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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A company tests underground storage tanks for leaks using a van equipped with a computer, to help customers comply with Texas Water Commission leak-detection regulations. Should the company be collecting sales tax on these testing charges?
No. Charges to test whether an underground storage tank leaks more than allowed by Texas Water Commission or other regulatory standards are not taxable. However, the testing company still owes sales o…
A company duplicates (dubs) master audio or video tapes into copies. Does dubbing count as manufacturing or processing, and can the company get a refund or reduction of sales/use tax on its dubbing equipment?
Yes — the Comptroller confirmed that making duplicates of master tapes is processing or manufacturing, so dubbing machinery and equipment can qualify for a phased-in sales/use tax refund or reduction:…
A commercial vehicle monitoring service places decals with an 800 number on trucking/shipping company vehicles so other drivers can call in complaints about how the vehicle is being driven; the service forwards the complaint reports back to the vehicle-owning company. Is this service taxable as an information service?
No. The Comptroller withdrew its two earlier opinion letters and ruled that this vehicle-monitoring service is not taxable because it qualifies as a proprietary information service under Rule 3.342(d)…
How is sales tax charged on the installation of a new lawn sprinkler system — what part of the cost, if any, is taxed on the invoice, and at what rate?
Installing a new sprinkler system is an improvement to realty, so how tax applies depends on billing: if the installer bills a lump sum, the customer owes no tax and the installer instead pays tax on …
A general contractor has a separated contract (materials and labor billed separately) to build a new commercial building, and subcontracts landscaping (grass, bushes, trees) and a hardwired burglar alarm system to other companies who install those materials into the realty. How does sales tax apply between the subcontractors, the general contractor, and the customer — and does it matter if the job is residential instead of commercial?
The subcontractors' full charges (materials and labor) to the general contractor are taxable. The general contractor can either pay tax to the subcontractors and pass that cost through as part of its …
A hotel resells telecommunications services to guests (marking up local and long-distance calls) but also uses the same trunk lines and phone equipment for its own business calls. Can the hotel buy the phone lines and equipment tax-free with a resale certificate, or get a refund of the sales tax it already paid?
No, not in full. A hotel cannot in good faith issue a resale certificate for trunk line service that it also uses for its own business calls — resale certificates may only be issued for lines dedicate…
Are charges for a children's summer camp and instructional classes (like karate, tennis, basketball, volleyball, and cheerleading) for kids ages 3-17 subject to Texas sales tax?
No. Rule 3.298(a)(2) specifically identifies children's day camps or boarding camps and instructional classes in any sport or musical discipline as non-amusement services, so charges for these camps a…
Are bacterial/microbial products used by feedlots, poultry farms, swine farms and dairies to digest livestock waste in catch ponds exempt from Texas sales tax as a farm/ranch exemption item?
No. The Comptroller ruled that microbial products used to biodegrade manure and other waste in livestock catch ponds do not qualify for the farm/ranch sales tax exemption, because that exemption is li…
Are urological catheters, incontinence devices, and ureteral stents exempt from Texas sales tax as prosthetic devices, even if they are only implanted or used on a temporary basis?
Yes. Urological catheters qualify for the Texas sales tax exemption for prosthetic devices regardless of whether they are used internally or externally, and no prescription is required. The Comptrolle…
A country club imposes a one-time mandatory assessment on its members to pay for a special county road assessment, and passes the money on to the county for use on previously dedicated and accepted roads. Is that mandatory assessment subject to Texas sales tax?
Yes. The Comptroller ruled the one-time mandatory assessment is taxable as an 'assessment or fee charged for a special privilege, status, or membership classification' in a private club under Rule 3.2…
A monument company designs, letters, and installs headstones and vaults; inscribes dates of death on existing stones; and does jobs like moving/leveling headstones or adding curbing and marble to cemetery lots. Which of these are taxable, and how does the tax apply?
It depends on the job. Designing, lettering, and installing a headstone or vault makes the company a contractor improving realty: under a lump-sum contract it pays tax to its own supplier on its cost …
A Texas general contractor has a written separated new construction contract with a nonprofit entity but sends monthly lump-sum progress billings (only separated into materials/labor/profit in a final summary billing). Does that billing practice turn the whole contract into a lump-sum contract for sales tax purposes?
