Texas State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Texas, with full citations and the original source on every page.
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An out-of-state contractor is building 12 miles of fence on the Texas side of the border under a lump-sum contract with the U.S. Section of the International Boundary and Water Commission (IBWC). Is the contractor exempt from Texas sales tax on the materials and services for this job?
Yes, for materials — because the contract is with the United States Section of the IBWC, which counts as a federal government agency under Rule 3.322(c)(1)(C), the contractor can use a Tax Code Sectio…
Is telecommunications service sold between related corporate affiliates exempt from Texas sales tax under the intercorporate services exemption?
No. Sales tax is due on telecommunications service charges even between related corporate affiliates. Texas started taxing telecommunications services in 1985, and Tax Code Section 151.346(c) specific…
A company runs credit and criminal background checks on prospective apartment tenants for property managers, faxing back the results for a fee. Is that service subject to Texas sales tax?
At least partly, yes, as of 1998. Furnishing credit information on a prospective tenant for a fee is taxable as a credit reporting service under Tax Code Section 151.0034. Whether the criminal-backgro…
A planned Internet business will sell sports and horse-race betting selections to account holders for a fee, refunding a bonus amount if the pick loses. Can the business structure its fees so most of the charge counts as nontaxable consulting rather than a taxable information service?
No. Consultation services centered on the consultant's own expert or professional opinion are not taxable if unrelated to sales of taxable items, but consultation services that are really in the natur…
A permitted retailer is selling a used tug it had been using for its own hauling (not income-producing) to a company that plans to claim a ship/vessel sales tax exemption. Is the sale of the tug itself exempt?
No. The occasional-sale exemption (Tax Code Section 151.304, Rule 3.316) doesn't apply because the seller is a permitted retailer. And the ships-and-ship-equipment exemption for vessels in foreign or …
The FCC assesses telecommunications carriers for the Federal Universal Service Fund (USF), similar to the state's Telecommunications Infrastructure Fund (TIF) assessment. When a carrier bills this USF charge through to its customers as a reimbursement, is it subject to Texas sales tax?
Yes. The USF assessment is made against the telecommunications carrier, not directly against the customer — whether it counts as a 'tax' or 'surcharge' is a question for the FCC, not the Comptroller. …
A company bought a tetrafluoroethane reclaimer machine to recapture refrigerant from truck air conditioners during repairs, instead of letting it vent into the atmosphere. Is the machine exempt from Texas sales and use tax because it protects the environment?
No. The purchase of the tetrafluoroethane reclaimer machine is subject to Texas sales tax. The Tax Code contains no exemption for equipment purchased to repair air conditioning systems, even though th…
A retail-building developer had its lot cleared and several large liveoak trees removed, then replanted the trees elsewhere on the same lot to meet City of Austin environmental guidelines. Is the tree removal/replanting taxable as a landscaping service, and can it be billed separately from the (nontaxable) land-clearing work?
Removing trees for the purpose of replanting them is a taxable arborist service (arborist services are landscaping services, which are taxable), even though clearing land for construction purposes is …
A traffic-engineering consultant sells market reports, expert-witness reports, and subject-expert reports to TxDOT and others, and separately performs consulting-style services (expert witness testimony, teaching training courses, nonprofit director work). Which of these are subject to Texas sales tax, and does it matter that the main customer is a state agency?
The market reports and expert-witness reports are proprietary information services gathered/compiled specifically for one client and not resalable by the consultant — so under Rule 3.342, they're not …
A medical-information researcher compiles reports from public-access databases into a bound booklet sold to only one client at a time, with the information not resalable by either her or that client. She also plans to do similar market research using databases and interviews. Does the fact she sells each report to just one client, with no resale rights, make her service exempt from sales tax as proprietary information?
No, it's still a taxable information service. The Rule 3.342(d)(1) exclusion for proprietary information requires the CLIENT to have enforceable property rights in the raw information — enough to stop…
A new computer hardware reseller is paying sales tax on components bought locally (rather than issuing a resale certificate), then charging its own customers sales tax again on the marked-up resale price — effectively taxing the item twice. Is that illegal, and how should it be handled? The reseller also does computer consulting, software installation, and system setup work — which of those are taxable?
