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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Is a consultant/contract programmer's fee for helping a customer create an interactive multimedia training program taxable, when the customer will own the finished program?
No, generally not. Helping a customer create an interactive computer-based training program that the customer will own is nontaxable computer programming under Tax Code 151.0101(5)(D) — but the provid…
Is sales tax due on charges by a medical transcriptionist for transcribing medical dictation, and does the state pay interest on refunds of tax collected on that service?
No sales tax is due on medical transcription charges. A district court ruled that a medical transcriptionist's transcription of medical dictation is not a data processing service, the Comptroller deci…
Does a sailboat chartering business need a Texas sales tax permit, and are rides like helicopter or boat rides taxable amusement services?
A sailboat chartering business (hiring out a crewed sailboat for transportation, not pleasure rides) does not need a Texas sales tax permit. But pleasure rides in trains, helicopters, boats, hot-air b…
Are the processing fee, trip fee, and reinstatement fee that a rental company charges on a lease agreement subject to Texas sales tax?
It depends on the fee. The processing fee (charged for processing the rental agreement) and the reinstatement fee (charged to renew a lapsed lease) are both taxable as part of the sales price of the r…
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…
Is a newsletter sold by subscription or single issue taxable in Texas, and are sales to governmental customers exempt?
Yes, newsletters are taxable. The Comptroller ruled that newsletters are taxed as information services under Rule 3.342, so sales tax is due on both single-issue sales and subscriptions. However, sale…
A mobile surgery service brings a portable laser machine, disposable surgical supplies, and a technician to a physician's office so the physician can perform minor, minimally invasive surgery there. Is the total charge to the physician taxable?
Yes. The Comptroller ruled that the total charge to the health care provider — covering the laser equipment, disposable items and tools, and the technician who monitors and adjusts the laser — is taxa…
Is building, replacing, or repairing a fence around nonresidential real property taxable in Texas?
It depends on what's done. Building a brand-new fence, or replacing an entire existing fence, is nontaxable new construction (though a combined demolition/removal charge can be taxable if 5% or more o…
A manufacturer's equipment lease started in 1993 and was later assigned to a new lessee, with the assignment becoming effective (per lessor approval) after the October 1, 1995 manufacturing exemption qualifying date. Does the assignment create a 'new lease' that has to meet the October 1, 1995 date to qualify for the manufacturing equipment lease exemption?
No. The original lease date (July 29, 1993) controls, not the assignment's effective or approval date. An assignment or assumption of an existing lease is not considered a new lease for purposes of th…
Is a tuxedo-rental business that cleans the tuxedos it rents out entitled to Texas's manufacturing/processing exemption on its laundry equipment and supplies?
Yes. A business that cleans the tuxedos it rents out is a 'processor' for Texas tax purposes and qualifies for the manufacturing exemption: qualifying laundry/dry-cleaning equipment (washers, dryers, …
Does the addition of a flash calciner unit and related equipment and modifications to an alumina and chemical processing plant qualify as exempt 'new construction' under the Increased Capacity Rule because it increases plant production capacity by about 20%?
Yes. The Comptroller confirmed that the alumina and chemical processing plant counts as a chemical processing plant under the Increased Capacity Rule (Rule 3.362), and that the new flash calciner unit…
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 …
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…
Is a paging service, where the pager device has a built-in transmitter that sends a location-verification signal back to the transmission equipment (but no voice or message back to the sender), subject to Texas sales tax?
Yes. Paging services are telecommunications services under Tax Code 151.0103(a), so Texas state sales tax is due on charges for all pages received in Texas, regardless of where they're re-transmitted.…
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…
Can a corporation use a three-factor apportionment formula instead of the single gross-receipts factor on a Texas franchise tax return?
No -- the refund was denied. A corporation filed an amended 1992 franchise tax report seeking a refund by using a three-factor apportionment formula instead of the single gross-receipts factor for bot…
Is a contract to add square footage to an existing building taxed as new construction, or as taxable repair/remodeling like a roof repair or HVAC replacement?