No. Monthly lump-sum progress billings alone do not convert a written separated new construction contract into a lump-sum contract. But lump-sum progress billings without any written separated contrac…
A pipeline contractor asks about the sales tax treatment of four kinds of jobs: removing and abandoning a pipeline, abandoning a pipeline in place and filling it with concrete grout, replacing an overhead pipeline crossing with a new underground pipe tied into the old line, and removing/disposing of old pipe. How is each taxed?
It depends on the job: (1) removing and abandoning a pipeline is not taxable unless it's done as part of a repair; (2) abandoning a pipeline in place and filling it with grout was first ruled taxable …
A pawnbroker was previously told (in a March 13, 1992 letter) that it should not charge sales tax when a customer redeems their own pawned property. Is that always true, or does it depend on whether the pawnbroker already declared the goods forfeited?
It depends on timing. If the original owner redeems the pledged property before the pawnbroker has exercised its option to treat the goods as forfeited, that redemption is not a taxable sale. But once…
If a pawnshop customer gets their pledged goods back after the redemption period has passed, is that a taxable retail sale, or is it still just a loan repayment?
It depends on whether the pawnbroker has already recorded the goods as forfeited. If the pledgor redeems the goods before the pawnbroker exercises the forfeiture option and records them as forfeited, …
A company already owns and has paid tax on computer equipment. It then transfers title to a lender for cash (roughly 10 times the equipment's fair market value) and simultaneously leases the same equipment back, keeping possession, depreciation for federal income tax purposes, and all the risks and costs of ownership. Are the lease payments subject to Texas limited sales tax?
No. Because the borrower never gave up possession, risk of loss, or (for federal income tax purposes) title, and the sale price and buyback price were tied to the amount of funds advanced rather than …
A blood/plasma products company asked which supplies used to collect blood and process it into blood products — collection bags, pooling bags/bottles, saline, separation-device disposable sets, reagents, and related machinery — are taxable versus exempt for Texas sales and use tax purposes.
Supplies used before processing begins to collect blood — Y-sets and 500 ML/600 ML collection bags — are taxable. Pooling bags and pooling bottles are exempt as containers under Rule 3.314 only when t…
A company is bidding on a multimillion-dollar heavy equipment job that will be exported to Latin America over about nine months, billed through progress payments, with a contract clause transferring title of designated goods to the customer at each progress payment. Should sales tax be charged/accrued on each progress payment and then refunded after export documentation is obtained?
Yes, tax is due on each progress payment as billed, because the sale is legally completed for tax purposes when title or possession transfers to the customer for consideration — here, that happens at …
A landlord leases office space in a multi-story building to a computer software manufacturer, and the electricity (partially sub-metered to cool the tenant's mainframe computers) is purchased by the landlord and passed through as part of the lease. Is that electricity exempt from sales tax as manufacturing-related use, and can the landlord get a refund?
No. The landlord's purchase of electricity and gas to supply leased office space is a commercial use, taxable under Tax Code 151.318 and Rule 3.295, regardless of what the tenant does with the space (…
Are Gore-Tex and GTAM periodontal materials, which are temporarily implanted to help regenerate gum and bone tissue lost to periodontal disease but are later removed, exempt from Texas sales tax as items that remain in the patient's body?
No. Even though these periodontal and bone-augmentation materials aid the healing process, they do not qualify for exemption because they are removed after one to nine months and do not remain permane…
If an optometrist duplicates a patient's prescription from their existing glasses (by neutralizing/measuring the old lenses) rather than performing a new refraction or receiving a written prescription, does the optometrist have to charge sales tax on the new glasses?
No. Texas Tax Code sec. 151.313(a)(6) exempts corrective lenses dispensed or prescribed by an ophthalmologist or optometrist, and the Comptroller ruled that an optometrist who duplicates a patient's p…
A medical equipment seller asked how Texas sales tax applies to four products: therapy mattress replacements/overlays, sequential compression devices, patient weighing systems (scales), and incontinence pads used with hospital/nursing home beds. Are incontinence pads exempt from sales tax?