Double-paying isn't illegal, but it isn't the correct procedure either: the reseller should issue a Rule 3.285 resale certificate to its local suppliers instead of paying tax upfront, and can seek a r…
How is Texas sales tax calculated and collected on a financing lease — is it based on the aggregate total of all lease payments, collected all at once, or spread out like an ordinary rental?
Under Rule 3.294(f)(3)(B), a financing lease is taxed differently from an ordinary lease: the lessor must collect ALL tax due under the entire lease at the earlier of when the lessee takes possession …
A customer gave a seller of cut limestone an exemption certificate claiming the limestone is exempt 'unprocessed material, merely sorted, sized, screened, washed or dried.' Can the seller accept that certificate in good faith?
No. The Comptroller considers cut limestone to be 'processed material,' not unprocessed material, and it is therefore taxable. The seller should not accept an exemption certificate from a customer on …
A private owner is building an office building specifically for a governmental Appraisal District, which is contractually obligated to buy the completed, improved property for its exclusive use once construction is done. Does the contractor performing this construction qualify for the sales tax exemption for improving real property for an exempt entity, even though the contract is technically between the owner and the contractor, not the District and the contractor?
Yes. Because the improvements are being built at the exempt entity's (the Appraisal District's) request, to its specifications, and will inure entirely to its benefit — with the District contractually…
A web developer asked three questions: is monthly web site maintenance/programming taxable if the site belongs to the client; does selling software over the web to out-of-state buyers require collecting Texas tax; and is web site design/programming work split between taxable and nontaxable pieces, with HTML vs. CGI vs. WinCGI programming treated differently?
Creating and maintaining web sites using HTML is a taxable data processing service (not exempt program-modification work), taxable in Texas whenever the customer gets the benefit of the service in Tex…
Are chocolate and strawberry flavored Nestle Quik (drink-mix) products exempt from Texas sales tax as food products?
Yes. The Comptroller confirmed both the chocolate and strawberry flavored Nestle Quik products are exempt from Texas sales tax as food products.
A 501(c)(3) nonprofit plans to hold an annual fundraising banquet selling food, beer, wine, and liquor, prepared and served by its own volunteer members. Does the nonprofit need to collect Texas sales tax on the food and beverage sales?
Not on the food and beverages, if specific conditions are met: the sale must be an ANNUAL event lasting no more than one week; it must be a fundraising project run exclusively by the volunteers of the…
A paranormal-research organization offers paid ghost investigations at homes/businesses, presentations to schools about ghost-theory research, and ghost-hunting classes (with optional textbooks). Are any of these services subject to Texas sales tax?
No — classes, seminars, presentations, and ghost investigations themselves are not taxable services. But two things are: any separately stated charge to students/participants for books or literature m…
Someone starting an Internet consignment business — selling other people's used goods online via Internet auctions and taking a commission — asked whether they need to charge sales tax, since they rarely see other online sellers doing so.
Yes, sales tax applies. Selling tangible personal property is subject to sales tax regardless of whether the goods belong to someone else and are on consignment, and regardless of whether the sale is …
A TDI-licensed company handles subrogation claims for insurance-carrier clients — pursuing recovery from responsible third parties or third-party carriers, without doing the actual claims adjustment or appraisal work itself, and earning a contingency fee only upon recovery. The company read Rule 3.355's insurance-services definition and concluded it doesn't apply to this kind of subrogation recovery work. Is that right?
No, subrogation recovery services like this ARE taxable insurance services. Even though the company doesn't adjust claims or do appraisals itself, filing claims with third-party carriers for reimburse…
An oil & gas well servicing company asked how Texas sales/use tax and the separate 2.42% well servicing tax apply to a specific list of services: gauging (pumping) services, fluid level service, wireline (slickline) services, gas lift equipment service, and production packer equipment service.
