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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Is a separately stated charge for inspecting and testing a commercial building's fire alarm system subject to Texas sales tax?
No. A fire alarm system in a commercial building is considered an improvement to realty, so separately stated charges for inspecting and testing that system are not subject to Texas sales tax, even th…
Does a contractor owe Texas sales tax on the profit and overhead portion of a cost-plus construction contract, with or without a guaranteed maximum price?
Cost-plus contracts (with or without a guaranteed maximum price) are treated as separated contracts under Tax Code § 151.056, so the contractor collects sales tax on materials charged to the job owner…
Is a cane-like device designed to help Parkinson's disease patients overcome motion block exempt from Texas sales tax?
Yes. The STEPP-ALERT, a cane-like device with a multi-colored flap that helps Parkinson's disease patients experiencing motion block phenomenon, qualifies as a therapeutic device and may be purchased …
When an exempt organization owns part of a joint venture that buys taxable items for a joint venture facility, how much of the purchase price can be bought tax-free with an exemption certificate?
An exemption certificate can only cover the percentage of a taxable item's purchase price equal to the exempt organization's percentage ownership interest in the joint venture that owns the facility w…
Does a multi-level marketing/direct sales company have to collect and remit Texas sales and use tax on sales made through its independent distributors?
Yes. Because a company's independent distributors act as its agents under Texas Tax Code § 151.024 and Rule 3.286(a)(3), the company (not the individual distributors) must collect and remit Texas sale…
Does a Texas mobile home dealer owe sales tax on the tools, equipment, and materials it uses to repair or refurbish manufactured homes held for resale?
Yes, in most cases. A Texas mobile home/manufactured housing dealer that repairs or refurbishes homes held for resale owes sales tax on the vehicles, jacks, nail guns, hand tools, and most other equip…
Does a tax-exempt religious organization owe Texas sales tax on books it publishes and sells, mostly at religious services and meetings?
No. The Comptroller ruled that a nonprofit religious organization exempt under IRC 501(c)(3) does not owe Texas sales tax on the sale or distribution of books it publishes, where the books were writte…
Does a county owe sales tax on debt-collection legal services performed by a law firm, and is the law firm's reimbursed expenses treated as taxable debt collection or sales tax?
No. Legal services performed by an attorney to recover debts for a client are not taxable as debt collection services, and a county, as an exempt governmental entity, does not owe sales tax on those l…
Are batteries for a blood pressure monitoring device exempt from Texas sales tax?
Batteries for a blood pressure monitoring device can be purchased tax exempt in Texas, but only if the device itself was purchased exempt under a doctor's prescription, and the batteries are bought fr…
Does electricity used in a vacant apartment unit count as residential use that is exempt from Texas sales tax?
Yes. The Comptroller determined that Section 151.317 of the Tax Code, as amended, defines residential use of electricity to include electricity used in vacant apartments -- except electricity used by …
Is steam exempt from Texas sales tax the same way ice is exempt?
No. The Comptroller ruled that steam does not qualify for a sales tax exemption. Although steam, like ice, is water in an altered state, the Tax Code only grants specific exemptions to ice (Tax Code 1…
Can a business renting out mobile office trailers use a resale certificate instead of paying sales tax on repair parts and repair labor for that rental inventory?
Yes. A business may issue a resale certificate instead of paying sales tax on repair or replacement parts bought for mobile office trailers held for rental, and may also issue a resale certificate to …
Does a nightclub or bar owe mixed beverage gross receipts tax or limited sales tax on the cover charges it collects from customers?
It depends on why and when the cover charge is collected. Cover charges collected from customers under 21, and all cover charges collected after 11:00 p.m., are subject to limited sales tax. Cover cha…
Are Kudos whole grain bars exempt from Texas sales tax as a food product, or taxable as a snack item?
The Kudos whole grain bar is exempt from Texas sales tax as a cereal product and food product, reversing the Comptroller's earlier position that it was a taxable snack bar.
A company provides mobile surgical units (installed in vehicles), disposable supplies, and sometimes a technician, to patients directly or to hospitals/physicians. How is this taxed for Texas sales, use, and motor vehicle tax purposes?
It depends on what's provided. If the company supplies a technician or surgical support along with the equipment, that's a non-taxable service, but the company still owes tax on supplies/equipment tha…
Why does our direct sales/multi-level marketing company (COMPANY A) have to collect sales tax on the suggested retail price of items sold to its distributors, when the distributors already pay sales tax to COMPANY A before reselling the inventory?
Because Rule 3.286(a)(3) treats a direct sales/multi-level marketing company as the "retailer" responsible for collecting and remitting Texas sales tax on the suggested retail price, rather than treat…
Is labor to repair real or personal property damaged by a disaster exempt from Texas sales tax even if the damage occurred outside an area officially declared a disaster area?
