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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Can caterers, party planners, florists, and bridal consultants who rent tables, linens, china, vases, and candelabras to re-rent to their own customers use a resale certificate instead of paying tax on the rental?
It depends on whether the renter serves prepared food. Food service operators -- restaurants, caterers, party planners, bridal consultants, and others who serve prepared food -- may NOT purchase, leas…
Can a Texas movie theater buy admission tickets tax-free for resale, and does the same rule apply to the gift certificates, envelopes, and passbooks it buys?
Movie tickets may be purchased for resale under Rule 3.298(f)(1), so a theater that already paid tax on tickets can get a refund by issuing its supplier a resale certificate (limited to a four-year st…
Can a Texas Internet service provider buy telecommunications services (like leased lines) tax-free for resale, even though part of its Internet access revenue becomes exempt from sales tax starting October 1, 1999?
Yes. Telecommunications services purchased to provide Internet access, data processing, or information services still qualify as a sale for resale under Tax Code Section 151.006(1), because each of th…
Does Texas treat a direct sales organization's distributor with a physical retail store in a mall or shopping center the same way it treats a home-based independent distributor, for sales tax permit and resale-certificate purposes?
No. Home-based independent distributors of a direct sales organization are never issued sales tax permits and may not give a resale certificate -- they pay tax on the suggested retail price, with a re…
Can a private investigator selling surveillance work to a television station use a resale certificate instead of charging sales tax, on the theory that the TV station resells the information to the public as part of its programming?
No. The private investigator is performing a taxable security service under Tax Code Section 151.0075 (services requiring a Private Investigators and Private Security Agencies Act license), not an inf…
Could a Texas lessor issue a resale certificate for a body and liftgate installed on an apportioned truck leased for interstate use?
Yes. Because the completed truck was a lease vehicle registered tax-free for apportioned interstate use, the lessor could issue a resale certificate to the company that sold and installed the body and…
If a company leases manufacturing equipment to a lessee who later incorporates it into a building (realty), does that later incorporation destroy the lessor's resale certificate, and when exactly does an operating lease's 'sale' happen for tax-reporting purposes?
No, incorporation into realty by the lessee does not destroy the lessor's resale certificate or trigger a 'divergent use' problem, because the equipment is still being used as claimed on the exemption…
Is a concrete pumping charge (using a primer to slick the pump's pipe) taxable, and is concrete sawing taxable on new construction versus a remodeling job?
A charge for pumping concrete that was sold by a third-party retailer to a foundation contractor is NOT subject to sales tax. Charges for sawing concrete as part of a NEW CONSTRUCTION contract are NOT…
How does Texas sales tax and the Telecommunications Infrastructure Fund (TIF) assessment apply to toll calls, 800-number calls, and prepaid telephone calling cards sold by a switchless telecom reseller?
Telecommunications services (toll calls, intrastate 800 calls, calling card usage) that originate in Texas and are billed to a Texas telephone number or billing/service address are subject to Texas sa…
As a Metabolife distributor, do I need my own Texas sales tax permit, and how does the tax on products I buy from Metabolife get handled?
No, home-based distributors of a direct sales organization like Metabolife are not issued sales tax permits -- Metabolife itself collects and remits tax on the suggested retail price of products sold …
As a Texas distributor for an out-of-state (Nevada) direct sales/multi-level marketing company, who is responsible for collecting and remitting Texas sales tax, and do I need my own sales tax permit?
The Nevada-based direct sales organization itself is responsible for collecting and remitting Texas tax on the products its distributors sell, regardless of where the organization is incorporated -- d…
A seller of early childhood educational products wants a full breakdown of how to tax sales to Head Start programs and other buyer categories -- which need an exemption certificate, which are automatically exempt, and which require a resale certificate?
The Comptroller sorted the buyer categories into four types: (c) exempt by statute, no certification needed from the purchaser -- Head Start Programs/Delegates/Grantees, Federal/State/Local Government…
An out-of-state Internet retailer plans to fulfill orders by drop-shipping from a related Texas limited partnership's warehouses, and will also pay commissions to unrelated Texas retail stores that host invisible order links on their websites. Does any of this create Texas sales/use tax nexus for the out-of-state retailer?
Yes. The Texas limited partnership doing the drop-shipping doesn't itself create nexus for the out-of-state retailer (it can just take a resale certificate). But paying commissions to Texas retail sto…
Our direct sales organization has given distributors conflicting information about whether they owe sales tax on products bought from us. Who actually owes the tax, and does it matter whether a distributor has a retail store versus sells from home?
The direct sales organization is responsible for collecting and remitting sales tax on products sold to its distributors — the idea that distributors don't owe tax to the organization is incorrect. A …
One of our distributors resold product to a customer in Michigan, and a separate distributor sells to a retail store with its own storefront in a mall. In both cases the distributor already paid us Texas tax up front on the product. How do we handle refunding or crediting that tax without double-paying the state?
