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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Does a wholesaler that only makes exempt resale of natural gas during pipeline transportation need a Texas sales tax permit, and can it use a resale certificate without a permit number?
No. A wholesaler that only makes exempt sales of natural gas resold during pipeline transportation does not need a Texas sales tax permit solely to report those exempt sales, but must still issue a re…
When an exempt organization owns part of a joint venture that buys taxable items for a joint venture facility, how much of the purchase price can be bought tax-free with an exemption certificate?
An exemption certificate can only cover the percentage of a taxable item's purchase price equal to the exempt organization's percentage ownership interest in the joint venture that owns the facility w…
Does a Texas mobile home dealer owe sales tax on the tools, equipment, and materials it uses to repair or refurbish manufactured homes held for resale?
Yes, in most cases. A Texas mobile home/manufactured housing dealer that repairs or refurbishes homes held for resale owes sales tax on the vehicles, jacks, nail guns, hand tools, and most other equip…
Can a business renting out mobile office trailers use a resale certificate instead of paying sales tax on repair parts and repair labor for that rental inventory?
Yes. A business may issue a resale certificate instead of paying sales tax on repair or replacement parts bought for mobile office trailers held for rental, and may also issue a resale certificate to …
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…
An industrial supply company runs a customer's tool crib inside the customer's manufacturing plant and charges shared-savings fees, start-up fees, transaction management fees, and contract labor reimbursement, plus sells products. Does it have to collect Texas sales tax on these charges?
Yes, generally. Presuming the industrial supply company is a retailer of the tool crib sales (not acting as the customer's purchasing agent), the shared savings fees, transaction management fees, and …
Can a Mexican retailer who will resell the goods in Mexico buy them tax-free from a Texas seller, and if so, what documentation is required?
Yes. Effective September 1, 1995, Mexican retailers may purchase goods tax free from Texas sellers if the goods will be resold in Mexico. The retailer must properly complete a Border States Uniform Sa…
Could a dealer rely on an auction house's blanket resale certificate when the certificate named the auction rather than the dealer as seller?
No. The auction house acted as the dealer's agent, so the dealership was the seller and had to be named on the blanket resale certificate. The required resale-certificate wording could be incorporated…
If a company keeps a resale inventory of replacement parts and later writes some of them down or scraps them because they're obsolete, is sales tax due on those parts?
It depends on what happens to the parts. Parts purchased for resale can be bought tax-free with a resale certificate. If the parts are later marked down and sold, sales tax is due on that (lower) sell…
Is the sale, fabrication/manufacture, and installation of custom blinds, draperies, and plantation shutters taxable in Texas, and does it matter whether the work is done in new-home construction versus an existing home?
It depends on the item and on new construction vs. existing home. Materials that become part of blinds and draperies are always taxable (tax collected per the contract type — lump-sum vs. separated). …
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…
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…
We run an electronic clearinghouse that scans, converts, and transmits medical insurance claims between healthcare providers and payors -- which of our fees (claims conversion, transaction, clearinghouse, archival) owe Texas sales tax, and do we owe use tax on the software and equipment we give customers?
Yes -- nearly all of the clearinghouse's fees are taxable. The Comptroller treated the claims-conversion, one-way transaction, clearinghouse, and archival fees as taxable data processing services (or,…
If our company manages a jail or prison under contract with a government agency, can we buy materials and utilities tax-free using a resale certificate?
Yes, but only if set up correctly. A private company (ABC) managing prison facilities for exempt governmental entities can issue resale certificates to its vendors for materials that will pass to the …
Does a nonprofit club that operates concession stands under a license from a school district have to collect sales tax on its concession sales?
Yes. Even though the club is an exempt organization, sales of taxable items it makes -- like concession stand food and drinks -- are still subject to sales tax. Per Rule 3.322(g)(1), the club can buy …
Do I owe Texas sales tax on sports cards sold through vending machines, including the chance cards redeemable for an autograph?
Yes -- receipts from sports card vending machines are subject to Texas sales tax because the cards are tangible personal property, not an amusement activity. These machines are not treated as skill-or…
If a Texas seller with Texas nexus sells to an out-of-state buyer who has no Texas nexus, and the buyer resells to a third party, does the Texas seller need to collect Texas tax, and what documentation does it need from the buyer?
A Texas seller does not have to collect Texas tax on a sale to an out-of-state buyer if the buyer gives the seller a valid Texas resale certificate showing the buyer is a bona fide retailer reselling …
Do I have to charge sales tax on sodium bentonite clay that I sell for different uses — animal feed, cat litter, well-plugging, pond/landfill sealant — and on delivery charges for it?
Sodium bentonite clay is taxable when sold to an end user no matter how it's used -- as animal feed additive, cat litter, well-plugging material, or a pond/tank/landfill sealant. The seller only needs…
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…
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…
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…
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 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…
Will Texas accept the Multistate Tax Commission's Uniform Sales & Use Tax Multi-Jurisdiction Certificate as a valid Texas resale certificate?
Not as submitted. The Comptroller's office reviewed a proposed Multi-Jurisdiction Sales & Use Tax Exemption Certificate and identified four problems that would need to be fixed before Texas could acce…
Does a law firm that performs background investigations for its clients have to charge sales tax like a licensed private investigator would?
