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 electricity used to recool ferns after they arrive in Texas from Mexico, and again after further processing, exempt from Texas sales tax as an exempt use in processing?
Yes, in this case. The Comptroller held that because a processing step (removing bacteria and deepening the ferns' color) occurred before each recooling, the recooling was itself part of processing, s…
For a Dallas-based mobile radio repeater service whose customers are located throughout the Dallas area and suburbs, should local sales tax be charged at the Dallas rate or at the various suburban rates based on each customer's location?
The Dallas rate. Local sales tax on mobile radio repeater services is based on where the telecommunications device (the repeater) that originates the amplified signal is located, not on the customer's…
Is a scrap metal processing service — cutting, chopping, and separating aluminum and copper conductors for electric utilities and co-ops — taxable, and does the machinery used qualify for the Texas manufacturing exemption?
The processing service itself is taxable, but the utility company can give the processor a resale or exemption certificate stating the service is purchased to further processing of property that will …
When a country club charges members a separate capital assessment to pay for remodeling the club, and the club itself already pays sales tax to the contractors doing the remodeling, is the members' assessment also taxable, or does that create impermissible double taxation?
Both charges are taxable — this isn't double taxation on the same transaction. The remodeling contractors must collect tax from the country club on the total charge for remodeling the nonresidential r…
How does Texas sales and use tax apply to the packing supplies, equipment, and moving vans a moving company uses for local, intrastate, interstate, and international moves?
It depends on how the mover bought the supplies and how it bills the move. If the mover pays tax when it buys supplies, no further tax is due on interstate, intrastate, and local moves (the customer's…
Is the Instituto Panamericano De Geografia E Historia (an organ of the Organization of American States) exempt from Texas sales tax on its purchases because of the OAS treaty?
No. The Comptroller ruled that the Instituto Panamericano De Geografia E Historia is not exempt from Texas sales tax because of the OAS Treaty. The 1948 treaty creating the OAS included a reservation …
Is a manufacturer's post-warranty travel-expense charge, travel extension contract, and extended service contract for repairing equipment taxable in Texas, and does bringing replacement parts into Texas under a warranty or service contract create a use tax liability?
Yes, the charges are taxable, but the parts generally are not use-taxed. The Comptroller held that a manufacturer's lump-sum "On-Site Expenses" charge for post-warranty travel (meals, lodging), a sepa…
As a customs broker, what date should I use as the 'date of export' when a proof of export covers multiple invoices grouped together, and how far back can those invoices go?
Under the Comptroller's rules, a single proof of export may cover multiple purchases from multiple vendors, but only if those purchases were made within the 30 days before the goods are certified as e…
Is a hospital's charge for an outside company's inspection and certification of hospital electrical and biomedical equipment (to meet federal or state safety regulations required for licensing) subject to Texas sales or use tax?
No. The Comptroller ruled that this inspection and certification service is a nontaxable service. It is not the repair or maintenance of tangible personal property, not the repair of nonresidential re…
Do cotton gins in Texas need to have a utility study performed before they can buy gas and electricity tax-exempt for processing?
No. The Comptroller reviewed utility studies of large and small cotton gins showing that gas usage was 98 percent exempt (processing) and electricity usage was over 91 percent exempt, even counting of…
If a direct pay permit holder buys equipment or software, stores it in Texas, and then ships it out of state before using it for anything other than storage, does Texas use tax apply?
No. The Comptroller confirmed that a direct pay permit holder does not owe Texas use tax on tangible personal property that is purchased (whether from a Texas or an out-of-state seller), stored in Tex…
Are the poles that an electric utility uses to support step-down transformers (and the transmission lines running along them) exempt from Texas sales and use tax as equipment necessary to the manufacturing of electricity?
No. The Comptroller concluded the poles are not exempt. Even though step-down transformers themselves are treated as part of the manufacturing process, the poles supporting them also carry transmissio…
Did transferring seller-financed vehicle receivables through a corporate reorganization and then to a limited partnership accelerate unpaid Texas tax?
The first transfer from the dealer corporation to a newly formed corporation did not trigger § 152.047(g). The later transfer of seller-financed receivables from that corporation to a limited partners…
Is a newspaper's charge for a caller voice mailbox — where people can call in and respond to a classified/advertisement — subject to Texas sales tax?
