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 the charge for a membership coupon book — which contains order forms customers use to order manufacturer coupons redeemable for discounts — subject to Texas sales tax?
No. The charge for the coupon book itself is not taxable because the sale is treated as the sale of an intangible. However, the company must pay Texas sales or use tax on the charge to print the coupo…
For Texas sales tax purposes, is work on golf course features (lakes, cart paths, retaining walls, bunkers, tee signs, bridges, gabions) taxable remodeling/repair labor, or nontaxable new construction labor?
It depends on the specific feature and circumstances. A golf course is a collection of improvements to realty (cart path, clubhouse, fairway, green, lake, parking lot, tee box); repairing, remodeling,…
A photographer offers glamour photography sessions that include a free makeover. Can the makeup and supplies used in the makeover be purchased tax free, and is the photographer responsible for collecting tax on the session itself?
Partly. The photographer may issue a resale certificate to buy tax free only the makeup and supplies actually transferred to the customer (like makeup, lipstick, and hair spray). Tax is owed on suppli…
Does re-processing a customer's plastic pellets — melting them down in a twin screw extruder, blending in a hardener, flame retardant, or other material, and re-pelletizing — qualify for Texas's manufacturing exemption?
Yes. The Comptroller ruled that melting the customer-owned plastic pellets, adding a hardener, flame retardant, or other material, and forming new pellets is "processing" tangible personal property th…
Is a health/athletic club's membership revenue subject to Texas sales tax, and does that change if the membership was purchased under a physician's written prescription?
It depends on what's being sold. Clinical services performed pursuant to a physician referral and written prescription (like cardiac, pulmonary, or diabetes rehab and testing, or physician-supervised …
For a Texas tire retreader, how is sales tax applied differently to 'stock retreads' (tires/casings the retreader owns and holds for sale) versus 'customer property retreads' (casings the customer already owns), and when do machinery, electricity, and natural gas used in retreading qualify for a manufacturing exemption?
It depends on who owns the casing. Retreading a 'stock casing' that the retreader owns and sells as a retread is a sale of tangible personal property — taxable on the full charge, but the retreader is…
Is an ultra pure water system and its associated piping, used to produce and distribute ultra pure water needed in semiconductor fabrication, exempt from Texas sales and use tax?
Yes. The Comptroller confirmed that the ultra pure water system and its associated equipment/piping — used to produce and distribute the ultra pure water required in the semiconductor fabrication proc…
Which of the specific services a paralegal/legal-assistance company provides (research, word processing, witness location, trial preparation, document organization) are taxable, and how should billing work if only some services are taxable?
Most of the services are taxable: research/record review in the public domain is a taxable information service (Rule 3.342); word processing of medical-record/deposition summaries, trial-preparation w…
Does a monitor a photographer uses to let customers preview and crop a photographic image before it's printed qualify for the Texas manufacturing sales-tax exemption?
No. The Comptroller ruled the monitors don't qualify for the manufacturing exemption because they're used primarily as a marketing tool to show customers the image before the final print — Tax Code § …
Are the risk management, claims administration, and safety/loss control services a third-party administrator provides to Texas employers subject to sales tax?
It depends on who the client is. These services count as taxable "insurance services" under Rule 3.355 when performed for an employer that carries a regular insurance policy (including one with a high…
Does a studio's equipment used to transfer raw film footage onto a video master tape qualify for the manufacturing exemption, and is the studio's transfer service or the sale of the resulting video master/duplicates subject to Texas sales tax?
Yes, the studio's computer equipment used to convert processed negative film into a video master tape qualifies for the manufacturing exemption under Texas Tax Code Sec. 151.318. The sale of the video…
A company that wants to sell a concentrated garlic-juice product to cotton farmers as an insect repellent/pesticide asked whether those sales are exempt from Texas sales tax and what it needs to do to comply.
Yes — selling the garlic-juice product to cotton farmers as a pesticide is exempt from Texas sales tax under the agricultural exemption (Rule 3.296), but the seller still needs its own sales and use t…
Are a temporary help service's charges for supplying skilled workers (e.g., plumbers) to help a construction business complete jobs taxable as sales tax, or exempt as 'services by employees' under Sec. 151.057?
