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 a Texas seller who is audited by another state (Alabama) and forced to pay that state's tax on the same materials get a multistate tax credit against, or a refund of, the Texas sales tax it already collected from its Texas customer?
No. The Comptroller ruled that Texas's multistate tax credit only offsets Texas use tax owed by a purchaser on items brought into Texas — it cannot be used to refund or credit sales/use tax the seller…
Does a company that operates a can-crushing prize machine owe sales tax on the advertising fees it charges, or on the machine and prizes it buys?
No, the advertising fee charged to companies for placing their logos on the machine is not taxable. But the machine's operator must pay sales tax on the taxable items it buys to run the promotion, inc…
Is a biotechnology company's purchase of cell, organ, or tissue taken from a cadaver exempt from Texas sales and use tax?
Yes. The Comptroller reversed an earlier determination and ruled that cell, organ, and tissue purchased or sold by a biotechnology company are exempt from Texas sales tax to the extent they are taken …
When a direct-sales or multi-level-marketing company gives away free prizes or awards at a home party, who owes the tax -- the company or the person who receives the prize?
The company giving away the prize owes the tax, not the recipient. Pulling an item out of tax-free resale inventory to give away as a prize is a taxable divergent use, so the company (or the distribut…
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…
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…
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…
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…
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…
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…
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…
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…
My client makes and installs custom stone/marble tabletops and wood, vinyl, and stone flooring in homes -- when do I charge sales tax on the materials versus the labor, and can I buy materials tax-free for resale?
Installing tile, marble, stone, hardwood, or wall-to-wall vinyl flooring into a home is treated as an improvement to real property, so residential installation labor is not taxable, but the contractor…
If our pharmaceutical company gives free prescription and nonprescription drug samples to physicians and hospitals in Texas, do we owe sales or use tax on them?
It depends on who receives the sample and whether it's prescription or nonprescription. Prescription and nonprescription drug samples given free to physicians (to be dispensed to patients) are exempt …
If I test or stage computer hardware/software in Texas before exporting it out of state, does that testing count as a taxable 'use' of the property in Texas, even if I hold a direct payment permit?
Yes -- testing or 'staging' tangible personal property (including computer hardware and software) in Texas before exporting it out of state is a taxable 'use' of that property in Texas. This applies r…
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…
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…
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…
Is cleaning/washing a trailer tank after hauling liquid chemicals a taxable service in Texas, and can the cleaning chemicals and required safety gear be bought tax free?
No, the cleaning itself isn't taxable — the Comptroller said washing out a trailer tank between loads is nontaxable maintenance to a motor vehicle. But the client still can't buy the cleaning chemical…
Can a company that overhauls and repairs jet turbine engines buy consumables like cleaning solvents and plasma tax-free, and does the machinery/equipment exemption apply even if some customers aren't certificated airlines?
Yes to both. The Comptroller told this engine-overhaul company that consumables such as cleaning solvents and plasma that are used up or transferred to the customer during overhauling, retrofitting, o…
Is a soil/groundwater remediation system (like an Air Sparge/Soil Vapor Extraction System) required by the Texas Natural Resource Conservation Commission exempt from Texas sales and use tax as pollution-control equipment?
No. The Comptroller ruled there is no sales tax exemption for the construction and installation of a Remediation System used to clean up contaminated soil and groundwater around an underground storage…
Is electricity used in a separately metered manager's office at an apartment complex taxable, or does it count as residential (exempt) use?
Taxable. The Comptroller told the utility and the apartment complex that electricity supplied to a separately metered office not occupied as a residence by an on-site manager is a taxable commercial u…
A seller ships forms into Texas for a customer who will export them to Mexico. The customer's exemption certificate isn't enough to cover the purchase — what are the options for handling the transaction without charging Texas tax?
The certificate the customer sent wasn't sufficient by itself, but the Comptroller described several ways to avoid Texas tax on goods purchased for export to Mexico: the customer can give an exemption…
Does the Texas exemption for services performed on certain exempted tangible personal property (Tex. Tax Code Sec. 151.3111) apply once that property becomes a fixture or improvement to real property, such as a steam boiler installed in an electric generating plant?