Yes. The Comptroller held that the charge for the caller mail box is taxable as a telecommunications service under 34 Tex. Admin. Code Rule 3.344. Because the newspaper charges advertisers a single co…
Is the electricity a company uses to chrome-plate aircraft engine parts exempt as 'processing,' or taxable because it's really 'repair and remodeling' of the engines back to their original specifications?
Taxable, on these facts. Even assuming some of the chrome-plating applications reprocessed the engines (by adding new specification options not originally on the parts), the Comptroller's Assistant Di…
When a bakery sells some food for immediate consumption (taxable) and some food not for immediate consumption (exempt), how does the Texas Comptroller decide whether a utility (electricity) exemption certificate based on a utility study can be accepted?
An exemption certificate based on a utility study can be accepted if it comes with a statement showing the quantity of goods sold for immediate consumption versus not sold for immediate consumption, a…
When a fleet company's damaged tires are adjusted and replaced under a manufacturer's or dealer's warranty, and the tires were originally sold on open account, how is Texas sales tax figured on the replacement or credit?
It depends on timing. Under Tax Code Section 151.007(c)(5), the sales price subject to tax does not include the separately identified value of property taken by the seller in trade as part of the cons…
In a reorganization forming a Texas real-estate limited partnership, which entities are subject to Texas franchise tax?
None of the three entities asked about were subject. In a planned reorganization, a Delaware parent would form two Delaware subsidiaries: one holding a 99% limited-partnership interest in a new Texas …
Is a company's charge for maintaining and calibrating the tools it uses to repair aircraft owned by a certificated or licensed carrier subject to Texas sales tax?
No. Charges to maintain, calibrate, and repair tools used exclusively to repair, remodel, or maintain aircraft, aircraft engines, or aircraft component parts for a certificated or licensed carrier of …
Which construction consumables, supplies, and equipment used by a road construction contractor are taxable versus exempt — LP gas, slings and cables, safety stickers, safety chains, safety flags, rope and twine, marking paint, caulk and putty, sponges, tape, razor blades, snap ties, and various safety wear?
It depends on the item: LP gas used off-road is exempt from sales tax, and several consumable-type supplies (marking paint, caulk and putty, sponges/rubbing bricks used once, duct and electrical tape,…
Is removing waste from a restaurant's grease trap taxable, and what about cleaning the sewer line it's connected to?
Removing wastes from a grease trap that is part of a sewer system is a non-taxable service, but cleaning out the sewer line itself is taxable when done for a non-residential customer such as a restaur…
Is machinery and equipment that a grower buys to dry, sort, grade and pack its own fruit and vegetables exempt from Texas sales tax as agricultural processing equipment?
Yes. Because Company A owns the fruit and vegetables being processed and is the original producer (grower) of those products, the machinery and equipment it buys to dry, sort, grade and pack them qual…
Are Juice Plus+ nutritional energy/protein bars subject to Texas sales tax, or are they treated as an exempt food product?
They are exempt from Texas sales tax. The Comptroller's Tax Administration staff reviewed samples and the label/brochure for the Juice Plus+ Bars and concluded the bars are a food product, and food pr…
Can Texas require the federal government (such as the U.S. Department of Defense running retail surplus stores) to pay Texas sales tax?
No. The Comptroller explains that Texas sales tax is legally imposed on the vendor's gross receipts, not on the buyer, so requiring the federal government to pay it as a purchaser would amount to Texa…
Are Juice Plus capsules — made only of dried fruit and vegetable juices — exempt from Texas sales tax as food products, and what about the related Juice Plus Bars?
Yes, the Juice Plus capsules are exempt food products because they contain only dried fruit and vegetable juices and are not advertised as anything else; that exemption applies to this distributor fro…
Are flash-dried fruit and vegetable juice capsules exempt from Texas sales tax as food products?
Yes. The Texas Comptroller confirmed the capsules — which contain only dried fruit and vegetable juices and nothing more — are exempt from sales tax as food products, consistent with a prior ruling is…
How should a direct sales (multi-level marketing) organization collect and remit Texas sales and use tax on sales its independent distributors make in Texas?