Exempt from sales tax, but only if all four conditions in Sec. 151.057 are met: (1) the temporary workers supplement the client's existing workforce on a temporary basis, (2) the work they do is norma…
How is sales tax computed and who must collect and remit it on photographs sold from coin-operated photographic booths installed in shopping malls and amusement centers?
The total charge for the pictures is taxable, and if the price already includes tax, a 'price includes sales tax' notice should be posted on the booth (tax can then be backed out of the total by divid…
When a contractor installs a polyurethane pipe liner in a brand-new pipeline being laid alongside an existing one, does it charge sales tax on materials only, or on materials and labor both?
It depends on timing: if the liner is applied to the new pipe after the pipe is attached to realty, the contractor is doing new construction of real property — labor is not taxable, but sales tax must…
Does a piece of exercise/fitness equipment sold by a manufacturer qualify for a Texas sales tax exemption as a therapeutic or orthopedic device?
Partly. The product qualifies for exemption as a therapeutic device, but only when it is sold to an individual under a doctor's prescription (Rule 3.284(a)(11) and (c)(8)). It does NOT qualify as an e…
When a grocery store customer redeems a discount coupon (either a store coupon or a manufacturer's coupon), how is sales tax calculated on the purchase?
Either way — store coupon or manufacturer's coupon — the coupon reduces the taxable sales price of the item, so sales tax is due only on the discounted price, not the original price. If the register f…
Does a little league baseball association have to collect sales tax on concession stand sales of food, candy, and soft drinks?
No. Associations that support athletics for children under 19 are exempt from paying and collecting sales tax on food, candy, and soft drink sales, as long as all the proceeds are used for the organiz…
Is the bill-paying portion of a freight-bill auditing company's services taxable as a data processing service if that bill-paying feature is offered to all customers at no extra charge?
No — under the revised contract, the bill-payment portion of the company's freight-bill auditing service is not taxable as a data processing service, as long as customers who don't use the bill-paymen…
A tow-and-storage contractor that sells seized and salvage motor vehicles at auction for the U.S. Marshals Service asks whether, after the January 1, 1996 law change, it must collect sales tax on those sales.
As of January 1, 1996, a salvage vehicle is no longer treated as a "motor vehicle" for tax purposes — it's treated as ordinary tangible personal property. So sellers of salvage vehicles must collect l…
When a Texas insurance company is placed into receivership, what priority does the Comptroller's claim for uncollected/unremitted sales tax and premium tax get, and does the Receiver (the Commissioner of Insurance) have to keep collecting and remitting tax going forward?
The Commissioner of Insurance acting as Receiver of an insolvent insurance company is NOT a governmental agency or otherwise exempt from tax, and sales tax owed by the receivership estate is a Class 3…
Is a commercial roofing contractor's reroofing, resaturation, regraveling, and panel-replacement work nontaxable 'scheduled and periodic maintenance,' or is it taxable repair/restoration under Rule 3.357?
It's taxable repair/restoration, not nontaxable maintenance. The Comptroller disagreed with the contractor's argument: the work described (reroofing, resaturation, regraveling, and panel replacement d…
Does a nonprofit/volunteer group have to collect sales tax on food and beverages sold at its annual fund-raiser, and can it get a refund of tax it already paid on two past fund-raisers?
No sales tax collection is required on food and beverages (like iced tea, sodas, coffee) sold at an annual fund-raising event if the sale lasts a week or less, is run exclusively by unpaid volunteers …
Is use tax due on complimentary (free) servings of beer that a bar brews on its own premises?
No use tax is due on the beer itself, because its ingredients (corn, wheat, barley, salt, yeast, etc.) aren't taxable items to begin with — but use tax is still due on the cost of any non-reusable ite…
A direct-sales/multi-level-marketing company asked how it should collect and remit Texas state and local sales/use tax on sales made through its independent distributors.
