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.
No Texas rulings match these filters
Try a different search term or clear the filters.
Do xerox-type copying machines used to sell copies as part of a commercial printing business qualify for Texas's manufacturing equipment exemption, and does it matter if the machines are acquired through a lease-purchase arrangement?
Yes to both. Copying machines used to produce copies sold as part of a commercial printing business qualify for the manufacturing exemption, and the exemption extends to leased equipment — the busines…
Is a scrap tire shredder's gate fee (charged to the hauler who brings in waste tires) taxable, and does it matter whether the shredded tire pieces end up in a landfill, get reused as landfill cover, go to a septic drain field, or get burned for energy recovery instead of a landfill?
Yes, the shredder's gate fee to accept tires from the hauler is taxable in all four scenarios — regardless of what ultimately happens to the shredded tire pieces (landfill burial, alternate daily cove…
Is a city's fee for accepting used tires at its 'landfill' taxable, when those tires are actually just stored there temporarily and then hauled away by a contractor to a different disposal site rather than being buried at the landfill itself?
Yes. Even though the site is called a landfill, functionally it's acting as a transfer station for the tires — they're staged there until there's enough volume, then hauled elsewhere for actual dispos…
Is a stand-alone traffic-directing charge (by a police officer or valet parker) taxable in Texas, separate from any charge for parking or valet parking the vehicle?
No. Traffic directing provided on a truly 'stand alone' basis — with no connected parking or valet parking charge — is not taxable. It only becomes an issue if the traffic-directing charge is bundled …
Is drilling a rathole or mousehole (holes in the rig floor used to hold drill pipe and hoisting equipment during oil/gas well drilling) subject to Texas sales tax or the separate 2.42% oil well services tax?
No. Drilling a rathole or mousehole in preparation for drilling an oil or gas well is not subject to sales tax or the 2.42% oil well services tax. However, the company performing this nontaxable servi…
Is Texas sales tax due on a separately stated, refundable $10 deposit charged on a returnable pallet — whether the underlying product is sold to the end user or to a retailer for resale?
No. A refundable pallet deposit that is separately stated to the customer and identified as refundable is not subject to sales tax, whether the sale is to the end user (with tax charged on the product…
Under the 1998 physical-presence nexus test, did an out-of-state internet retailer create Texas sales tax nexus merely because its website was linked from an unrelated third party's website that happened to be hosted on a server located in Texas — and is that charge for maintaining the link itself taxable?
Under the physical-presence rule this 1998 letter applied, no — a retailer with no physical presence in Texas, taking orders through an out-of-state server, did not have Texas sales tax nexus just bec…
Is a restaurant's fryer filter machine — which cleans and recirculates shortening/oil so it can keep frying food — exempt from Texas sales tax as manufacturing equipment?
It depends on the date. Before October 1, 1997, the filter machine, its parts/accessories, and repair labor were exempt because the shortening it processed became part of the fried product. Effective …
Are a professional recruiting firm's placement fees, and its separate contract-labor billings for secretarial/consulting help, subject to Texas sales tax?
Placement fees for recruiting are not taxable. Contract labor billings may be taxable, though, depending on whether the arrangement qualifies as an exempt 'employee' or 'temporary help service' under …
Is a remanufactured drilling rig, built exclusively for use by a foreign customer, exempt from Texas sales tax if it's stored in Texas for up to six months after completion while the customer decides on its foreign destination?
No. Sales tax is due when title transfers at completion. Because the customer plans to store the rig until needed rather than remove it forthwith, the rig can't be treated as for exclusive use outside…
If a company designs its products, buys the raw materials and packaging, and controls production, but has a third-party subcontractor actually assemble the goods, can the company still buy its packaging materials tax-free as a manufacturer?
Yes. Because the company designs the product, supplies the raw materials and packaging, and controls the production process — even though a subcontractor's employees do the physical assembly — the Com…
When a hotel — building, land, and all its furnishings (artwork, silverware, linens) — is sold for one lump-sum price and then immediately leased back out as a hotel for a single lease amount, is any of that subject to Texas sales tax? What about tangible property a partner trades with the partnership before the sale closes?