No, not merely by doing background investigations for clients. Legal services are not on the list of taxable services, so attorneys don't collect sales tax on their legal fees — they're instead treate…
Does a photographer owe Texas sales tax on a fee charged for licensing the use of a copyrighted photograph, versus on photographs delivered to a Texas advertising agency for an ad?
It depends on what is being sold. A fee charged for licensing or for the right to use a copyrighted photographic image, illustration, or transparency for publication is not subject to Texas sales tax.…
Is the labor to develop a multimedia presentation, desktop-published literature, or graphic art (booth graphics, ads, slides) taxable in Texas when it's delivered to the client on a diskette or as film/output, and can the developer buy reproduction materials tax-free?
Yes, taxable. The Comptroller told this developer that charges (labor and materials) to create a multimedia presentation delivered on diskette are taxable as the sale of a computer program, and that l…
If a nonprofit hospital system creates a new tax-exempt subsidiary to own its medical office buildings, does that new subsidiary qualify for the same Texas sales and use tax exemption, and can supplies, services, and construction purchases for the buildings be bought tax-free?
Yes, largely. The Comptroller ruled the new nonprofit subsidiary (COMPANY), as a Section 501(c)(3) organization, is eligible for the same exemption under Texas Tax Code Section 151.310(a)(1) and (2) a…
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…
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…
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…
Does a company's proposed Multi-Jurisdictional Sales Tax Certificate form comply with Texas resale certificate requirements?
Yes, with one fix needed. The Comptroller found the submitted Multi-Jurisdictional Sales Tax Certificate form met Texas's basic requirements, but flagged one gap: Texas resale certificates may only co…
Does the Texas Comptroller agree that the industry-published 'Sales Tax Guide for Texas Printers' (June 1995 edition) — covering when printers charge sales tax, what equipment/energy purchases qualify for the manufacturing exemption, and how to claim refunds — reflects current Comptroller policy?
Yes, with the corrections shown in this letter. The Comptroller's Tax Administration Division (Gilbert Zamora) reviewed the trade associations' 'Sales Tax Guide for Texas Printers' line-by-line, marke…
Is caring for indoor plants a taxable service in Texas, and do I owe sales tax on the supplies (stakes, fertilizer, leaf cleaner, containers) I use to provide that service?
Yes, indoor plant maintenance is a taxable service in Texas, and whether you owe tax on your supplies depends on whether they're transferred to the customer: items like plant stakes that stay with the…
Is an indoor plant care and maintenance business subject to Texas sales tax, and does taxing an existing service contract violate the Constitution's ban on impairing contracts?
Yes, the service is taxable. The Comptroller told an indoor plant care provider that maintaining tangible property (like indoor plants) has been taxable since the Legislature imposed the tax in 1984, …
Can a software manufacturer use resale/exemption certificates for manual production costs, software localization, and licensed fonts/tools/clip art, and do programmers' computers count as manufacturing equipment?
Mostly yes, with one question left open. The Comptroller ruled that a software manufacturer's charges for typesetting, desktop publishing, artwork, translation/localization, and packaging graphics qua…
Does a cottonseed delinting operation qualify for the Texas manufacturing exemption, and can it accept resale/exemption certificates for the bags, fungicide, and insecticide it charges producers for?
Yes. The Comptroller ruled that machinery and equipment used directly in processing (delinting) the cottonseed qualifies for the Texas manufacturing exemption, and the delinter may accept a resale or …
Can a stadium skybox landlord separately state charges for parking passes, TV/phone use, electricity, and janitorial services in a suite license agreement so that only those specific items are taxed?
No. The full charge for the skybox license is taxable as an amusement admission charge with no deduction allowed, even if items like parking passes, electricity, and janitorial services are separately…
Is Texas sales tax due when a facsimile-service company installs, rents, and maintains fax equipment in hotel rooms so guests can send and receive faxes?
It depends on who actually operates the equipment. If the equipment is transferred to the care, custody, and control of the hotel (or, in turn, the guest) — meaning the customer has the right to move,…
Can a caterer, hotel, or event planner give a resale certificate for tables, chairs, lighting, audio-visual equipment, or a margarita machine provided to a customer as part of a catering service?
No. The Comptroller's office treats these items as used by the caterer to render its catering service, not as sold or rented to the customer, because control and possession of the property never pass …
Is Texas sales tax due on simulcast horse/dog racing services purchased by a racetrack for its patrons to view, and can the racetrack buy those services for resale?
Simulcast services sold to a racetrack are classified as cable television services and are subject to Texas sales tax under Tax Code Section 151.0101(a)(2). However, the racetrack can purchase the sim…
Can a racetrack buy simulcast horse/dog racing signals tax-free with a resale certificate, or does it owe sales/use tax on the simulcasting fee?
It depends on whether the receiving track charges admission. If the receiving track charges an admission fee to see the live or simulcast races, the simulcast signal is being resold as part of a taxab…
Can a direct pay permit holder resell repair parts or supplies to another company without losing its direct pay permit, if it didn't know at the time of purchase that the items would be resold?