It depends entirely on the PURPOSE of the specific job, not the service's name — the same activity (like pulling rods) can be taxable on one job and nontaxable on another, and no single service is eve…
Is a direct sales company required to collect Texas sales and use tax from its independent distributors — including both home-based distributors and distributors who operate their own retail stores/kiosks in malls or strip centers?
Yes for home-based distributors: the direct sales organization itself is treated as the retailer and must collect tax on the suggested retail price, because Texas doesn't issue sales tax permits to ho…
A notary public who prepares deposition summaries and plaintiffs' original petitions for lawyers involved in civil and criminal lawsuits asked whether these services are subject to Texas sales tax.
No, these specific services are not taxable. Tax Code Section 151.353 exempts court reporting services — preparing a document or other record in a civil or criminal suit by a notary public (or a licen…
A client plans to build a two-story office area inside an existing warehouse without raising the roof — installing a new second floor where none existed before, alongside remodeling the existing first floor. Does it matter whether the first and second floors are built under one contract or two, or at different times, for purposes of Texas's new-construction sales tax exemption?
No, not for the second floor's exemption. Installing a new second floor where one didn't previously exist qualifies as exempt new construction, regardless of whether it's done under the same contract …
A telecommunications carrier wants to combine its new FCC Universal Service Fund (USF) pass-through charge with its existing state Telecommunications Infrastructure Fund (TIF) charge on one billing line, to keep bills simpler. The carrier also asked: (1) if it collects more TIF reimbursement from customers than it actually owes the state, must it remit that excess to Texas, and (2) are voice mail box revenues (with no paging component) subject to the Texas Telecommunications Assessment?
Combining the USF and TIF charges into one billing line is allowed — both assessments are made against the carrier, not directly against ratepayers, and there's no prohibition on collecting a single c…
Artificial Insemination (A.I.) Certificates are documents breed associations require to register animals resulting from artificial insemination, authenticating that the producer purchased the semen used. They're increasingly sold separately from the semen itself (for customer convenience) rather than always bundled together. Are these certificates subject to Texas sales tax?
No. Charges for A.I. certificates sold to purchasers of the semen, authenticating their purchase, are exempt from sales tax in the same manner as the semen itself — even when the certificate is bought…
Is glauconite (a naturally occurring mineral) exempt from Texas sales tax like other unprocessed natural materials such as sand, dirt, and gravel?
Yes, when sold unprocessed. Glauconite is treated the same as sand, dirt, and gravel: it's considered unprocessed — and therefore not taxable — if it has been merely sorted, sized, screened, washed, a…
A business stores liquid in tanks and, before selling it to final consumers, filters out impurities using a pump-and-filter system — without this filtration, the product isn't marketable. Does that filtration equipment qualify for the manufacturing exemption?
It depends on facts the letter says weren't fully provided. If the client receives the liquid already in a MARKETABLE state and is merely filtering out impurities that accumulated from its OWN storage…
A refined sugar producer built three large 'conditioning silos' that dehumidify sugar as a final processing step before packaging. Sugar cycles through silo #1 for 24-36 hours, then may go on to silo #2 or #3 for additional, variable-length dehumidification. Do all three silos qualify for Texas's manufacturing equipment exemption?
Silo #1 qualifies for exemption (as a piece of manufacturing equipment, not counting its foundation, assuming it isn't installed under a lump-sum realty-improvement contract) because it's used for a s…
A seller wants to sell one-time-use, USDA-approved polyester straps to meat packers, replacing the reusable stainless steel hooks currently used to suspend carcass beef in refrigerated rail trailers for shipping (the straps are also lighter and skip the hook-sanitizing requirement). Do these straps qualify for a sales tax exemption as packaging supplies?
Yes — the straps qualify for exemption as packaging under Rule 3.314 when sold to a meat packer that processes the meat for sale, since they function as a container/packaging supply used to ship and t…
A refinery is relocating a large storage tank (exceeding 500 barrels, treated as real property) — tearing it down at its current location and rebuilding it, using the same materials in the same configuration, either elsewhere within the same facility or at a different facility. Is this relocation taxable?
