-stock savings bank conversion that qualifies as a tax-free federal reorganiza…
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