The lump-sum sale and the lump-sum leaseback are both treated as real property transactions and are not subject to Texas sales or use tax — the furnishings are incidental to the realty (and the sale m…
Is the sale of software source code exempt from Texas sales tax when the buyer will fold it into another software program and resell the combined product?
Yes. Because the source code becomes a component part of another software program that will be sold at retail, the seller may accept an exemption certificate under Rule 3.300(d)(2) instead of collecti…
Is a DEXA (dual energy x-ray absorptiometer) machine, used by a doctor to diagnose osteoporosis and measure bone mineral density, exempt from Texas sales tax as an orthopedic appliance?
No. A doctor must pay sales tax on a DEXA machine and cannot issue an exemption certificate for it under Rule 3.284(a)(9), because the orthopedic appliance exemption covers devices used to correct or …
Are fees paid to a third-party adjusting company that inspects plumbing damage claims and coordinates repairs under a national class action settlement taxable 'insurance services' in Texas?
No. Because the adjusting company's services are performed under a court-supervised class action Settlement Agreement rather than under an insurance policy, they don't count as taxable insurance servi…
Is a charge for training customers on how to use software subject to Texas sales tax?
It depends on whether the training is bundled with the sale of the software or billed separately. Training provided in connection with the sale of the product is part of the taxable sales price under …
Are the dies a printer uses for diecutting, foil stamping, embossing, and engraving exempt from Texas sales tax as manufacturing equipment, regardless of how long the dies last?
Yes. Diecutting, foil stamping, embossing, and engraving are processing activities, so dies used in them are exempt as accessories to exempt processing equipment under Rule 3.300 — with no requirement…
Are a company's natural gas meter chart calculation, chart audit, consulting, and training services taxable as data processing, given that a computer is used to help calculate the final figures?
No. After an on-site audit review, the Comptroller reversed its earlier position: chart calculations, chart audits, consulting, and training are not taxable data processing services because they depen…
Can a general contractor holding an owner's direct payment permit pass that permit or exemption certificate on to its subcontractors and vendors?
No. A direct payment certificate is nontransferable — only the permit holder named on it may issue it. The general contractor that receives it from the owner uses its own resale certificate when buyin…
When rebuilding fire-damaged spaces in a strip center — where two spaces will have all walls and the roof replaced, leaving only the foundation — is the work taxable nonresidential repair, or untaxed new construction?
It depends on whether the spaces share a common foundation, wall, or roof with the rest of the complex. If they do, replacing the walls and roof is still nonresidential real property repair and remode…
Can a property management company buy materials and services tax-free on behalf of an exempt entity it manages property for, and from what date does that entity's tax exemption take effect?
A property management company acting as the exempt entity's designated agent under a written management agreement may issue exemption certificates on the entity's behalf, and the entity's exemption ap…
Is a county's fee for letting the public access county documents and records through a computer link a taxable information service in Texas?
No. Rule 3.342(d)(3) excludes information that must be furnished under the Texas Public Information (Open Records) Act, Government Code § 552, from the definition of a taxable information service — so…
Is a country club's optional 'buyer's club' membership fee (which gives members a discount on Pro Shop purchases) subject to Texas amusement services sales tax?
Yes. The buyer's club membership fee is taxable as an amusement service because Rule 3.298(b) taxes fees charged for a special privilege, status, or membership classification in a private club — and t…
Is an extended warranty/service contract on residential real property taxable in Texas?
Generally no — an extended warranty on existing residential real property is not taxable in Texas. But there are exceptions: an extended warranty tied to a pest control service, or to repair/remodelin…
For a company that prewires new homes for audio/video and security systems, sells stereo equipment after the builder sells the house, and installs and monitors security systems: what's taxable, and does prewiring alone count as a security service or as ordinary contractor work?
It depends what's bundled together. Prewiring ALONE (before any keypad/alarm equipment goes in) is treated under the ordinary contractor rule (Rule 3.291) — materials taxable, labor not, depending on …
Is a manufacturer's purchase of reusable wood/metal shipping containers, plus the rings and fixtures used to secure product inside them, tax-exempt if the containers are returned and reused to move product between the manufacturer's own facilities? Is repair work on those containers exempt too?
