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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Did Texas or its political subdivisions impose income tax on individuals, or franchise tax on an unconnected North Dakota S corporation?
No on both stated facts. Texas and its political subdivisions imposed no individual income tax on wages, interest, dividends, capital gains, or other income. The North Dakota S corporation also was no…
Can the Comptroller exempt interstate trucking companies from sales and use tax on repair parts and tires, or let them apportion the tax based on Texas miles versus total miles?
No blanket exemption and no mileage-based apportionment. The Comptroller explained it cannot rule on whether the sales tax on repair parts and tires is unconstitutional as applied to interstate trucki…
Are disconnection or cancellation charges billed by a telecommunications company subject to Texas sales tax?
Yes. The Comptroller ruled that disconnection or cancellation charges tied to telecommunications service are taxable in the same manner as the underlying service, because they fall within the Tax Code…
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 …
Is mowing, grading, dirt work, and other land-clearing or site-preparation work taxable in Texas, and does it matter whether the work is for new construction or an existing property?
It depends on the activity and the type of property. Agricultural mowing (hay, pasture) is not taxable, but mowing vacant lots for weed/pest control is taxable lawn maintenance. Site preparation, clea…
When did a corporation's beneficial interest in a trust owning a Texas real-estate joint venture create former Texas franchise-tax nexus?
The joint venture and trust escaped franchise tax only if they were not formed as taxable entity types. The trust was doing business in Texas through its general-partnership interest in a venture owni…
Can an unincorporated local chapter of a national 501(c)(3) organization use the parent organization's Texas sales tax exemption?
Yes. The Comptroller ruled that a local chapter meets the requirements for exemption from Texas sales, excise, and use tax because it is an unincorporated branch of a parent organization that already …
Does a nonprofit organization have to collect sales tax on snack items its youth members sell as part of a fundraising drive?
It depends. Two one-day tax-free sale days per year are exempt if designated in advance, and food products (including candy, carbonated beverages, and diluted juices) sold by a member under 19 of a no…
Does a city have to collect sales tax on a separately stated drainage utility district fee billed alongside its electricity and solid waste charges?
No. The Comptroller ruled that a city's monthly drainage utility district fee is not related to its taxable sales of electricity or solid waste collection services, so the city is not required to coll…
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 …
How did a Texas S corporation report recognized gain from land sold under threat of condemnation for former franchise tax?
The recognized net gain entered both former franchise-tax components. It was included in taxable-capital surplus and earned-surplus federal taxable income, and the net gain entered both Texas receipts…
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 kinds of fishing bait are exempt from Texas sales tax as perishable bait, and how does a seller refund tax already collected on them?
Exempt. Live and perishable bait -- including live bait, minnows (fresh or frozen), goldfish, scaleless carp, shrimp, crawfish, worms/night crawlers, shad, shad guts, chicken livers, and chicken heart…
Is sales tax due on insurance adjusting services for claims related to a declared disaster or catastrophe?
Yes, taxable. Insurance adjusting services are a taxable 'insurance service' under Texas Tax Code Section 151.0039, and nothing in the tax code exempts adjusting services just because the claim relate…
How does a Texas bank treat gains, losses, interest, and dividends from federal government obligations it buys and sells for its own account?
Only net gains and losses on the securities go into gross receipts, sourced by the payor's location; interest and dividends from federal obligations are excluded from the earned-surplus base. A Texas …
Should a staffing arrangement where workers are dedicated full-time to one client be taxed as staff leasing services or as temporary help services?
Staff leasing services. The Comptroller ruled that once the contract was revised to give the staff leasing firms (along with the limited partnership) authority to hire, fire, discipline, reassign, and…
Is a Foley urine meter tray (catheter, urine bag, betadine, and other supplies) exempt from Texas sales tax as a prosthetic device or medicine?
Partially exempt. The catheter and urine bag in a Foley urine meter tray are exempt as prosthetic devices because the catheter performs the function of the ureter and the urine bag performs the functi…
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…
When a hotel is remodeled into an apartment complex, is the remodeling contract taxed as residential or nonresidential real property work?
It depends on the property's use after conversion, not before. The Comptroller ruled that remodeling a hotel into an apartment complex is treated as residential real property work, because after conve…
Are chemicals used to treat water and wastewater exempt from Texas sales tax?
It depends on what the water is used for. Chemicals that become part of water processed and sold for drinking are exempt from Texas sales tax under the manufacturing/processing rule, but chemicals use…
Are catheters, and colostomy bags and related supplies, exempt from Texas sales tax as prosthetic devices or medical appliances?
It depends on the item. Colostomy bags, flanges, paste, tape, barriers, seals, gaskets, and dressing-change wipes are exempt under Rule 3.284(c)(2) as colostomy appliances and related supplies. Cathet…
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 did the former Texas throwback rule treat equipment shipped from Texas to another state as Texas receipts?