Under Rule 3.286(a)(3), the company is treated as a distributor and must obtain a Texas sales and use tax permit and collect/remit state tax (then 6 1/4%) plus applicable local taxes on sales made thr…
Which cleanroom facilities and related equipment used in semiconductor (microchip) fabrication qualify for the Texas manufacturing exemption — specifically a chemical analysis lab and equipment air lock, chemical/gas dispense and storage rooms with their safety/cleanroom controls, and an electrical distribution room?
The chemical analysis lab and equipment air lock cleanrooms and their associated equipment are exempt under Sec. 151.318(q). For the chemical/gas dispense and storage rooms, the piping, filters, and s…
When a contractor pulls materials out of a valid tax-free inventory located inside a city and MTA (mass transit authority) taxing jurisdiction, and uses those materials on a lump-sum new construction job located outside that city/MTA area, which city's and MTA's local use tax applies?
The local (city and MTA) use tax is based on where the tax-free inventory is stored/kept at the time of or just before the materials are removed for use — not on where the construction job itself is l…
Does a nonprofit civic organization (and the nonprofit/school booster groups selling food in its festival concession area) have to collect sales tax on food and beverages sold as an annual fundraiser?
No — not if the sale is an annual event lasting a week or less, is run exclusively by unpaid volunteers of the participating nonprofit organizations, is entirely noncommercial (no caterer, restaurant,…
Is an electric cooperative exempt from Texas sales tax on the materials it buys to build a distribution line, and is the cooperative's charge to a customer for that line taxable?
The electric cooperative itself owes no sales or use tax on the materials it buys to build the distribution line — the Electric Cooperative Act (Article 1528b, Sec. 30) exempts electric cooperatives f…
Is a $1 surcharge that a private club must collect from baseball ticket purchasers and remit to a sports facility authority (as required under the Development Corporation Act of 1979) subject to Texas sales tax?
No. A $1 surcharge that a sports facility authority requires a private club to collect from ticket purchasers and remit directly to the authority — authorized under the Development Corporation Act of …
When a grocery store's gas-pump trading stamp promotion is redeemed for a mix of taxable and nontaxable food items, how is sales tax computed?
Redeeming trading stamps for merchandise is treated as a retail sale. The retailer must collect and remit sales tax on the taxable items redeemed (here, soda), based on whichever is larger: the redemp…
As a direct sales organization (multi-level marketing company), who is responsible for collecting and remitting Texas sales/use tax on sales made by its distributors, and how should local tax be tracked?
The direct sales organization itself — not each individual distributor — is responsible for collecting and remitting sales or use tax on Texas sales made through its distributors, per Rule 3.286(a)(3)…
A towing company asks whether towing/transfer charges billed in connection with vehicle repossessions — including a "second tow" from a storage facility to an auction — are taxable debt collection services or nontaxable towing/transportation.
It depends on whether a repossession actually occurred. If a towing company is hired only to move a vehicle the lender already has access to (e.g., after the borrower voluntarily drops it at a dealers…
A business sold all its operating assets (except two officers' cars and equipment it leased from a third party under an operating lease, which it couldn't transfer). Does the sale still qualify for the occasional sale exemption?
Yes. The Comptroller ruled that the sale still qualifies for the occasional sale exemption. The two automobiles didn't count because they were used for general business purposes, not operations. And b…
If a company owns the patents and formulas for its products but has a separate contract manufacturer physically make the product under the company's supervision, is the company itself considered the 'manufacturer' for Texas sales and use tax purposes?
Yes. Because the company developed the formulation process, supplies the manufacturing formulas and instructions, keeps its own manager/scientist on site during manufacturing and testing, and is respo…
Is labor to repair major appliances taxable, and does a laundry/dry cleaner that owns and rents out uniforms, mops, or linens qualify for the manufacturing exemption on its washers, dryers, and repair parts?
It depends on what's being repaired and how the appliance is used. Repair labor on tangible personal property (free-standing, plug-in appliances) is generally taxable, while repair labor on real prope…
Is a repossession company's charge to a bank or lender for repossessing a vehicle a taxable service, including when the bank calls off the repossession before the vehicle is picked up?