Building an addition onto an existing nonresidential structure (or building a new structure) is new construction under Rule 3.291, not repair/remodeling — so under a lump-sum contract the contractor p…
Is a lump-sum contract to repaint condominium/apartment buildings taxable, and does the contractor need a sales tax exemption certificate from the condo association?
No sales tax exemption certificate is needed. Repainting a condo/apartment building under a lump-sum contract is a nontaxable repair to residential real property — the contractor pays tax on the paint…
How does the 18-month window for using a replaced vehicle toward a fair market value deduction get calculated, and what date counts as the start of that clock?
The 18-month period for using a replaced vehicle as a fair market value deduction starts on the date the vehicle is retired from service — not on the date it is later sold. A 'new vehicle' for this pu…
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…
Is a geocoding service — manually matching bus-ridership survey answers to numbered map locations for an out-of-state (Washington) firm, with no computer involved — subject to Texas sales/use tax?
No. The Comptroller held that this geocoding service is not subject to Texas sales/use tax.
Is nonalcoholic beer subject to Texas sales tax, or is it taxed under the Texas alcoholic beverage tax instead?
Nonalcoholic beer is subject to Texas sales or use tax, taxed the same way as other soft drinks or sodas, regardless of brand or type. It is NOT subject to Texas alcoholic beverage taxes. However, if …
Are down-hole labor charges performed in conjunction with drilling a new oil or gas well subject to Texas sales tax if they occur a short time after the well's Railroad Commission (RRC) completion date?
Yes, they're taxable. Down-hole new construction on a new well is considered complete once the Texas Railroad Commission certifies the well completed for production. Any down-hole labor charges perfor…
A printer sold newspaper inserts/flyers to retail stores. Some inserts were delivered directly to newspapers for distribution, some went to a mailing service instead, and some were shipped out of state. Are any of these exempt from Texas sales and use tax, and should the assessed penalty and interest be waived?
Split result. Inserts delivered directly to an actual newspaper for distribution as part of the newspaper are exempt under Tax Code § 151.319(c), so those specific invoiced items were ordered removed …
Is a syringe that injects solution into a catheter attached to a patient (rather than directly into the patient) exempt from Texas sales tax as a hypodermic syringe?
No. Because the needle goes into a catheter attached to the patient rather than directly into the patient, the syringe is not considered a hypodermic syringe, so it does not qualify for the Tex. Tax C…
A supplier sells car wash soap, upholstery shampoo, deodorizers, and other supplies to auto dealers, car washes, body shops, and detailers. Which of these items are taxable, can customers just write 'BLANKET' on a resale certificate, and is the supplier covered if a customer just refuses to pay tax?
No blanket exemption from listing items, and no, a refusal-to-pay form doesn't protect the seller. A resale certificate must describe the general nature of the taxable items — the single word 'Blanket…
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). …
Does a ready-mix concrete reclaimer — equipment that washes and separates sand and gravel out of waste ready-mix concrete so it can be reused — qualify for Texas's manufacturing equipment sales tax exemption?
Yes, if the equipment is an integrated piece of equipment whose primary purpose is a direct manufacturing process. The Comptroller ruled that washing and separating manufactured aggregate so it can be…
A manufacturer hired a company to manage its parts/supplies warehouse, and that same company also sells parts/supplies to the manufacturer. What determines whether the warehouse management fee is taxable?
It depends on whether the manager is performing taxable services (like janitorial or data processing) as part of the warehouse management work. If so, tax is due on those taxable services, including o…
When is custom software considered 'developed from scratch' and when has a developer transferred 'exclusive rights' to it, for purposes of the Texas custom-programming tax treatment discussed in an earlier ruling (fiche 9309L1273C08)?
It depends on the facts, but the letter lays out the tests: 'exclusive rights' means the developer gives up ALL rights to copy, change, or market the software and won't sell it to anyone else — if the…
If a state agency leases office space in a privately owned building and puts the utilities in its own name, is it exempt from tax on the utilities even if the building owner later reimburses the agency for the utility cost?