In both cases, the company can recoup the tax by taking a credit on its own current sales tax return (adjusting reported taxable sales) rather than filing a separate refund request. For the out-of-sta…
Our company provides a huge bundle of contracted facilities-management services to malls and shopping centers — janitorial, HVAC upkeep, roof/electrical/plumbing repair, painting, parking lot work, landscaping, equipment repair, snow removal, pest control, and more — all separately itemized on our invoices. Which of these services are taxable, and how do we handle sales tax on the supplies and parts we buy to perform them?
It splits into two legal categories with very different rules. Rule 3.356 "real property services" (janitorial/custodial work like restrooms, building lighting, landscaping, parking lot lights, snow r…
We lease Internet-access equipment (computers, modems, printers, etc.) to assisted care living facilities so residents can go online, charging a per-resident fee plus an installation fee. Do we owe sales tax on our charges to the facility, and can we buy the equipment tax-free for resale?
You collect Texas sales tax (8.25% in this case) on both the installation charge and the per-resident/monthly facility fee — but you don't owe any additional local tax for other cities/counties you de…
I sell rubber stamps as a distributor for a Utah-based direct sales (home-party) company that requires distributors to collect sales tax from customers on shipping charges. Is that correct, and does it matter whether I'm buying product to resell versus for my own use?
It depends on why the distributor is buying the product. When a direct sales company ships product directly to an end customer who ordered from a distributor, tax must be collected on the shipping cha…
My company provides a menu of services to cable TV companies building or rebuilding systems — map verification, base map development, field surveying, quality control, CAD digitizing, system design, plotting, make-ready surveying, subscriber audits, and system audits. Which of these are taxable, and does it matter whether I bundle them or bill them separately?
It depends entirely on WHO creates the underlying design and what your client is really purchasing. If you collect the field data yourself and produce an original engineering design using your own exp…
A 501(c)(3) nonprofit is accepting an assignment of a lump-sum general construction contract for a low-income housing project (financed through a partnership with for-profit limited partners who bought low-income housing tax credits), and will serve as the substituted general contractor using separated subcontracts. Can the nonprofit's subcontractors buy materials tax-free, can the nonprofit pass along exemption certificates to them, and who ultimately owes tax on the incorporated materials?
The nonprofit, as a lump-sum general contractor, is the consumer of all building materials and pays tax on them itself — no tax is collected from the project partnership on the lump-sum charge. Becaus…
Our client sells nationwide Internet-based e-mail/fax subscriptions through a toll-free number, using hand-held devices manufactured overseas by OEMs (who license our client's audio-coupling software into the devices) and sold through unrelated third-party Texas retailers. Our client has no office or server in Texas. Does this create Texas sales tax nexus, is the e-mail/fax service itself taxable, and how do we figure out which local tax rate applies?
Yes, nexus exists, on two independent grounds: the client's licensed software resides in hand-held devices used by Texas customers (creating nexus in every local jurisdiction those devices are used), …
How did Texas tax a total-loss vehicle sale, its later resale after repair, and an insurer's receipt of the vehicle after paying a claim?
A vehicle declared a total loss lost its motor-vehicle identity for sales tax purposes, so its sale was taxed under Chapter 151. After repair, later sales returned to Chapter 152 motor vehicle tax. An…
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…
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 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:…
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…
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…
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…
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 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…
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…
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 …
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…
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…
How did Texas treat temporary paper license plates and window-tint stickers for sales tax, and what changed in 2025?
The temporary-paper-tag analysis is obsolete: House Bill 718 replaced dealer-issued temporary buyer, dealer, and converter tags with TxDMV metal plates on July 1, 2025. Historically, transferred red-l…
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…
Can a motor vehicle paint and body shop switch from separately billing parts (with tax collected from the customer) to a lump-sum price (paying tax itself on parts, collecting none from the customer)?
Yes, this is an acceptable way to handle the tax. Labor to repair motor vehicles is not taxable under Rule 3.290(g)(1)-(2). A shop billing a lump-sum price for motor vehicle repair is not a retailer o…
Does a Texas computer retailer need to collect Texas sales tax on computers and parts it ships to customers outside Texas, and can it buy those components tax-free?
No Texas tax collection is required. A retailer is not required to collect Texas sales tax on computers or parts it ships to customers outside Texas, but must keep documentation — like postal receipts…
Can an Internet service provider buy its facility 'environment' and T1 connectivity charges tax-free if it charges its own customers sales tax on those services?
The ISP's own supplier should not charge it tax on the monthly $150 environment-and-connectivity charge. Instead, the supplier itself must pay tax on the taxable items included in that charge — except…
When is a staff leasing arrangement exempt from Texas sales tax, and what happens if the leased employees perform otherwise-taxable services like data processing, security, or collections?
A staff leasing arrangement is exempt from sales tax only if it meets ALL of Rule 3.364(b)'s conditions: at least 75% of the assigned employees were previously the client's own employees for at least …
If a bulletin-board-service (early internet) provider mistakenly paid sales tax for years on dedicated phone lines it actually bought tax-free for resale, how does it get that overpaid tax refunded?
The dedicated telephone lines were purchasable tax-free for resale under Tax Code § 151.006(1), since the provider was reselling the taxable telecommunications service to its bulletin-board clients. H…
Is a gas compression service taxable, and does it matter whether the compressor is instead leased or rented out to the customer?