No. Sales tax is due on the shipping containers, shipping rings, and shipping fixtures used to move product between the taxpayer's own facilities, and sales tax is also due on repair charges for those…
Is a consulting firm's service of physically inspecting a company's buildings, updating its CAD floor-plan/systems database, and maintaining cost-allocation codes for floor space subject to Texas sales tax?
No. All three parts of this consulting arrangement — (1) inspecting buildings and updating the floor-plan CAD database, (2) updating other building-systems layers (electrical, plumbing, etc.) in the s…
Is renting a race track to a professional driving school (to instruct drivers) or to race teams for practice sessions taxable as an amusement service?
No. The Comptroller reversed an earlier (October 29, 1997) letter that had said these track rentals were taxable. Renting the track to a driving school or to race teams for practice is not the provisi…
Is a $15 fee a business charges customers for a check returned due to insufficient funds subject to Texas sales tax as a debt/claim collection service?
No. There is no sales tax owed on charges by a bank, or by a business, for a returned/insufficient-funds check — the charge is an overdraft-type charge, not payment for a service performed for the cus…
An insurance agent also charges a separate hourly or flat fee to review a client's existing retirement and health plans and propose new plans. Is that consulting fee subject to Texas sales tax as a taxable insurance service?
No. Reviewing existing retirement/health plans and proposing new plans doesn't fall within the definition of taxable insurance services in Rule 3.355(a)(1) through (6) — the Comptroller found these ac…
Is the charge/fee to dispose of produced salt water (brine) from oil/gas exploration in a saltwater disposal well subject to Texas sales tax as a waste removal service?
No. Rule 3.356(a)(3)(B) excludes waste materials resulting from the exploration, development, or production of oil, gas, geothermal resources, or any other substance regulated by the Railroad Commissi…
For a contractor working on an exempt entity's job site: is a portable toilet rental tax-exempt because the contract requires it, and is the transportation/delivery charge for hauling dirt, sand, caliche, or rock to the site taxable?
Portable toilet rentals are NOT exempt, even when the contract with an exempt entity requires them — Sec. 151.311 only exempts tangible personal property incorporated into the realty or completely con…
An engineering/CAD services company asked about eight separate activities: (A) revising client drawings, (B) creating new designs, (C) scanning documents, (D) plotting, (E) computer consulting/installation/troubleshooting, (F) software training, (G) furnishing employees to clients, and (H) accepting direct pay permit numbers. Which of these are subject to Texas sales tax?
Mixed answers across all eight: (A)/(B) drafting FROM client-supplied specifications is taxable (a "draftsman" sale of tangible personal property), but genuine professional engineering — developing th…
Is a risk management consulting firm's fee-based work — exposure analysis, insurance program design/negotiation, policy review, claims reporting/management, due diligence, and statistical reporting — subject to Texas sales tax, even though the firm doesn't sell insurance or earn commissions?
Yes. Even though the firm is paid strictly in fees (no insurance sales, no commissions), its risk-management activities fall within taxable insurance inspection services (Rule 3.355(a)(2)) and insuran…
Is a standard reclining chair exempt from Texas sales tax when purchased with a doctor's prescription for back support?
No. A reclining chair does not meet the definition of a therapeutic appliance or device (an item designed to alleviate pain or for use in treating/curing sickness, disease, suffering, or deformity) — …
Is replacing a race track's surface taxable real property repair/remodeling (labor and materials both taxable to the customer), or is it new construction (only materials taxed, to the contractor, under a lump-sum contract)?
It depends on the scope of work. Merely RESURFACING the existing track or a portion of it is real property repair or remodeling under Rule 3.357(a)(8) — the ENTIRE charge is taxable to the customer, a…
A building manager remodels office space (moving/removing walls, adding doors/locks, electrical work, carpet/paint) for a taxable tenant that subleases the space to a Texas state agency (TDH). Who pays sales tax on the remodeling — the building manager, the taxable tenant, or the exempt state agency — and does it matter that the state agency requested the work and is the primary beneficiary?