No, not automatically. The Comptroller classified incontinence pads as therapeutic appliances, which are exempt from Texas sales tax only when sold to an individual under a doctor's prescription; when…
When did Texas start applying the agricultural exemption to ostriches, emus, rheas, and cassowaries, and does it matter whether these birds are commonly thought of as food?
The Comptroller's office began applying the agricultural exemption to ostriches in March 1990, after the Texas Department of Agriculture published information that ostriches were being raised as food …
A company runs hydrostatic tests on underground storage tanks (USTs) and drills monitor wells/test holes to check for soil contamination, sometimes breaking concrete or restoring it afterward as part of the job. Which of these charges are taxable real property/repair services, and which are nontaxable testing?
A standalone charge for running a test (leak test, contaminated-soil test hole) is not taxable. But once the job moves into breaking concrete, repouring/restoring concrete, capping a hole, or installi…
Which supplies and materials that a restaurant or cafe buys are exempt from Texas sales tax as resale items, and which ones are taxable?
Disposable items a restaurant provides to customers as part of the food service — like paper cups, straws, napkins, to-go containers, foam containers, and food/beverages themselves — can be purchased …
Are retailers required to collect sales tax when they gift wrap a product for a customer, and can retailers buy gift wrapping supplies (paper, ribbons, boxes, bows) tax-exempt for resale?
A retailer that sells a product and charges extra to gift wrap it must collect sales tax on that gift wrapping charge, because the Comptroller treats gift wrapping as a taxable service connected with …
A precast concrete contractor asked how Texas sales and use tax applies to lump-sum vs. separated contracts, to precasters who don't erect their products on site, and to hauling/delivery charges for the concrete components.
A contractor who improves real property is the consumer (not seller) of materials under a lump-sum contract, and pays tax on the materials' purchase price (including in-bound freight) but doesn't coll…
A hotel or motel buys telecommunications trunk line service partly to resell to guests and partly for its own business calls. Can it issue a resale certificate for that service, and if it already paid sales tax on services it resold, can it get a credit?
A hotel cannot in good faith issue a resale certificate for trunk line service that it also uses for its own business calls — resale certificates may only be issued for lines dedicated to reselling te…
A taxpayer sought a refund of Texas sales tax paid on a VCR that was allegedly exported to Canada, but the formal Canadian customs entry document listed a video camera instead of a VCR. Can an affidavit or statement from the purchaser take the place of the formal export document to prove the export and support a refund?
No. Affidavits, statements, or exemption certificates given by purchasers are not acceptable proof of export. The only acceptable proof is the formal entry document from the foreign country (here, Can…
Is a nonprofit student store at a Job Corps Center required to collect Texas sales tax when it sells packaged snack food items to enrolled students?
No. Items sold in the nonprofit student store at the Job Corps Center are exempt from Texas sales tax under 29 U.S.C. § 1707(c), even though proceeds go into a student welfare fund supporting center p…
A business selling exercise, therapy, and orthopedic items asked which of its products are exempt from Texas sales tax as medical/therapeutic items and which are taxable general merchandise. A related, earlier letter also asked about orthopedic supports and an electronic monitoring device called Back Alert. Which items qualify for exemption?
It depends on the item. Soft/moldable lumbar support inserts, compression shorts, and orthopedic braces (lumbar, carpal tunnel, knee, ankle, tennis elbow supports) are exempt as braces. The AcuTemp Ho…
House Bill 11 let telephone utilities pass through an increase in their own tax liability to customers as a billing adjustment. Is that pass-through adjustment itself subject to Texas sales tax?
Yes. The tax increase from House Bill 11 was levied on the telephone carrier, not directly on the customer, so even though the carrier visibly passes it through as a billing adjustment, it's still par…
A contractor's job was bid and included in the original new-construction contract, but the work wasn't actually performed until after the building was already occupied. Is that job taxable repair/remodeling labor, or nontaxable new-construction labor?
Generally, remodeling work done after a building is first occupied is taxable repair and remodeling under Rule 3.357. But if the work was already part of the original new-construction contract, was bi…
If a contractor doing taxable asbestos abatement work on nonresidential real property separately states a charge for air monitoring, does the contractor have to collect sales tax on that air monitoring charge?