Yes. Utilities are taxable items, but a state agency occupying a privately owned building can buy them tax exempt under Sec. 151.309, Tax Code, as long as the utilities are in the agency's own name an…
Is revenue from a repeater service that is not connected to the public switched telephone network subject to Texas sales tax, and is it also subject to the Telecommunications Infrastructure Fund assessment?
Yes to sales tax, no to the TIF assessment. Revenue from a repeater service that is not interconnected to the public switched network is subject to Texas sales tax, but is not subject to the Telecommu…
Is a technical writing service — such as preparing a material safety data sheet on compressed gases — subject to Texas sales tax?
No, not the writing/editing itself. Separately-stated charges for developing a technical document (research, writing, and editing) are not taxable, but the writer owes tax on the materials and supplie…
A privately owned building is leased to a tax-exempt entity, and the owner plans a 12,000 square foot expansion. Is the construction work exempt from Texas sales tax as an improvement for an exempt organization?
No. Because the building is privately owned, the construction work can only qualify for the exemption if the remaining lease term exceeds the anticipated life of the improvement. Here the lease has 9 …
Is a towable hydro-mulcher taxed as a motor vehicle or under the limited sales tax, and what happens when one is mounted on a cab chassis before the chassis is sold?
Towable hydro-mulcher units are considered equipment or moveable specialized equipment and are taxed under the limited sales tax provision (not as motor vehicles). But if one of those units is install…
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…
Is a medical transcriptionist's service of transcribing oral or taped medical dictation into a patient's records and letters subject to Texas sales tax as a data processing service?
No. A district court ruled that a medical transcriptionist's transcription of medical dictation is not a taxable data processing service, the Comptroller decided not to appeal, and medical transcripti…
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…
Can a utility company refund state and city sales tax on an inactive residential electricity account where the electricity was used 100% for residential purposes?
The utility can accept an exemption certificate and refund the state sales tax, but only for billing periods within the 4-year statute of limitations (billing periods starting on or after August 1, 19…
Are restocking fees charged when a customer returns merchandise subject to Texas sales tax?
No. Restocking fees are not taxable. The retailer should credit the customer the original purchase price plus the tax paid on that price, and then may deduct the separately stated restocking fee from …
Is a water softener used to condition water for a newspaper printing press exempt from Texas sales/use tax as manufacturing equipment?
No. The water softener itself is taxable equipment because it is one step removed from directly manufacturing the newspaper. However, the chemicals previously used to treat the water are exempt as nec…
Does a raw water sand filter system that treats water used to cool machinery and equipment in a manufacturing process qualify for Texas's manufacturing exemption?
No. The raw water sand filter project does not qualify for the manufacturing exemption because the water it treats is not used in processing tangible personal property for sale — it's used to keep the…
Is the charge for a membership coupon book — which contains order forms customers use to order manufacturer coupons redeemable for discounts — subject to Texas sales tax?
No. The charge for the coupon book itself is not taxable because the sale is treated as the sale of an intangible. However, the company must pay Texas sales or use tax on the charge to print the coupo…
For Texas sales tax purposes, is work on golf course features (lakes, cart paths, retaining walls, bunkers, tee signs, bridges, gabions) taxable remodeling/repair labor, or nontaxable new construction labor?
It depends on the specific feature and circumstances. A golf course is a collection of improvements to realty (cart path, clubhouse, fairway, green, lake, parking lot, tee box); repairing, remodeling,…
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…
Does re-processing a customer's plastic pellets — melting them down in a twin screw extruder, blending in a hardener, flame retardant, or other material, and re-pelletizing — qualify for Texas's manufacturing exemption?
Yes. The Comptroller ruled that melting the customer-owned plastic pellets, adding a hardener, flame retardant, or other material, and forming new pellets is "processing" tangible personal property th…
Is a health/athletic club's membership revenue subject to Texas sales tax, and does that change if the membership was purchased under a physician's written prescription?