No. Once the Legislature enacted Tax Code Sec. 151.350, the exemption for disaster-repair labor applies only to property damaged within an area officially declared a disaster area by the Governor or t…
A fabric awning manufacturer/installer asked whether it's a manufacturer or a contractor, how to tax mixed-use supplies like screws and grommets, whether awning storage and reinstallation is taxable, and whether it still qualifies for the manufacturer utility tax exemption.
It depends on the facts of each job. If custom awnings are attached to a building with the intent to become a permanent improvement to realty, the installer is acting as a contractor (not selling tang…
A company picks up used oil field tubing at a customer's wellsite and gives the customer a book credit, then cleans, grades, and repairs the pipe and sells it back to the same customer. Are these transactions taxable, and can resale/direct-pay certificates be used?
Yes, tax can be due, but it depends on how the deal is structured. The pickup of the pipe (with a book credit given) and the later sale of the cleaned pipe back to the customer are treated as two sepa…
Is a consultant/contract programmer's fee for helping a customer create an interactive multimedia training program taxable, when the customer will own the finished program?
No, generally not. Helping a customer create an interactive computer-based training program that the customer will own is nontaxable computer programming under Tax Code 151.0101(5)(D) — but the provid…
Is sales tax due on charges by a medical transcriptionist for transcribing medical dictation, and does the state pay interest on refunds of tax collected on that service?
No sales tax is due on medical transcription charges. A district court ruled that a medical transcriptionist's transcription of medical dictation is not a data processing service, the Comptroller deci…
Does a sailboat chartering business need a Texas sales tax permit, and are rides like helicopter or boat rides taxable amusement services?
A sailboat chartering business (hiring out a crewed sailboat for transportation, not pleasure rides) does not need a Texas sales tax permit. But pleasure rides in trains, helicopters, boats, hot-air b…
Are the processing fee, trip fee, and reinstatement fee that a rental company charges on a lease agreement subject to Texas sales tax?
It depends on the fee. The processing fee (charged for processing the rental agreement) and the reinstatement fee (charged to renew a lapsed lease) are both taxable as part of the sales price of the r…
A taxpayer bought and used an aircraft before it was a licensed and certified carrier, and later argued it was diligently trying to get certified. Does that get it out of paying tax on the purchase?
No. The taxpayer owes Texas tax on the full purchase price of the aircraft. Not yet being a licensed and certified carrier at the time of purchase doesn't by itself disqualify a diligent applicant fro…
Is a newsletter sold by subscription or single issue taxable in Texas, and are sales to governmental customers exempt?
Yes, newsletters are taxable. The Comptroller ruled that newsletters are taxed as information services under Rule 3.342, so sales tax is due on both single-issue sales and subscriptions. However, sale…
A mobile surgery service brings a portable laser machine, disposable surgical supplies, and a technician to a physician's office so the physician can perform minor, minimally invasive surgery there. Is the total charge to the physician taxable?
Yes. The Comptroller ruled that the total charge to the health care provider — covering the laser equipment, disposable items and tools, and the technician who monitors and adjusts the laser — is taxa…
Is building, replacing, or repairing a fence around nonresidential real property taxable in Texas?
It depends on what's done. Building a brand-new fence, or replacing an entire existing fence, is nontaxable new construction (though a combined demolition/removal charge can be taxable if 5% or more o…
A manufacturer's equipment lease started in 1993 and was later assigned to a new lessee, with the assignment becoming effective (per lessor approval) after the October 1, 1995 manufacturing exemption qualifying date. Does the assignment create a 'new lease' that has to meet the October 1, 1995 date to qualify for the manufacturing equipment lease exemption?
No. The original lease date (July 29, 1993) controls, not the assignment's effective or approval date. An assignment or assumption of an existing lease is not considered a new lease for purposes of th…
Is a tuxedo-rental business that cleans the tuxedos it rents out entitled to Texas's manufacturing/processing exemption on its laundry equipment and supplies?
Yes. A business that cleans the tuxedos it rents out is a 'processor' for Texas tax purposes and qualifies for the manufacturing exemption: qualifying laundry/dry-cleaning equipment (washers, dryers, …
Does the addition of a flash calciner unit and related equipment and modifications to an alumina and chemical processing plant qualify as exempt 'new construction' under the Increased Capacity Rule because it increases plant production capacity by about 20%?
Yes. The Comptroller confirmed that the alumina and chemical processing plant counts as a chemical processing plant under the Increased Capacity Rule (Rule 3.362), and that the new flash calciner unit…
An industrial supply company runs a customer's tool crib inside the customer's manufacturing plant and charges shared-savings fees, start-up fees, transaction management fees, and contract labor reimbursement, plus sells products. Does it have to collect Texas sales tax on these charges?