Sales shipped from Texas entered Texas receipts when the seller was not subject to tax in the destination state. Taxable capital used charter, authority, or doing-business standards; earned surplus as…
Can a custom flexible packaging manufacturer bill for artwork and printing plates without charging sales tax if the customer provides a manufacturer's exemption certificate?
Yes. The Comptroller confirmed that when a company bills customers for artwork and plates used in manufacturing custom flexible packaging, no state or local sales tax needs to be charged, as long as t…
Does a California company that runs an internet 'mall' website for Texas retailers create Texas sales tax nexus for itself or for the retailer's out-of-state clients, and who is responsible for collecting and remitting the sales tax?
The Comptroller ruled that COMPANY A, a California business that built and ran e-commerce websites for retailers (including some in Texas) and collected payment on their behalf, was responsible for co…
Which fishing baits are exempt from Texas sales tax as perishable bait, and which baits are still taxable?
Exempt. Sales tax is no longer due on perishable fishing bait such as worms, minnows, water dogs, crawfish, live or frozen shrimp, frozen shad, frozen squid, blood baits, and crickets. Fishing lures, …
Did a Texas-organized LLC owe former franchise tax and have to file an initial report even if taxed federally as a partnership?
Yes. Organization under Texas law made the LLC subject to former franchise tax despite federal partnership treatment. Its initial report used Rule 3.562 for taxable capital and earned surplus, includi…
Is installing or removing window tinting/sunshield film on a commercial building taxable, and does it matter whether the building is residential or nonresidential?
Taxable, if the building is nonresidential. The Comptroller ruled that adding or removing window film or tinting on an existing commercial building (like a store front or office building) is taxable r…
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…
How long does the statute of limitations run on the manufacturing phase-in exemption, and does it differ if the exemption was claimed at the time of purchase versus refunded later?
A four-year statute of limitations applies to purchases made during the last quarter of 1993, 1994, and later periods when the manufacturing phase-in exemption is claimed at the time of purchase (gove…
What former Texas franchise-tax penalties applied when a report was more than 60 days late and a tax determination remained unpaid?
A report more than 60 days late incurred a 10% penalty on unpaid tax. If the taxpayer had also received a deficiency or jeopardy determination and failed to pay it on time, the letter said an addition…
What counts as exempt 'machinery and equipment' for a Texas enterprise project, and how do the related sales tax refunds work?
The Comptroller ruled that 'machinery and equipment' for a Texas enterprise project under Section 151.429(a) covers essentially all depreciable property purchased for use in the zone -- production mac…
Does the Texas fishing bait exemption put fishermen on the same footing as hunters, and are ice and small containers of honey taxable?
The Comptroller confirmed the perishable bait exemption puts fishermen on an equal footing with the exemptions available for hunters. Separately, ice is taxable even though it is for consumption, beca…
Can a Texas manufacturer buy external packaging supplies like corrugated void-filler and air bags tax free?
Yes. The Comptroller ruled that a manufacturer may give a vendor a properly completed exemption certificate to buy external packaging supplies -- including corrugated void-filler and air bags used to …
Is a service that posts a client's website link and information to other websites' free submission forms taxable in Texas?
Not taxable. The Comptroller ruled that a business which posts a client's website link and information to free listing/submission sites around the internet is providing a service that is not taxable.
Is a foreign corporation that is the general partner of a Texas-active limited partnership subject to Texas franchise tax, and what about its shareholders and out-of-state limited partners?
The foreign corporation is subject to Texas franchise tax as the general partner of a Texas-active partnership; its individual shareholders and any out-of-state limited partners are not. A Florida S c…
When restaurant/food-processing equipment like an ice machine is bought tax-free under the manufacturing exemption but later put to a different use, who owes the tax, and how much?
It depends on when the equipment was bought. A vendor who accepts an exemption certificate in good faith isn't liable for the tax -- the purchaser is. For an ice machine bought tax-free between Octobe…
Is Texas sales tax owed on direct-to-home satellite TV installation, equipment rental, and programming charges, and does local tax apply?
Yes, the tax charge was correct. Equipment rental and installation for direct broadcast satellite TV are taxable at the full state-plus-local rate (6.75% in this case), but programming charges are tax…
Is overhauling a compressor used to lift oil and maintain well pressure a taxable service in Texas, or is it exempt as manufacturing equipment repair?
Taxable. The Comptroller ruled that a compressor used to lift oil from wells and maintain pressure for recovering additional oil is production equipment, not exempt manufacturing equipment, so the ser…
Are hearing aid batteries exempt from Texas sales tax, and does a retailer need an exemption certificate to sell them tax-free?