No. The Comptroller's office told the taxpayer that the Sec. 151.3111 exemption for services on certain exempted tangible personal property does not extend to property once it becomes a fixture or imp…
Is equipment that a company builds and uses to remediate (clean up) contaminated soil at natural gas pipeline metering sites subject to Texas sales/use tax?
The soil remediation service itself is not taxable, but the Comptroller concluded that the equipment purchased or fabricated to perform that service is taxable, because on the facts presented the equi…
If a construction contract to expand a chemical or petrochemical plant's capacity was signed before October 1, 1995 (when Senate Bill 640 took effect), is the labor taxed under the old law or the new law?
It depends on when the labor was actually performed, not when the contract was signed or when title/acceptance happens. Labor performed before October 1, 1995 is taxable, even if billed later or accep…
Does a paper machine made of interconnected, bolted-down manufacturing equipment count as real property (an improvement to realty), or does it stay tangible personal property for Texas tax purposes?
It stays tangible personal property. The Comptroller's Tax Policy Division toured a paper manufacturing facility and agreed that the 'paper machine' — actually a series of interconnected machines that…
Does a Texas healthcare provider owe sales tax on polysomnographic sleep units (equipment used to diagnose and treat sleep disorders and sleep apnea)?
Yes. The Comptroller confirmed the company correctly paid sales tax on its polysomnographic sleep units. Healthcare providers owe sales tax on equipment they buy to provide their services unless a spe…
When a contractor buys materials, supplies, or equipment for a construction or design contract where title passes to an exempt customer, when does the contractor owe Texas sales or use tax instead of claiming a resale exemption?
It depends on timing. Under Day & Zimmerman v. Calvert, a contractor's purchases can be exempt as sales for resale only if title to the property passes to the customer before the contractor makes any …
Is a business that prints and mails advertising coupons directly to consumers on behalf of retailers providing a taxable sale, or a nontaxable advertising service, under Texas sales and use tax law?
It's a nontaxable advertising service, not a taxable sale of coupons. The Comptroller told this business that printing coupons out of state and mailing them directly to consumers in specific zip codes…
Is a service, estimate, or trip charge taxable if a customer gets an estimate to repair an appliance but decides not to have the repair done?
No. A service, estimate, or trip charge made in connection with the repair of tangible personal property is generally taxable, but there is no taxable charge if an estimate is rendered for a fee and t…
Is painting, patching, and seal coating work on a neglected strip shopping center's walls and parking lot considered nontaxable maintenance, or is it taxable repair/remodeling/restoration?
It's taxable repair, remodeling, and restoration, not nontaxable maintenance. The Comptroller explains that maintenance under Rule 3.357(a)(4) means scheduled, periodic work done to sustain or support…
If a customer paid tax on parking space rent before getting a Texas sales tax permit, and later gets a permit, can the tax already paid be refunded?
Generally no. A customer cannot issue a resale certificate for purchases made before the effective date of its sales tax permit, so tax collected before that date should not be refunded. The only way …
Is an interior decorator's design fee, purchasing fee, administrative charge, freight/move-in charge, or consultation fee taxable under Texas sales and use tax?
It depends on how the charge is billed. A separately stated interior design fee or a stand-alone consultation fee is not taxable. But a design fee folded into a lump-sum charge for taxable property be…
Are vibrating shaker screens used at a sand, gravel, and aggregate processing plant exempt from Texas sales tax as manufacturing equipment?
It depends on where in the process the shaker screens are used. Shaker screens used before the aggregate material undergoes any physical or chemical change (such as crushing) are not part of manufactu…
Is cleaning out debris from an existing farm irrigation canal a taxable service in Texas, and does the agricultural exemption cover it?