Yes, generally. Presuming the industrial supply company is a retailer of the tool crib sales (not acting as the customer's purchasing agent), the shared savings fees, transaction management fees, and …
How can operators of Mexican aircraft document that taxable items (cargo, repair parts) are exported from Texas so sales tax doesn't apply, and does it matter whether the aircraft is a licensed/certified carrier?
It depends on the aircraft's designation. Operators of any Mexican aircraft can document export of taxable cargo items (not installed) using a Pedimento de Importaciones from Mexican customs, but must…
Is a paging service, where the pager device has a built-in transmitter that sends a location-verification signal back to the transmission equipment (but no voice or message back to the sender), subject to Texas sales tax?
Yes. Paging services are telecommunications services under Tax Code 151.0103(a), so Texas state sales tax is due on charges for all pages received in Texas, regardless of where they're re-transmitted.…
Can a Mexican retailer who will resell the goods in Mexico buy them tax-free from a Texas seller, and if so, what documentation is required?
Yes. Effective September 1, 1995, Mexican retailers may purchase goods tax free from Texas sellers if the goods will be resold in Mexico. The retailer must properly complete a Border States Uniform Sa…
Is a contract to add square footage to an existing building taxed as new construction, or as taxable repair/remodeling like a roof repair or HVAC replacement?
Building an addition onto an existing nonresidential structure (or building a new structure) is new construction under Rule 3.291, not repair/remodeling — so under a lump-sum contract the contractor p…
Is a lump-sum contract to repaint condominium/apartment buildings taxable, and does the contractor need a sales tax exemption certificate from the condo association?
No sales tax exemption certificate is needed. Repainting a condo/apartment building under a lump-sum contract is a nontaxable repair to residential real property — the contractor pays tax on the paint…
How does the 18-month window for using a replaced vehicle toward a fair market value deduction get calculated, and what date counts as the start of that clock?
The 18-month period for using a replaced vehicle as a fair market value deduction starts on the date the vehicle is retired from service — not on the date it is later sold. A 'new vehicle' for this pu…
Is a geocoding service — manually matching bus-ridership survey answers to numbered map locations for an out-of-state (Washington) firm, with no computer involved — subject to Texas sales/use tax?
No. The Comptroller held that this geocoding service is not subject to Texas sales/use tax.
Is nonalcoholic beer subject to Texas sales tax, or is it taxed under the Texas alcoholic beverage tax instead?
Nonalcoholic beer is subject to Texas sales or use tax, taxed the same way as other soft drinks or sodas, regardless of brand or type. It is NOT subject to Texas alcoholic beverage taxes. However, if …
Are down-hole labor charges performed in conjunction with drilling a new oil or gas well subject to Texas sales tax if they occur a short time after the well's Railroad Commission (RRC) completion date?
Yes, they're taxable. Down-hole new construction on a new well is considered complete once the Texas Railroad Commission certifies the well completed for production. Any down-hole labor charges perfor…
A printer sold newspaper inserts/flyers to retail stores. Some inserts were delivered directly to newspapers for distribution, some went to a mailing service instead, and some were shipped out of state. Are any of these exempt from Texas sales and use tax, and should the assessed penalty and interest be waived?
Split result. Inserts delivered directly to an actual newspaper for distribution as part of the newspaper are exempt under Tax Code § 151.319(c), so those specific invoiced items were ordered removed …
Is a syringe that injects solution into a catheter attached to a patient (rather than directly into the patient) exempt from Texas sales tax as a hypodermic syringe?
No. Because the needle goes into a catheter attached to the patient rather than directly into the patient, the syringe is not considered a hypodermic syringe, so it does not qualify for the Tex. Tax C…
A supplier sells car wash soap, upholstery shampoo, deodorizers, and other supplies to auto dealers, car washes, body shops, and detailers. Which of these items are taxable, can customers just write 'BLANKET' on a resale certificate, and is the supplier covered if a customer just refuses to pay tax?
No blanket exemption from listing items, and no, a refusal-to-pay form doesn't protect the seller. A resale certificate must describe the general nature of the taxable items — the single word 'Blanket…
If a company keeps a resale inventory of replacement parts and later writes some of them down or scraps them because they're obsolete, is sales tax due on those parts?
It depends on what happens to the parts. Parts purchased for resale can be bought tax-free with a resale certificate. If the parts are later marked down and sold, sales tax is due on that (lower) sell…
Is the sale, fabrication/manufacture, and installation of custom blinds, draperies, and plantation shutters taxable in Texas, and does it matter whether the work is done in new-home construction versus an existing home?