No. Air monitoring is direct scientific observation of physical phenomena, not a taxable service, and it is commonly provided as a distinct, stand-alone service. So a contractor performing taxable asb…
Is a 'continuous passive motion' (CPM) device an exempt orthopedic device or a taxable therapeutic appliance under Texas sales tax rules, and when is it exempt when sold, leased, or rented?
The Comptroller reclassified the CPM device from a therapeutic appliance to an orthopedic device under Rule 3.284(a)(9) after new facts showed it works on joints (not muscles) and doesn't function as …
A retailer of new and used manufactured homes repairs/renovates used units before resale, moves and installs units for customers, and a real estate lessor repairs and adds on to rental property — how does Texas sales tax apply to the labor and materials in each of these situations?
It depends on the scenario. Repair/renovation labor on a used manufactured home (treated as residential real property) is not taxable, but the materials generally are. Labor to move and install a manu…
If a retailer gives away merchandise for free as a promotion — like a shirt to the first ten customers, or a prize in a drawing — or sells items on a 'buy one get one free' basis, how is Texas sales tax handled?
It depends on whether the customer pays anything. On a 'buy one get one free' deal (or two-for-one pricing), the retailer only owes tax on the amount actually charged to the customer — not on the cost…
A company repairs and restores motor vehicles/trucks that it owns and holds for rental, using gas and electricity in the process. Is that gas and electricity exempt from tax the way it would be for a manufacturer, or is it taxable because it's being used on the company's own rental property rather than in manufacturing property for sale?
Yes, with a line drawn at what counts as "repair." A company that owns property it holds for rental can claim the manufacturing-type exemption for gas and electricity used directly in repairing or res…
Is mobile radio data two-way (packet radio) transmission service taxable the same way as traditional cellular telephone service in Texas?
Yes. Both mobile radio data two-way transmission service (packet radio) and traditional cellular telephone service are taxable as telecommunications services if the communication originates in Texas a…
Our organization is exempt from federal income tax under Section 401(a) of the Internal Revenue Code (a qualified pension/employee benefit trust). Does that also make us an exempt organization for Texas sales and use tax purposes?
No. Being exempt from federal taxation under IRC Section 401(a) does not make an organization exempt from Texas sales and use tax. Texas Tax Code 151.310(a)(2) only exempts organizations that qualify …
A company leases a private telephone line to connect to its remote construction sites. The line is billed on a per-call basis, and only 12% of the calls originate in Texas (the rest originate in California, New Mexico, and New Jersey). Is any portion of the private line charge subject to Texas sales tax?
Yes, but only the Texas-connected portion. Long-distance telecommunications that originate in Texas and are billed to a Texas telephone number or billing/service address are subject to Texas sales tax…
A leasing company leases computer hardware to a client and collects tax on the lease payments. Because its lease agreement doesn't allow resale of software, the leasing company instead gives the client funds to buy the software directly from a vendor, and never takes title or possession of the software. Is that software funding a taxable financing lease, and can the software and hardware be scheduled together?
No — the funds provided for the software are a loan, not a financing lease, so the leasing company doesn't have to add tax to the client's repayment of principal and interest on it. The software loan …
Can a business use measured kilowatt (KW) demand — the peak-usage figure a utility uses for billing — as the determining factor for the predominant-use sales tax exemption on electricity, instead of the method set out in the Comptroller's rules?
No. Kilowatt demand only measures the electricity used during peak billing periods, not total usage, and is merely a utility billing cost factor. It is not a determining factor for predominant use und…
Is dredging (removing mud, sand, or silt) from a river, channel, pond, or boat slip subject to Texas sales tax?
It depends on whether the dredging changes the waterway. Dredging done at a new construction site, or done to remove sand/silt from a naturally occurring river, lake, or channel without changing its c…
Was an oilfield company's charge for pressure testing well rods and tubing taxable under Texas Letter Ruling 9205L1171B14?
No. The company used a load-and-test truck to pressure the rods and tubing solely to find parted rods or holes, then notified the owner if repair was needed. Because the company performed testing and …
Which oil-spill pad recycling, site assessment, and soil remediation charges were taxable in Texas?