It depends on what's being sold. Clinical services performed pursuant to a physician referral and written prescription (like cardiac, pulmonary, or diabetes rehab and testing, or physician-supervised …
Which of my internet service company's fees -- monthly service, set-up, domain registration, custom web design, extra disk space, audio/video, and secure server -- are subject to Texas sales tax?
Most of the fees an internet service provider charges are taxable, but not all. The Monthly Service Fee, Set-Up Fee, Additional Disk Space Fee, Audio/Video Fee, and Secure Server Fee are all taxed as …
As an advertising agency, which of our 'nonbillable' expenses (items and services we buy but can't fully bill back to clients) owe Texas sales/use tax, and which don't?
It depends on whether the item was resold to the client or just consumed by the agency. If an agency buys a taxable item or service for a client but ends up not billing (reselling) it -- for example, …
If I trade gift baskets to a radio station in exchange for a free radio ad (a tradeout), do I owe Texas sales tax on the baskets?
It depends on what's mostly in the basket, not on the fact that it's a barter. This corrected 1996 Comptroller letter says that if the taxable items (the basket itself and any miscellaneous, non-food …
Is nitrogen used to nitrify drilling mud, and the cementing of a well's casing seat, subject to Texas sales/use tax and the oil and gas well servicing occupation tax?
Yes to both. The Comptroller held that sales of nitrogen and drilling mud are subject to Texas sales or use tax, and that a product made by combining the two (nitrified drilling mud) is also taxable. …
If I start a computer-aided design (CAD) drafting business, do I have to charge sales tax on the blueprints I produce, and does it matter whether I'm a licensed architect or engineer?
Yes -- a draftsman (whether drawing by hand or using CAD software) owes sales tax on the delineations and blueprints produced from a customer's specifications, and on additional copies, because produc…
Is a real estate inspection service -- checking a building's structural components like plumbing, wiring, and roof and issuing a condition report -- subject to Texas sales tax?
No. The Comptroller ruled that real estate inspection services -- checking structural components of a building such as plumbing, electrical wiring, HVAC units, and roofs, and issuing a written conditi…
Is equipment sold to hearing-impaired customers, like FM systems, amplified phones, and alarm devices, exempt from Texas sales tax the same way hearing aids are?
Only two specific products in this ruling -- the Williams Sound Pocket Talker and the SoundMate TW6AA Belt Pack Transmitter and receivers -- are exempt outright as hearing aids. A longer list of other…
If my restaurant sells 'bulk food' that needs more cooking or heating before it can be eaten, how do I document that it's not taxable, and what records does the Comptroller expect?
Uncooked, refrigerated, or frozen food that still needs cooking or heating is not 'food ready for immediate consumption' under Rule 3.293(a)(9)(A) and is not taxable, regardless of quantity -- 50 froz…
If I buy natural gas in Texas and ship it out of state by pipeline to generate electricity at my out-of-state plant, do I owe Texas sales tax on the gas?
No. The Comptroller ruled that buying natural gas in Texas and shipping it via interstate pipeline to Pennsylvania, where it is consumed to manufacture electricity, is a noncommercial use of natural g…
Can a non-profit water supply corporation use a sales tax exemption certificate on purchases for a project funded by the Texas Water Development Board's Economically Distressed Areas Program (EDAP)?
Yes, but only for purchases tied to Economically Distressed Areas Program (EDAP) projects. Water Code Sec. 17.921(a) specially defines non-profit water supply corporations as "political subdivisions" …
Does a metal roller-leveling process that flattens coiled metal and changes its hardness count as manufacturing or processing, so the wrapping/packaging and equipment used with it are tax-exempt?
The Comptroller's Tax Policy Director did not agree, on the facts presented, that a metal coil leveler qualifies as exempt manufacturing/processing equipment. He explained that if the leveling-induced…
Does a real estate agent or firm owe Texas sales tax on market analyses, feasibility studies, and property inspection reports sold to clients?
It depends on what the written report actually contains. Compiling data on sold or listed properties (comparable sales, listings for an area or subdivision) is a taxable 'information service.' But a r…
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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.