It depends on the item and on new construction vs. existing home. Materials that become part of blinds and draperies are always taxable (tax collected per the contract type — lump-sum vs. separated). …
Does a ready-mix concrete reclaimer — equipment that washes and separates sand and gravel out of waste ready-mix concrete so it can be reused — qualify for Texas's manufacturing equipment sales tax exemption?
Yes, if the equipment is an integrated piece of equipment whose primary purpose is a direct manufacturing process. The Comptroller ruled that washing and separating manufactured aggregate so it can be…
A manufacturer hired a company to manage its parts/supplies warehouse, and that same company also sells parts/supplies to the manufacturer. What determines whether the warehouse management fee is taxable?
It depends on whether the manager is performing taxable services (like janitorial or data processing) as part of the warehouse management work. If so, tax is due on those taxable services, including o…
When is custom software considered 'developed from scratch' and when has a developer transferred 'exclusive rights' to it, for purposes of the Texas custom-programming tax treatment discussed in an earlier ruling (fiche 9309L1273C08)?
It depends on the facts, but the letter lays out the tests: 'exclusive rights' means the developer gives up ALL rights to copy, change, or market the software and won't sell it to anyone else — if the…
If a state agency leases office space in a privately owned building and puts the utilities in its own name, is it exempt from tax on the utilities even if the building owner later reimburses the agency for the utility cost?
Yes. Utilities are taxable items, but a state agency occupying a privately owned building can buy them tax exempt under Sec. 151.309, Tax Code, as long as the utilities are in the agency's own name an…
Is revenue from a repeater service that is not connected to the public switched telephone network subject to Texas sales tax, and is it also subject to the Telecommunications Infrastructure Fund assessment?
Yes to sales tax, no to the TIF assessment. Revenue from a repeater service that is not interconnected to the public switched network is subject to Texas sales tax, but is not subject to the Telecommu…
Is a technical writing service — such as preparing a material safety data sheet on compressed gases — subject to Texas sales tax?
No, not the writing/editing itself. Separately-stated charges for developing a technical document (research, writing, and editing) are not taxable, but the writer owes tax on the materials and supplie…
A privately owned building is leased to a tax-exempt entity, and the owner plans a 12,000 square foot expansion. Is the construction work exempt from Texas sales tax as an improvement for an exempt organization?
No. Because the building is privately owned, the construction work can only qualify for the exemption if the remaining lease term exceeds the anticipated life of the improvement. Here the lease has 9 …
Is a towable hydro-mulcher taxed as a motor vehicle or under the limited sales tax, and what happens when one is mounted on a cab chassis before the chassis is sold?
Towable hydro-mulcher units are considered equipment or moveable specialized equipment and are taxed under the limited sales tax provision (not as motor vehicles). But if one of those units is install…
If a company buys an aircraft, will it owe Texas sales or use tax depending on where the aircraft is hangared and how much it's flown in Texas?
The Comptroller agreed with the taxpayer on all three points: (1) an aircraft hangared outside Texas and used more than 50% outside Texas is not subject to Texas use tax; (2) if the aircraft is used o…
Is a medical transcriptionist's service of transcribing oral or taped medical dictation into a patient's records and letters subject to Texas sales tax as a data processing service?
No. A district court ruled that a medical transcriptionist's transcription of medical dictation is not a taxable data processing service, the Comptroller decided not to appeal, and medical transcripti…
A for-profit company contracts with a Texas public school district to operate and manage one of its elementary schools, buying computers, software, books, and supplies for the school. Are those purchases exempt from Texas sales/use tax?
Generally no, not automatically. Because the for-profit company (not the school district) is buying the goods to perform its taxable-benefit services contract, the company owes tax on the taxable good…
Can a utility company refund state and city sales tax on an inactive residential electricity account where the electricity was used 100% for residential purposes?
The utility can accept an exemption certificate and refund the state sales tax, but only for billing periods within the 4-year statute of limitations (billing periods starting on or after August 1, 19…
Are restocking fees charged when a customer returns merchandise subject to Texas sales tax?
No. Restocking fees are not taxable. The retailer should credit the customer the original purchase price plus the tax paid on that price, and then may deduct the separately stated restocking fee from …
Is a water softener used to condition water for a newspaper printing press exempt from Texas sales/use tax as manufacturing equipment?
No. The water softener itself is taxable equipment because it is one step removed from directly manufacturing the newspaper. However, the chemicals previously used to treat the water are exempt as nec…
Does a raw water sand filter system that treats water used to cool machinery and equipment in a manufacturing process qualify for Texas's manufacturing exemption?
No. The raw water sand filter project does not qualify for the manufacturing exemption because the water it treats is not used in processing tangible personal property for sale — it's used to keep the…
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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.