Yes, it's taxable. Cleaning debris out of an existing irrigation canal to restore it to near its original working order is nonresidential repair and restoration of real property, which is taxable unde…
When a repair company fixes real-property equipment (like a restaurant refrigeration system) under a manufacturer's warranty, or provides a free 'goodwill' repair afterward, who owes Texas sales/use tax on the labor and parts?
It depends on who is footing the bill and why. When an out-of-state manufacturer's warranty covers the repair and the repair company bills the manufacturer (not the property owner) for labor and parts…
Is telephone or on-site technical support for software taxable in Texas, and can a contractor providing that support staff to a company accept a resale certificate instead of charging tax?
Yes, charges for telephone technical support of tangible personal property (including software) are subject to Texas sales and use tax if provided to a recipient in Texas, though the service can be pu…
Is a caregiver referral agency's fee taxable, and are the pre-employment screening services it performs (criminal history, driving records, reference checks) subject to Texas sales tax?
The referral fee itself is not taxable. But the pre-employment screening components — criminal conviction histories, driving records, and reference confirmations — may be taxable if the customer (not …
Does Texas local sales and use tax apply to conference calling charges when the conference call center or 800 number is located outside Texas but some participants call in from Texas?
It depends on where each leg of the call originates, not on where the conference call center is located. For a 'Dial Out' call, the client owes state (but not local) sales tax on its own call to the o…
Is a charge for disassembling a communications tower — including mileage, travel, per diem, loading, hauling, and unloading of the tower materials — subject to Texas sales tax?
No, not when those charges are separate and apart from any taxable work. The Comptroller told this taxpayer that charges for disassembling a ROHN tower — including mileage, travel, per diem, loading, …
Can a company's electronic 'CPC Sales Tax Reporting' system, generated through a corporate procurement card, replace paper vendor invoices as acceptable documentation for Texas sales and use tax compliance?
Yes, with a major condition. The Comptroller ruled that the described procurement card sales tax reporting system will meet the office's data reporting requirements, but only if the vendor actually en…
When a distributor for a direct sales/multi-level marketing company buys items for their own personal or business use (not for resale) and gets overcharged sales tax on the retail price instead of the company's wholesale price, how do they get a refund?
The direct sales organization normally collects tax from distributors based on the retail sales price. But for items a distributor buys for their own use (not resale), tax should instead be based on t…
Are feeding tube systems (gastrostomy, jejunostomy, and related enteral/parenteral supplies) and closed tracheal suction system products (TRACH CARE) exempt from Texas sales and use tax as prosthetic devices?
Yes, generally. The Comptroller ruled that nasal gastric and gastrointestinal (enteral and parenteral) feeding-tube devices and related supplies, as well as closed tracheal suction system products (TR…
Is the labor to clean a non-residential septic tank or sewer holding tank taxable in Texas?
It depends on whether the cleaning is scheduled. If a non-residential septic tank or sewer holding tank is cleaned on a scheduled, periodic basis, the labor is nontaxable maintenance labor. If it's cl…
Is the labor to repair and maintain manufacturing machinery and equipment, like owned printing presses or leased photocopy machines, exempt from Texas sales and use tax?
Yes, but only once the equipment itself qualifies for the manufacturing exemption. As of January 1, 1995, when the phased-in manufacturing equipment exemption became fully effective, maintenance on qu…
Are security labels/tags that retailers attach to merchandise to prevent theft taxable, and did the resale/exemption certificates retailers had on file for these labels remain valid after the October 1, 1991 law change?
As of October 1, 1991, security labels sold to retailers for attaching to products at the retail location are taxable (they fall under the wrapping, packing, and packaging materials rule change), and …
Is electricity used to run coolers and cooling rooms that flower shops use to extend the life of cut flowers an exempt manufacturing/processing use, or a taxable use?
Mostly taxable. Electricity used to lower cut flowers to their target (precooling) temperature counts as processing, but that only takes 30 minutes to an hour. Once flowers reach the target temperatur…
Is a company's charge for custom or noncustom training materials on compact disc, or for other training materials like books and video tapes, taxable under Texas sales tax, and can a separately stated training fee avoid tax?