Yes. Repossession work done for a financial institution is a taxable "debt collection service" under Rule 3.354(a)(4). This applies whether the repossession is a voluntary turn-over the company picks …
When a company does lump-sum interior refurbishing, avionics upgrades, or performance modifications on a customer's private aircraft, is that taxable repair/remodeling labor, or nontaxable processing/manufacturing labor — and does it matter that the work is done on an unfinished ('green') aircraft versus one already in service?
Interior refurbishing and performance-altering modifications performed on an already-completed customer aircraft are repair or remodeling, not processing — and Texas law specifically excludes repair, …
Is the labor to repair refinery/chemical plant processing equipment taxable, and is the labor to repair railroad track taxable, given that the equipment and track were exempt as manufacturing equipment or rolling stock when first purchased?
It depends on whether the item is still personal property or has become part of the realty. If refinery/plant manufacturing equipment still retains its character as tangible personal property, repair …
Is the computer hardware and software a company uses to draw its own blueprints for fabricating food processing equipment exempt from Texas sales tax as manufacturing equipment?
No. Preparing blueprint drawings happens before the first stage of production, so the computers and software used to create those blueprints do not qualify as exempt manufacturing equipment under Rule…
Is cleaning debris out of an existing farm irrigation ditch or canal every fall and spring taxable as nonresidential repair/restoration, or is it exempt agricultural maintenance?
Taxable. Cleaning debris out of an existing irrigation canal restores it to as near its original working order as possible, which is nonresidential restoration under Rule 3.357 — not exempt maintenanc…
What was the January 1996 internal memo about a special postcard mailing to Texas taxpayers who had a local sales tax rate change in 1995?
This is NOT a taxpayer-specific letter ruling — it's an internal Comptroller staff memo (with the attached postcard text) explaining that 610 sales-tax yearly filers in specific jurisdictions (the cit…
A wholesale floor covering distributor asks: is sales/use tax due when it buys carpet samples for its own showrooms, when it later resells those used samples to dealer customers at a discount, when its salespeople swap out a dealer's sample display for free, and can it get a tax refund when it has to discard samples that go out of style?
Tax is due when the distributor first buys the carpet samples, because it uses them in its own showrooms. When those used samples are later resold to a dealer, a resale certificate can be taken instea…
Can a cellular telephone company buy 'positive validation' (fraud-prevention/roamer-validation) services tax-free with a resale certificate, on the theory that the cost is passed through to customers on their cellular bill?
No. The Comptroller ruled that positive validation service is not an integral part of the cellular service sold to customers, so the cellular company cannot purchase it tax-free for resale — regardles…
Is the sale of electronic tokens/credits used to play phone-based casino-style games taxable in Texas, when winning tokens also enter callers into a weekly raffle drawing?
Yes. The Comptroller determined that selling the tokens/credits is taxable as an amusement, regardless of the raffle mechanic layered on top. The letter also flags that raffles are generally not legal…
Does producing an animated television commercial using computer graphics qualify for Texas's motion picture exemption, and does the computer/software used to make the master tape qualify for the manufacturing exemption?
Yes to both, with limits. Using computer graphics to produce a master video tape that will be sold, broadcast, or distributed qualifies for the motion picture exemption (Rule 3.350). The computer and …
Can an apartment complex give a utility company a residential-use exemption certificate for gas/electricity without first getting a formal utility (predominant use) study done?
Yes, for apartment complexes matching the studied pattern (meters that mix small commercial use, like the manager's office, with residential common-area use, like club rooms, laundry rooms, pool pumps…
Does an air compressor used exclusively to power an abrasive blasting system that prepares steel surfaces for coating qualify for the Texas manufacturing sales tax exemption?
Yes. The Comptroller ruled that the air compressor qualifies for the manufacturing exemption because it is used exclusively to propel the blast media that prepares steel surfaces for coating — equipme…
Does a maid who cleans houses need to collect Texas sales tax on her charges, and does the new small-business exemption for lawn care/landscaping apply to housecleaning?