Exempt. The Comptroller confirmed that hearing aid batteries are exempt from Texas sales tax as a supply or replacement part for hearing aids, which are themselves exempt by statute. The purchaser doe…
Were receipts from goodwill and other intangibles sold to a Florida corporation included in former Texas receipts?
No. Assuming the asset-sale income was unitary, receipts allocated to goodwill and other intangibles followed the payor's legal domicile. Because the buyer was a Florida corporation and the tangible-p…
Did holding interests in limited partnerships doing business in Texas create former franchise-tax liability for a corporation?
Not if the corporation's only activity was holding limited-partnership interests. But if it was a general partner in any partnership doing business in Texas, the corporation was subject to former Texa…
Did the former Texas throwback rule cover interstate solicitation and products sold to customers outside the United States?
For interstate sales, independent solicitation created taxable-capital nexus but was protected under Public Law 86-272 for earned surplus, so the same shipments could avoid throwback for one component…
Are concession stand food sales taxable when a school district runs the stands at sporting events instead of during the regular school day?
Yes. The Comptroller ruled that food sales from concession stands a school district operates during sporting events are taxable, because the Tax Code 151.314(d)(1) exemption for school food sales only…
Can a retailer avoid collecting and later refunding Texas sales tax on items sold for export to Mexico by routing delivery through a customs broker at the border?
Yes. A retailer can avoid collecting and then refunding sales tax on items sold for export to Mexico by shipping the item to a licensed customs broker at the border and having the broker deliver it to…
When a landlord bills a commercial tenant separately for electricity measured through the tenant's own sub-meter, is that billing a taxable sale of electricity, and can a predominant-use manufacturing study exempt it?
No. The Comptroller ruled that billing a tenant for electricity through a separate sub-meter is not a sale of electricity by the landlord -- it's just part of the rental/lease price of the real estate…
Were separately stated delivery and tank-cleaning charges subject to Texas motor vehicle rental tax?
No. The Tax Policy Division said separately stated cleaning and delivery charges were not subject to motor vehicle rental tax. The letter attributed that treatment to a recent motor vehicle administra…
Is cleaning, inspecting, and applying a protective monel coating to oilfield equipment like submersible pumps and tank batteries a taxable repair or remodeling service in Texas?
Yes. Coating and re-coating oilfield equipment such as submersible pumps and tank batteries counts as taxable maintenance, remodeling, or repair of tangible personal property under Rule 3.292, so the …
Is a package of disposable products sold to hospitals for use in a heart-lung pump during open heart surgery exempt from Texas sales tax?
Yes. The package of disposable products sold to hospitals for use in a heart-lung pump during open heart surgery is exempt from Texas sales tax, because a heart-lung pump and its accessories and attac…
When is a staffing or subcontractor arrangement exempt as a 'temporary employee' under Texas law, versus a taxable temporary help service?
It depends on meeting all four requirements of Tex. Tax Code § 151.057: the work must normally be done by the client's own employees, the client must supply the equipment, the client must directly or …
How should an apartment complex handle sales tax refunds for electricity used in vacant apartment units that were taxed as commercial accounts, and can it still use exemption certificates for residential accounts billed at commercial rates?
When several tenants' electricity accounts are billed in the apartment complex's name, the complex itself is the buyer and can receive the tax refund directly rather than needing a separate request fr…
When a multi-level marketing company sells vouchers to its distributors that are redeemed for printed goods like trading cards, who owes sales tax on the sales to the final customer?
The company itself, not just its independent distributors, is a 'direct sales organization' responsible for sales tax on the full selling price of the vouchers and related items sold through its distr…
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…
Do casualty insurance agencies owe Texas sales tax on fees they charge clients for services like claims administration, risk inspections, and rate-setting when those fees are paid instead of a sales commission?
Yes. When a casualty insurance agency charges a client a fee -- instead of earning a sales commission -- for services such as claims administration, risk inspections, rate-setting, or claims/loss adju…
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…
Can a corporation and its affiliates file one combined Texas sales tax return instead of separate returns for each entity?
No. The Comptroller's office will not accept a combined sales tax return or report from a corporation and its affiliates -- Texas requires each entity to file its own separate report, and the agency d…
Is providing equipment with an operator for oilfield lease-site work -- like restoring a wellsite, cutting a pipeline right-of-way, building or maintaining a road, or setting frac tanks -- taxable under Texas sales tax?
It depends on the specific service. Reclaiming an oil and gas lease site back to its pre-drilling condition is not taxable, but restoring other nonresidential real property improvements is taxed. Sett…
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…
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 …
Does a process server who files court documents and pulls certified copies of court records owe sales tax on those services?
Filing or serving legal documents like citations, subpoenas, and writs is not a taxable service, and researching court records or requesting certified copies is not taxable by itself. But sales tax is…
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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.