Cleaning absorbent pads and booms and selling new or used pads were taxable. Proprietary site assessments and soil remediation were not, while reusable or public-source information could be taxable in…
How did Texas Letter Ruling 9205L1169C06 tax refinishing labor for residential built-ins, nonresidential built-ins, and free-standing appliances?
Labor on residential built-in improvements was nontaxable. Labor on nonresidential built-ins and on free-standing appliances, furniture, or other tangible personal property was taxable. Residential ma…
Was a mandatory charitable Christmas-tree sponsorship taxable when the sponsor received possession of a decorated tree for three weeks?
Yes. The payment was mandatory to receive the tree, and the sponsor received value commensurate with the payment through three weeks of possession. The Comptroller treated the arrangement as a taxable…
When was a dealership's environmental fee on a Texas motor-vehicle repair order taxable under Letter Ruling 9205L1167G09?
The fee followed the underlying charge. A fee based on nontaxable motor-vehicle repair labor was nontaxable; a fee based on taxable materials was taxable; and a fee calculated from the combined materi…
Could a nonexempt club use the Knights of Columbus sales-tax exemption to buy equipment for facilities used by the Knights, and could it avoid tax on items bought for resale?
The club could not claim an exemption for its own purchases because it was not exempt. But the Knights of Columbus could buy qualifying equipment tax-free with its own funds, and the club could act as…
Were ultralight flight instruction and aircraft-repair labor taxable under Texas Letter Ruling 9205L1167B13?
Actual flight instruction conducted under FAA Part 61 or Part 141 was not taxable, and labor to repair an ultralight aircraft was exempt. A noninstructional pilot flight that went nowhere was taxable …
Did a riding mower qualify for Texas' agricultural sales-tax exemption when it was used in pastures and in a garden?
No on the facts described. Mowing pasture weeds for production could qualify, but aesthetic mowing and mowing nonproduction areas did not. Garden use qualified only if the food was sold in the regular…
Were labor charges for cleaning up a crude-oil spill taxable when the spill might be an industrial discharge regulated by the Texas Water Commission?
Potentially no, but only conditionally. If the Texas Water Commission confirmed the crude spill was a regulated industrial discharge, the provider could accept an exemption certificate for collecting …
When did a plant-turnaround charge remain nontaxable real-property maintenance despite including some taxable repairs?
Scheduled periodic work on operating improvements was maintenance. If repairs and other taxable services were 5% or less of an individual lump-sum charge, that charge remained nontaxable. Significant …
Were separately stated oil-and-gas well gauging and pumping-service charges taxable under Texas Letter Ruling 9204L1166D11?
Gauging was not taxable when it consisted of reading well-production information and reporting the results. Pumping services were taxable because adjusting well instruments that affected production wa…
Were a pressure washer and air compressor exempt farm-maintenance equipment when they were also used on highway vehicles and well casing?
No. Maintenance equipment qualified only if used exclusively on exempt farm equipment. Using the washer on highway vehicles and the compressor on well casing, an improvement to realty, meant both purc…
Could an electric cooperative formed under Article 1528(b) buy taxable items for its own use without paying Texas sales or use tax?
Yes, if it was formed under the Electric Cooperative Corporation Act, Article 1528(b). Such a cooperative was exempt on taxable items bought for its own use and could give vendors properly completed e…
Could a commercial-property tenant obtain a sales-tax refund for natural gas bought by its landlord and passed through at cost?
No for the period at issue. The property owner was the gas purchaser and used it in connection with commercially leasing the property. The tenant's manufacturing activity and reimbursement of the land…
Was a customized, computer-generated diet plan taxable when an independent dealer collected the questionnaire and fee and the diet company sent materials to the client?
Yes. The Comptroller said the custom diet was taxable to the clients. The independent dealer had to collect the tax and report and remit it on quarterly returns.
How did Texas tax soil decontamination, disposal, hauling, and backfill sales by a facility treating petroleum-contaminated soil?
Decontaminating the soil was nontaxable regardless of reimbursement. Disposing of soil after treatment was taxable waste removal; hauling untreated soil could be nontaxable if it was a regulated indus…
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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.