The teardown, relocation, and rebuild are treated as nontaxable SERVICES, with the rebuild at the new location qualifying as new construction. In a new-construction contract, materials (but not labor)…
An oil and gas well operator places its own compressors at well sites to boost gas pressure for working interest owners, billing them monthly under line items historically called 'compressor rental' (recently relabeled 'compressor services'). The operator's compressors were later sold to a commonly-owned affiliate, which now leases them back to the operator. Are the operator's compression services to working interest owners taxable rentals of tangible personal property, or nontaxable services — and does the billing label, or the separate affiliate lease-back arrangement, change that answer?
The compression services the operator provides to working interest owners are NONTAXABLE services, not taxable rentals — because the working interest owners never get physical possession, control, ope…
A notary public asked the Comptroller to confirm whether the document/record preparation services she performs for lawsuit participants are exempt from Texas sales tax, and whether she's now exempt from collecting sales tax altogether.
Her document/record preparation services for civil or criminal lawsuit participants ARE exempt from sales tax, under Tax Code Section 151.353's court reporting services exemption — covering documents …
A company bought a used forklift at a Texas auction intending to export it abroad, but the forklift needed major repairs first and sat at a Texas repair facility for several months before shipping. The company sought a refund of the sales tax it paid, arguing it never stored or actually used the forklift — only had it repaired. Does the export exemption apply?
No — refurbishing the forklift after the company took title to it counts as a USE of the forklift in Texas, and that use causes the loss of the export exemption on the original purchase, even though t…
A monthly publication is distributed free of charge at over 250 locations, funded by advertisers who pay for ad space. The publisher currently pays tax on its own printing materials. Does the publisher instead qualify as a 'controlled-circulation' publication — letting it buy printing materials tax-free with a resale certificate and instead collect tax from advertisers — and do the advertisers owe tax on their ad space purchases?
No, not on the facts described — this publication does not appear to meet the controlled-circulation test. Per Sharp v. Cox Texas Publications, a controlled-circulation magazine must show all five of:…
Can a chiropractor sell or dispense vitamins to patients tax-free in Texas?
Yes. A chiropractor is a licensed practitioner of the healing arts and may sell or dispense vitamins tax-free under Rule 3.284(b)(2)'s drugs and medicines exemption. To document the exempt sale, the c…
A company plans to build a permanent oil-tool testing rig facility — a derrick, mast, substructure, and supporting equipment permanently mounted on a concrete foundation with embedded I-beams forming a tracking system, using TWO separate contractors (one for site planning/foundation, one for installing/hard-wiring the derrick and equipment). Does this qualify as new construction (an improvement to realty) for Texas sales tax purposes, and does splitting the work across two contracts change that?
Yes, the whole project is new construction — there's no existing test rig facility at the site, and the equipment is being permanently, irremovably attached (the derrick can't be detached from the I-b…
A taxpayer was audited, paid the resulting deficiency determination in full, then submitted additional documentation within 60 days that got some items amended. There are still other items the taxpayer believes are exempt but hasn't yet documented to the auditor. How much time does the taxpayer have to present that additional documentation without losing the ability to claim a refund — is it six months from the audit's final date under Tax Code Section 111.104, or does the normal four-year statute apply?
It depends on whether the specific item was already part of the audit. Tax Code Section 111.104(b) lets a taxpayer file a written refund claim within SIX MONTHS from the date the deficiency determinat…
A company operates parking facilities in a large medical complex and sells monthly parking services to nearby tax-exempt organizations (like hospitals), which in turn let designated employees, physicians, nurses, volunteers, and directors use that parking for free while carrying out their work at the exempt organizations' facilities. The parking operator doesn't currently collect sales tax on these sales but does get exemption certificates from the exempt organizations. Is that correct?
Yes. Sales of parking services to an organization exempted under Tax Code Section 151.310(a) and Rule 3.322(f)(1) are exempt from tax when that exempt organization (or its authorized agent) pays for t…
A web developer whose services expanded into more on-line artwork asked how Texas sales tax applies to illustrations/graphics for a website, HTML/JAVA programming, multimedia programming, and professional consultation — and whether it matters if these are provided to companies outside Texas.