Yes, the charge for the training materials themselves is taxable. The Comptroller ruled that the total charge for each custom or noncustom training project documented on compact disc is taxable, as is…
Is labor to repair, remodel, restore, or renovate a building that is a Recorded Texas Historic Landmark, but not listed in the National Register of Historic Places, exempt from Texas sales tax?
No. Rule 3.357(e)(4) only exempts labor to remodel, restore, or repair buildings that are listed in the National Register of Historic Places. Being a Recorded Texas Historic Landmark (a state designat…
Can a corporation with multiple internal divisions get separate direct payment (direct pay) permits for each division, so each division reports and pays its own Texas sales and use tax?
No. The Comptroller's Tax Administration division denied the request. Only one direct payment permit may be held by the legal entity (the corporation as a whole, referred to in the letter as "CORP A."…
When a shop changes a customer's oil and oil filter, does it charge sales tax on a lump-sum price or does it need to separately state and tax the materials?
Either method is allowed, and the tax treatment differs. If you charge one lump-sum price for the oil change (parts and labor not separated), you do not collect sales tax from the customer, but you mu…
When a construction contract commingles taxable renovation/remodeling labor with nontaxable new-construction labor and the contract doesn't separately state the two, can a taxpayer's own engineer certify how much labor was new construction in order to claim a tax refund?
Yes. The Comptroller's Tax Policy Division said the customer's construction engineer may certify the split between new-construction labor and renovation/remodeling labor on a commingled job, citing Ru…
If a beverage distributor buys pre-mix or post-mix carbonated drink machines and loans them to restaurant customers as a marketing incentive (in exchange for the customer agreeing to buy that distributor's soft drink products), can the machines be purchased tax-free as manufacturing equipment?
No. Even though pre-mix and post-mix drink machines otherwise qualify as manufacturing equipment under Rule 3.300, loaning them to customers is itself a taxable "use" of the equipment by the distribut…
Are a television, a VCR, and pre-recorded or blank video cassettes sold for use on a maritime vessel exempt from Texas sales and use tax as component parts of the vessel or as sea stores/ships' stores?
A television and/or VCR can qualify as an exempt component part of a vessel if it is bolted or otherwise firmly attached to the vessel, under Rule 3.297(b)(2)(B). A video cassette cannot be attached t…
If a company designs tools, dies, jigs, and fixtures on a computer for manufacturers, is the sale of those designs subject to Texas sales tax?
Yes. The Texas Comptroller ruled that selling a computer-generated design is taxable as the sale of a pattern for use in manufacturing. Selling a design modification for an existing production-line ma…
Is a business's total charge to etch glass items (such as awards or motor vehicle windows), including labor, subject to Texas sales tax?
Yes. The Comptroller held that etching glass items is taxable processing or fabrication of tangible personal property, so the total charge to the customer — including labor — is taxable as graphic art…
Is replacing the ground beds/anodes in a cathodic corrosion protection system on an existing pipeline every 7 to 15 years considered nontaxable real property maintenance, or taxable repair and remodeling of real property?
It's taxable repair and remodeling, not maintenance. The Comptroller reaffirmed that adding cathodic protection systems to existing pipelines is taxable repair, restoration, or remodeling of real prop…
Is a Texas insurance underwriter liable for sales and use tax on the risk-inspection services it buys from an outside vendor as part of underwriting a policy, and is the underwriting activity itself taxable?
The underwriting activity itself is not taxable — Tax Code § 151.0039(b) and Rule 3.355(c)(1) exclude insurance coverage for which a premium is paid, or sales commissions paid to insurance agents, fro…
Is a ripper and the bulldozer that powers it exempt from Texas sales and use tax as manufacturing equipment when they are used to break limestone and shale out of the earth as the first step in making cement?
Yes, with a condition. The Comptroller ruled the ripper qualifies as manufacturing equipment and is exempt from sales and use tax because it is the first stage in producing cement, breaking limestone …
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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.