Gas compression services performed under a contract where the provider never transfers possession or control of the compressor to the customer are NOT taxable -- it's a service, not a rental or lease,…
When a Texas printer/fulfillment house mails direct-mail advertising for an out-of-state customer to addresses both inside and outside Texas, how much of the charge is subject to Texas sales tax?
Only the pieces mailed to Texas addresses are subject to Texas tax; pieces mailed by the third-party mailer to addresses outside Texas are not taxed, even though the seller (a Texas business) billed a…
Does a business that recycles and resells used air filters for large trucks owe sales tax on those sales -- and how does that differ from a motor vehicle repairman who cleans a filter and puts it back in the same truck?
Yes, sales tax is due on the sale of recycled air filters, and the seller must collect it unless it receives a valid resale or exemption certificate. This is different from a 1984 letter (document 841…
I sell to a Mexican retailer who wants to buy tax-free for resale in Mexico -- what documentation do I need beyond a standard Texas resale certificate, and does a blanket certificate expire over time?
Beyond a properly completed Texas (or Border States Uniform) resale certificate, Rule 3.285(d)(2) requires you to also keep a copy of the buyer's Mexican Registration Form showing their RFC (Mexican f…
Is installing an awning or canopy taxable as new construction, or as a sale of tangible personal property, under Texas sales tax rules?
It depends on whether the canopy becomes an improvement to the realty. If it does, the installation labor counts as new construction and is not taxable, but the materials are taxable (per the lump-sum…
Is a Texas motor vehicle painting/repair shop's charge for painting materials, consumables (masking tape, sandpaper, solvents, etc.), and supplies taxable, and can the shop buy them tax-free for resale?
It depends on how the shop bills. Motor vehicle repair labor itself is not taxable, but tangible personal property furnished in the repair is. If the shop separately states labor and parts/materials o…
Does a mobile home skirting/door/window installer owe sales tax on the charge to the dealer, or on the materials, when installing skirting on mobile homes treated as real property?
It depends on how you bill. For sales tax purposes a mobile home is treated as real property, so you can use either a lump-sum contract (you pay tax on materials, and your lump-sum charge to the deale…
When a caterer or event planner rents out a facility with recreational amenities and provides food, is the facility rental charge taxable as an amusement-service admission?
Yes, in most cases. Because the taxpayer's facility included a swimming pool, volleyball court, horse riding trails, baseball fields, and fishing area, the Comptroller ruled the facility rental itself…
Can a motor-repair company buy small parts like nuts, bolts, grease, and paint tax-free under a resale certificate, even if it stops billing customers separately for those items?
Yes. The Comptroller ruled that a company repairing and rebuilding electric motors can still purchase small parts like nuts, bolts, grease, and paint tax-free under a sale-for-resale certificate, and …
When a contractor repairs railroad track versus depots or parking areas for a railroad company, what parts of the job are taxable?
It depends what's being worked on. Repairing parking facilities is fully taxable as nonresidential real property repair. For track work, the track materials themselves are exempt (bought tax-free via …
Is a sale-leaseback of equipment the lessee already owns and paid tax on subject to Texas sales and use tax?
It depends on the type of transaction. A true sale-leaseback where the lessor leases the equipment back to the lessee under an operating lease is taxable on the lease charges. But if the sale-leasebac…
Which charges by a public relations/advertising firm — campaign coordination, ad production, air time, copywriting, graphic design, printing, mailing lists, postage, billboards, and specialty items — are taxable in Texas?
It depends on the service. Campaign coordination, producing radio/TV ads, buying air time, public relations copywriting, newspaper ads, and billboard space are not taxable. Graphic design, printing, m…
When an event planner bills a client for a mix of food, rentals, decorations, and entertainers, which of those charges are subject to Texas sales tax?
It depends on the item. The Comptroller ruled that food, rentals (tables, chairs, decorations, tents), and most goods transferred to the customer are taxable, while charges purely for live entertainer…
Can a caterer, hotel, or restaurant use a resale certificate to buy or rent tables, chairs, decorations, or audio-visual equipment used in providing food service, instead of paying tax on those items?
No. A caterer, hotel, or restaurant that buys or rents equipment (such as tables, chairs, utensils, decorations, or audio-visual equipment) to use while providing food service must pay tax on that equ…
Is non-executable source code that a seller licenses to manufacturers, who must substantially re-engineer it before use, a 'completed computer program' subject to Texas sales tax?
Yes. The Comptroller ruled that the seller's non-executable source code -- even though customers must substantially re-engineer it before using it -- meets the dictionary definition of 'source code' a…
Does a company owe Texas sales or use tax on loose product samples and sample binders or books that it produces or buys to help its sales representatives solicit customers?
Yes. The Comptroller ruled that loose samples and sample binders or books distributed in Texas are taxable, because their only use is to demonstrate the products they represent, not to be sold themsel…
Does a film and video production company owe sales tax on special-effects paint, blank tape stock, and duplicate tapes (dubs) it has made for clients?
It depends on the item. The blue paint used exclusively for blue-screen special effects can be bought tax-free with an exemption certificate (though separately billed painting labor is still taxable),…
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.