Creating graphics/logos with a drawing program for a client's homepage is taxable graphic art (Rule 3.312). Scanning data into a site and creating HTML documents is taxable data processing (Rule 3.330…
An outsourced digital pre-press/asset management company runs a Texas photography studio plus several product lines (digital photography, 2D/3D digital illustration 'Liquid Graphix,' resold data-communication solutions called 'ViNET,' and custom/modified software) delivered to customers via mail, contract carrier, or the Internet. The company asked a long list of Texas sales/use tax questions covering nearly every one of its product lines and business practices.
Yes across the board — having a Texas studio requires the company to be permitted and to collect/report Texas sales/use tax on its taxable Texas sales. Software sales are taxable tangible personal pro…
A manufacturer uses a third-party service company to handle its warranty repair claims (both original manufacturer's warranty and separate extended warranty). Is that third-party service provider required to charge the manufacturer Texas sales tax on its parts-and-labor claims — and does the answer differ for a regular manufacturer's warranty versus an extended warranty?
For the manufacturer's ORIGINAL warranty: the manufacturer may give the third-party service company an EXEMPTION certificate for the labor and material charges used to fulfill the manufacturer's warra…
Can a student training for a pilot certificate or the next level of flight rating (instrument, commercial, multi-engine, airline transport, etc.) claim a Texas sales tax exemption on aircraft rentals used for training, including solo flights?
Yes. A student enrolled in an FAA-approved program may claim exemption on aircraft rentals used for flight training, including instructor-approved solo flights (evidenced by a logbook endorsement, whi…
Is Texas sales tax due on software sold over the internet and downloaded from a Texas-hosted server, when the customer downloading it is located outside Texas — and what records does the vendor need to keep to support that?
No Texas tax is due when an out-of-state customer downloads software from a Texas server. The vendor must keep records showing the customer was located out of state at the time of the download — the a…
If the upper floors of a multi-story building are gutted down to the floor slab of each floor — but the building's ceilings, floors, and end walls stay standing — does rebuilding those upper floors count as untaxed new construction, the same way gutting a one-story building down to its slab would?
No. The one-story rule (demolish to the slab with no walls/framing remaining = new construction) does not simply carry over floor-by-floor in a multi-story building. Gutting upper floors down to each …
Is a forensic engineering firm's technical consulting for plaintiff attorneys — in lawsuits where the defendant's insurance coverage isn't the point of the litigation — automatically exempt from Texas sales tax as a non-insurance service, just because the client is a plaintiff's lawyer rather than an insurance company?
No blanket exemption exists just because the client is a plaintiff's attorney rather than an insurer or defense side — the sales tax law and Rule 3.355 draw no distinction based on who purchases the s…
A distributor buys 'zero-value' rechargeable phone cards from an out-of-state company, distributes them through take-one display racks and to churches/schools/clubs as fundraiser items, and earns a commission only when a customer later loads value onto the card by mailing a check or paying by credit card directly to the out-of-state company. How is Texas tax handled on the cards themselves and on the value customers later load onto them?
The blank cards themselves are tangible personal property subject to Texas use tax when the distributor buys them — but cards bought for resale (to the public via display racks, or to churches/schools…
Are $1 telephone debit cards sold through vending machines subject to Texas sales tax and the Telecommunications Infrastructure Fund (TIF) assessment, and how does tax get collected when the card's per-minute value is set at the time of use rather than sale?
Yes — as of this 1998 letter, $1-or-less vending-machine calling cards were treated as prepaid telecommunications services subject to Texas sales tax and the (then-existing) 1.25% TIF assessment; tax …
How is Texas sales tax figured on manufacturing and installing signs — is it always taxed as tangible personal property, or does it depend on whether the sign becomes part of the building and whether the job is new construction or remodeling?
Three questions decide it. First, does the sign stay identifiable as tangible personal property (tax on the full labor+materials charge), or become an improvement to real property? Second, if it's rea…
Is chartering a helicopter, with the pilot included, a taxable lease of the aircraft, or a nontaxable service?