The remodeling charge is taxable in general, but WHO owes it depends on who is billed and who is the ultimate consumer. The building manager may issue the general contractor a resale certificate (sinc…
Are balloon angioplasty catheters and stents taxable when sold to doctors or hospitals, including when used in clinical studies, and what happens if they're sold together as a package?
Balloon angioplasty catheters are taxable when sold to doctors or hospitals, even for use in clinical studies. Stents are exempt as a prosthetic device under Rule 3.284(a)(10)(C). If the two are sold …
Which hearing-aid-related products (ear wax removal system, Eargene, dry aid kits/dehydrators, telephone foam pads, hearing aid batteries) are exempt from Texas sales tax, and does a prescription matter?
An ear wax removal system, Eargene (for itching), dry aid kits (dehydrators), and foam pads for the telephone are all exempt from Texas sales tax ONLY when sold to an individual WITH a doctor's prescr…
A financial-printing company itemizes typesetting, graphic design, proofing, alteration/correction, printing, and post-printing distribution/mailing/postage/storage services on customer bills. Which of these are taxable, and does separately stating them on the invoice change the answer?
Typesetting, graphic design, proofing, alteration/correction, and printing (items 1-5) are ALL taxable in total as charges for a printed item, whether billed as one price or separately. Mailing servic…
Is installing, monitoring, servicing, or repairing a burglar alarm/security system taxable as a security service, even if the system becomes part of a new-construction improvement to real property?
Yes. Installation of a security system is taxable if the installer is required to be licensed under the Private Investigators and Private Security Agencies Act, Sec. 13 — and the ENTIRE charge for sec…
A financial-document company converts customer documents into electronic format and transmits them to government regulatory agencies, and separately offers software and training so customers can format their own documents. Is the electronic formatting/transmission service taxable, does it matter if the customer is inside or outside Texas, and how is the software/training service taxed?
The electronic formatting service is taxable as data processing under Sec. 151.0035, and the transmission fee is part of its taxable sales price (Sec. 151.007(a)(2)). But Sec. 151.330(e) exempts servi…
Is an automated medication dispenser machine — leased to elderly patients with medication non-compliance problems, prescribed by their doctors — exempt from Texas sales tax?
No. The automated medication dispenser (a machine that organizes complex pill regimens, is lockable/tamper-proof, dispenses into a removable drawer, and has audio/visual reminders) is taxable — there …
A distributor of trade show display booths sells, rents, ships, sets up, breaks down, and stores booths that travel to trade shows around the country. Depending on where a booth is first delivered/set up (Texas or out of state) and where it's later stored, which charges are taxable?
It all depends on where the booth FIRST goes after the sale. If the customer takes delivery out of state first, the initial sale and related charges are untaxed (though the customer owes Texas use tax…
Can a for-profit retail business legally sell raffle tickets to customers, with merchandise as the prize and the proceeds going into the business — and is there a sales tax angle regardless?
The Comptroller flagged a legality problem, not just a tax one: raffles are generally understood not to be legal in Texas except for certain nonprofit groups, so a for-profit business should check wit…
In a three-party drop-shipment chain (Seller Corp. sells to out-of-state Buyer Corp., but ships directly to Buyer Corp.'s Texas customer, Other Corp.), what documentation does Seller Corp. need to avoid collecting Texas tax, can it accept Buyer Corp.'s home-state resale certificate instead of a Texas one, and does an affidavit from Other Corp. (about tax it separately paid) relieve Seller Corp. of liability?
A valid resale certificate from Buyer Corp. relieves Seller Corp. of the duty to collect Texas tax — this certificate can be a Texas resale certificate, a multi-jurisdiction certificate, or Buyer Corp…
Is a membership-based press release distribution service — which edits members' news releases, reformats them in wire-service style, and electronically transmits them to media outlets — subject to Texas sales tax, even though it uses telecommunications and data processing to do it?