No to both, with a distinction: the July 1, 1995 small-business exemption for self-employed lawn care/landscaping workers earning $5,000 or less does NOT extend to housecleaning services, because that…
Is a company that isn't a joint venturer with a theater/performance operator still liable for sales tax on admissions as a "provider" of taxable amusement services?
The Comptroller found that, based on the one contract reviewed, Operating Company is not a joint venturer with Company A — but that doesn't settle the matter, because Operating Company may still be a …
Is a Texas manufacturer's sale of etchant — a chemical used to etch unwanted copper off printed circuit boards — subject to sales tax, given that none of the etchant ends up in the finished circuit board and the spent etchant is bought back by the seller for recycling?
The sale of the etchant is a taxable sale of tangible personal property, but the purchaser (a circuit-board manufacturer) can buy it tax-free with a resale/exemption certificate, because the etchant i…
Is the construction of a special, secured room inside an existing building — built to protect a customer's inventory and equipment during manufacturing — exempt from Texas sales tax as either a manufacturing exemption or new construction?
No. The Comptroller ruled that building a special security room within an existing building — even though it was a specific contract condition needed to protect a customer's manufacturing inventory an…
A mail order company plans to set up two subsidiary corporations and a limited partnership that will operate in Texas, buying goods for resale to the mail order company, which then ships items to Texas customers; the mail order company will also periodically send a handful of employees into Texas to train and check on the limited partnership's staff. Does any of this create Texas sales/use tax and franchise tax nexus for the mail order company, and does the limited partnership have to collect sales tax on sales to the mail order company or its customers?
Yes, the mail order company has nexus. Sending its own employees into Texas on a recurring basis (initial training plus periodic quarterly/semi-annual site visits) to train and review the limited part…
If a broker pays a financial-information company's subscription fee for a customer, and also pays the information company a separate premium/commission based on the customer's brokerage business, is that premium/commission subject to Texas sales tax — and does it matter that the broker is out of state?
The premium/commission a broker pays an information-service provider is NOT subject to sales tax as long as it's separately stated and represents genuine, separate compensation to the provider (not pa…
A vendor sells equipment to a leasing company, which then leases it to the original customer under a deal labeled a 'financing lease' with declining monthly payments and a buyout/return/renew option at the end of each year — is that a financing lease or an operating lease for Texas sales tax purposes?
It's actually three separate leases, not one financing lease. Because the customer can return the equipment, buy it, or roll into a new lease with a new rental amount at the end of each year, the Comp…
If a Texas business creates a website for a customer located in Mexico, does it still owe Texas sales tax on the charge?
Yes. The Comptroller confirmed that creating website software is taxable as tangible personal property, and that tax applies even when the customer is located in Mexico, because the software resides o…
Is the Tarjeta Nacional De Inscripcion (a Mexican vehicle-registration document a customer gave a Texas seller) valid proof that goods were exported to Mexico for the Texas export exemption?
No. The Tarjeta Nacional De Inscripcion is not acceptable proof of export because it doesn't document that the specific goods sold were actually shipped into Mexico. Valid proof of export instead requ…
Does a company that drafts customers' bank accounts electronically (EFT/ACH) on behalf of its business clients have to charge Texas sales tax on its drafting fees?
No. The Comptroller told the taxpayer that the fee it charges for its bank drafting service is not a taxable service, so it should not collect sales tax on those fees from its customers. However, beca…
Does a clean room used to make the protective garments worn in semiconductor fabrication qualify for Texas's semiconductor fabrication clean room sales tax exemption?
No. The Comptroller held that the 'semiconductor fabrication clean room' exemption (created by Senate Bill 640) only covers clean rooms used to manufacture an actual semiconductor product — a clean ro…
If my business charges landfill, garbage, or pallet companies a fee just to accept pallets and scrap materials at my facility (which I then use as raw material), do I owe sales tax on that fee?
No. The Comptroller ruled that a fee charged simply to accept pallets and related materials delivered by landfill, garbage, and pallet companies — without collecting the waste from the customer — is n…
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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.