It's a nontaxable service. Chartering an aircraft with a pilot included is not a taxable lease, regardless of whether the charge for the pilot and the aircraft is separately stated or billed as one su…
When a multi-level marketing company (MLMC) sells products to its own independent distributors for their personal use (not for resale), should it collect sales tax on the wholesale price the distributor actually pays, or the retail price?
The MLMC should collect tax on the amount it actually charges the distributor for personal-use purchases — not the retail price — but only if the distributor tells the MLMC at the time of ordering tha…
If a company becomes a co-plaintiff to help a plaintiff collect a court judgment, and its compensation comes out of the judgment itself rather than a separate invoiced fee, does Texas sales tax still apply to that arrangement?
Yes. Helping collect a delinquent debt or judgment is a taxable 'debt collection service' under Tax Code § 151.0036(a) and § 151.0101(a)(8), and the tax applies to whatever the company receives for th…
For an audio/visual system installer doing remodeling work, are separately stated engineering charges (system design, drawings, installation supervision) taxable when the engineering covers both the equipment itself and the ceiling wiring that connects it?
Split treatment applies. Engineering charges attributable to the equipment (which stays tangible personal property, not an improvement to realty) are part of the taxable sales price of the equipment a…
When a business refurbishes and resells used or repossessed manufactured homes — sometimes for itself, sometimes as a broker for a lending institution — how is Texas sales tax handled on the sale of the home itself and on the parts/materials/tools used to refurbish it?
Only the first sale of a new manufactured home into Texas (manufacturer to dealer) is taxable — resales of a used manufactured home are not. But parts and materials used to refurbish a home you buy an…
If a firm currently does nontaxable liquidation-related subcontracting work for Special Deputy Receivers of insolvent insurance companies, and plans to expand into marketing, reinsurance, and managerial consulting for insurance companies, will that new consulting work be subject to Texas sales tax?
Likely yes. Rule 3.355(a)(1)-(6) taxes insurance services performed pertaining to policies of insurance, and paragraphs (a)(4) and (a)(6) specifically include consultations. The Comptroller has alread…
A metal-failure-analysis forensic engineering firm that rarely works directly for insurance companies (mostly working for chemical plants/refineries, plaintiff attorneys, and defense attorneys) asks a detailed set of questions about exactly when its investigative work is taxable as an 'insurance service' — including cross-state cases where the incident, the client, or both are outside Texas.
Work performed directly for an insurance company is always taxable — collect tax automatically, no letter needed. For every other client (plaintiff attorneys, defense attorneys, direct corporate clien…
On a separated new-construction contract for an Enterprise Zone project, are a contractor's charges to the customer for its own equipment, rented equipment, equipment-with-operator, and profit markup taxable — and does the Enterprise Zone designation change any of this?
No special treatment applies just because the job is in an Enterprise Zone — the normal separated-new-construction rules apply. Charges the contractor bills the customer for its own equipment use, for…
Can a direct sales organization accept a resale certificate from one of its independent distributors, and does it matter whether that distributor works from home or runs a retail store/kiosk?
It depends on whether the distributor has a retail outlet. Home-based independent distributors are not issued Texas sales tax permits — the direct sales organization is treated as the retailer and mus…
Does a free-standing support bridge for hydrogen piping leading into a semiconductor cleanroom qualify for Texas's manufacturing equipment exemption, even though the bridge itself sits outside the cleanroom and isn't attached to the building?
Yes. The manufacturing exemption for cleanroom equipment covers piping and related equipment used in connection with manufacturing/processing/fabrication in the cleanroom, and that equipment does not …
Is the Texas Workers' Compensation Insurance Fund (successor to the Workers' Compensation Facility) exempt from sales tax on insurance services because it's a state-created entity?
No. Neither the Texas Insurance Code nor the Texas Tax Code exempts the Fund from sales tax, and Insurance Code § 12(c) actually requires the Fund to pay all taxes in the same manner as any other lice…
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These are official tax letter rulings and advisory opinions issued by Texas's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.