Yes. A direct pay permit holder does not lose its permit by occasionally reselling items to another business, as long as it did not know at the time it purchased those items under the permit that they…
Can a racetrack buy simulcast horse/dog racing signal services tax-free using a resale certificate?
Yes, but only if the receiving track charges an admission fee to see the live races and/or the simulcast. Because the simulcast is being resold as part of a taxable amusement service in that case, the…
Does a company that rebuilds customers' ink rollers for the printing industry owe Texas sales tax on materials and equipment, or can it claim a manufacturing exemption?
The company may buy rebuilding materials tax-free with a resale certificate, but must charge its customers tax on the full charge to rebuild each roller. Equipment used solely to rebuild customers' ro…
Should a manufacturer give its supplier a resale certificate or an exemption certificate when buying component parts or ingredients that will become part of an item manufactured for sale?
Either one. The Comptroller confirmed that a supplier may accept either a resale certificate or an exemption certificate in lieu of tax when a manufacturer purchases component parts or ingredients of …
If I sell petroleum products to out-of-state customers with title transferring inside a Texas pipeline, do I owe Texas sales tax, and what proof do I need that the product left the state?
Crude oil is not subject to Texas limited sales, excise, and use tax at all. Processed oil, natural gas, and other petroleum products are taxable unless the customer resells them (resale certificate) …
Texas Letter Ruling 9406L1309F10: Meals/Food To Go — Entrees/Dinners Delivered To Customers In Refrigerated Or Frozen State With No Utensils Provided
No sales tax is due. Because the gourmet entrees are delivered refrigerated or frozen for the customer to heat and eat later, and no eating utensils are provided with the sale, the sale falls under th…
Does the Texas Workers' Compensation Facility's sales tax exemption on insurance services also cover its member insurance companies?
The Texas Workers' Compensation Facility's exemption from sales tax on insurance services (under V.A.T.S., Article 5.76-2, Sec. 2.06) applies only to insurance services the Facility itself buys -- it …
Texas Letter Ruling 9406L1313G06: Copies — Professionals (Lawyers/Architects/Engineers/Accountants) Purchasing Photocopies For Transfer To Clients As Part Of Nontaxable Services — No Resale/Exemption Certificate Allowed
No. A lawyer, architect, engineer, or accountant who buys photocopies, blueprints, or similar items to pass along to a client as part of a nontaxable professional service must pay sales tax on that pu…
Texas Letter Ruling 9406L1307A03: Hazardous Waste/Excluded Waste — Containers/Drums/Roll — Off Boxes — Used To Provide Nontaxable Removal Services — Provider Cannot Issue Resale Certificate
No. A hazardous waste removal company cannot issue a resale certificate for the containers, drums, or roll-off boxes it uses on the job, because hazardous waste removal is a nontaxable service (exclud…
Is close captioning work performed as part of producing a film or video subject to Texas sales tax, and can the captioner buy tapes tax-free?
Close captioning is treated as one of the steps in creating a master film or video, not as a separately taxable service. The captioner should get an exemption certificate from the client stating the f…
Do retailers owe Texas sales tax on the paper, ribbons, boxes, and bags they buy to provide gift-wrapping services to customers?
Yes. Under Rule 3.314, a retailer must pay sales tax on the purchase price of gift-wrapping supplies (paper, ribbons, boxes, tissue, bags, etc.) used to provide gift-wrapping services, and must also c…
When a company buys equipment under a resale certificate and leases it to a customer, is sales tax owed on the rental payments or on the outstanding balance when the equipment is returned to the vendor?
Tax is owed on the rental stream — either accrued on the rental payments or remitted as each payment is received — not on any outstanding balance owed to the vendor when the equipment is returned at l…
Can a newsletter publisher buy the envelopes it uses to mail newsletters to subscribers tax-free with a resale certificate?
No. The Comptroller ruled that mailing envelopes are taxable wrapping and packaging supplies under Tax Code Section 151.302(c), so the publisher must pay tax on them even though it can issue a resale …
Does selling an airplane back to the original leasing company and leasing it back under a financing lease or operating lease trigger Texas sales tax?
It depends on the type of lease and the facts. For a financing lease, if the corporation originally paid tax on the plane, the new lease is also a financing lease, and there is evidence the corporatio…
Does a personal shopper have to collect Texas sales tax on commission and consulting fees charged to clients?
Yes, when the fees relate to a sale of clothes. The Comptroller ruled that a personal shopper who buys clothes for clients is a seller of that clothing, so commissions and consulting fees added to the…
Is painting lettering on a store's windows a taxable service in Texas?
Yes. The Comptroller ruled that painting letters on a store's windows is taxable as nonresidential repair and remodeling of real property under Rule 3.357. The service provider must collect and remit …
Can a manufacturer buy raw materials tax-free in Texas if the processed goods are sold to a foreign buyer rather than resold domestically?
Yes. The Comptroller ruled that a manufacturer buying raw materials (here, horse pericardia) to be processed and resold can use the Tax Code Section 151.318(a)(1) manufacturing exemption even though t…
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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.