No. Editing, reformatting, and distributing press releases to media is not a taxable service — Rule 3.321(a)(5) specifically exempts public relations services, media placement services, creative conce…
If software is purchased for use on a server located in Texas, is the purchase taxed as tangible personal property (with a multistate benefit-of-service allocation available), or as a data processing service?
The software purchase is taxable as tangible personal property (TPP), not as data processing — Tex. Tax Code Sec. 151.009 defines TPP to include a computer program. Because it's TPP rather than a serv…
For a race car owner: is a full sponsorship fee (sponsor gets exclusive use/decoration of the car for a year) taxable, is a partial sponsorship fee for just a decal taxable, is parking/storing other owners' race cars taxable, and must sales tax be charged on repair labor as well as parts?
A FULL sponsorship fee (exclusive use of the car for a year) is a taxable rental of the race car. Displaying a sponsor's DECAL alone (no other use of the car) is NOT a taxable service. A PARTIAL spons…
Is a natural gas line that fuels an underground farm irrigation system exempt from Texas sales tax as agricultural equipment?
Yes. The materials for a natural gas line used exclusively to fuel a qualifying underground irrigation system on a farm or ranch qualify for the agricultural exemption as a component part of that irri…
When a single lump-sum construction contract covers both a tax-exempt city-owned building and a private, taxable hotel, how does a Texas contractor split the sales tax exemption?
The contractor owes sales tax on all purchases or rentals of tangible property and taxable services related to the privately-owned hotel, but may buy tax-free the incorporated materials, certain servi…
Is Texas sales tax due on the full price of an item, or the discounted price, when a customer redeems a manufacturer's cash-savings check at a retailer?
Sales tax is due only on the discounted price, not the full price. A $3.00 savings allowance check issued by a manufacturer and redeemed by a retailer toward a purchase is a discount coupon under Rule…
Can a contractor building an exempt government facility buy waste-hauling services tax-free when jobsite clean-up is required by the contract?
Yes. A contractor may issue an exemption certificate for waste removal services when improving realty for an exempt entity, if the contract specifically requires the contractor to remove the waste. He…
Does the federal preemption on local taxes for direct-to-home satellite TV programming also cover local sales tax on the satellite equipment itself?
No. The Telecommunications Act of 1996 preempts local taxing jurisdictions from imposing sales tax on direct-to-home satellite programming itself, but that preemption does NOT extend to sales of the s…
Is a wireless subscription background-music service (like Muzak) taxable, and how does that differ from installing a security alarm system?
A wireless subscription music service (like Muzak) — where the provider installs sound equipment, transmits music by subscription, and later removes the equipment when the subscription ends — is a non…
Is a mobile chapel taxed as a mobile office or as a motor vehicle, and how does a church claim a sales tax exemption on it?
A mobile chapel meets the definition of a mobile office, not a motor vehicle, so it is taxed under the limited sales tax statute rather than motor vehicle tax. An exempt entity, like a qualifying chur…
Is wrapping/packaging material taxable when a retailer (not a manufacturer) buys it, and is sales tax due on prepaid telephone calling cards?
Both are taxable to the retailer. Tissue paper used to wrap items for sale and clear video cases are taxable purchases for a retailer — only manufacturers may claim the wrapping-and-packaging exemptio…
When a Texas software company licenses a computer program and does custom programming, is out-of-state delivery exempt, and when is software consulting taxable?
A software license and related customization services delivered to a customer IN Texas are taxable, but the same software (including upgrades) shipped by the seller to a point OUTSIDE Texas is exempt …
Is an insurance agent fee charged under Texas Insurance Code Article 21.35B subject to Texas sales tax?
No. An agent fee authorized under Texas Insurance Code Article 21.35B — charged in connection with an insurance application or policy issuance, and not in lieu of a commission — is not subject to Texa…
Is a fee for producing a microwave path feasibility analysis report subject to Texas sales tax?
No. Charges for producing microwave path feasibility analysis reports — compiled from personal observation, computer tabulations, terrain profiles, mathematical data, CAD depictions, color photos, des…
Browse Texas rulings by topic
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.