The direct sales organization itself — not each individual distributor — is responsible for collecting and remitting Texas state and local sales and use tax on the taxable sales its distributors make …
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 the lease of aerial-application tracking equipment to a crop duster exempt from Texas sales tax when the equipment is used for aerial spraying of insecticide and fertilizer on farms and ranches?
Yes, the lease can be exempt from sales tax if the aircraft is FAA-licensed for aerial application of fertilizers and insecticides and is used exclusively for aerial spraying on farms and ranches to p…
Can a manufacturer issue an exemption certificate for the part of its garbage collection service that removes waste from its manufacturing process, and how is 'industrial solid waste' defined?
Yes, but only for the manufacturing-related portion. The Comptroller told a poly bag manufacturer that it could give its waste removal service provider an exemption certificate for the part of the ser…
Is a remote computer data backup service, where a client's data is copied over phone lines by modem and temporarily stored (not manipulated), subject to Texas sales tax?
Yes. The Comptroller ruled that a remote backup service — where a client's computer data is copied daily over phone lines by modem and temporarily stored for security purposes — is a taxable data proc…
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, …
Is a business that programs customers' own cellular phones by selecting preset options built in by the manufacturer required to collect Texas sales tax on that service?
No. The Comptroller's Tax Policy Division held that this cellular phone programming service is not subject to Texas sales tax, because the business does not sell or repair any tangible personal proper…
Is the radioactive wafer used in nondestructive X-ray testing a taxable purchase of tangible personal property, even though what the tester actually wants is the radioactivity it emits?
Yes. The Comptroller ruled that the wafer containing radium 192 is the sale of tangible personal property, so sales or use tax is owed on its purchase even though the buyer's real interest is in the r…
Is converting a purchased warehouse into a manufacturing facility — by adding electrical wiring, HVAC, interior structure, processing piping, floor specs, and reinforcements — taxable remodeling or non-taxable new construction under Texas sales tax rules?
It is taxable remodeling, not new construction. The Comptroller told the taxpayer that even though the warehouse-to-manufacturing conversion was extensive — adding electrical wiring, heating and air c…
Is the film used to create a template for burning circuit boards exempt from Texas sales tax, and are fees paid to programmers for custom software taxable?
Both are tax-favorable for the taxpayer: the film qualifies for the manufacturing exemption under Tax Code Section 151.318 because it is used by a third-party custom manufacturer to produce circuit bo…
Is selling pooled telephone survey data taxable in Texas, and does modifying that data for a specific client change the answer?
Yes, it's taxable either way. The Comptroller ruled that selling pooled telephone survey information to a specific client without modification is a taxable transaction, that modifying the pooled infor…
When a company reorganizes its subsidiaries and transfers assets between them, does the timing of the transfer (during business hours vs. after hours) affect whether the occasional sale exemption applies?
Yes — the timing matters. The Comptroller advised that if the assets of subsidiaries A and B are transferred to new subsidiaries D and E during business hours, when the transferred segment has both in…
Is cement — Portland or Masonry, including white cement — exempt from Texas sales tax, and what about concrete made from it?
Cement, whether Portland or Masonry (including white cement), is exempt from Texas sales tax under the specific exemption in Texas Tax Code Sec. 151.308(a)(4), so no sales tax should be collected on s…
Can an out-of-state retailer that ships goods into Texas only to have them forwarded out of the country claim a use tax exemption for temporary storage?
Yes. The Comptroller told the taxpayer that the Mexican Navy may issue an exemption certificate to CORP A claiming the temporary storage exclusion under Texas Tax Code Section 151.011(f), because the …
Does a company owe sales tax when it just removes software from one computer and installs it on another, and does exempt-program modification also cover editing that computer's autoexec.bat and config.sys files?
No tax is owed. The Comptroller's Tax Policy Division advised that simply removing software from one computer and installing it on another does not constitute remodeling of tangible personal property,…
If a motor vehicle repair shop charges one lump-sum price for an oil and filter change (with no separate charge for the oil and filter), does it owe sales tax on that charge to the customer?
No. Labor to repair or maintain a motor vehicle is not taxable, and a shop that charges a single lump-sum price for an oil and oil filter change (with no separately stated materials charge) is a lump-…
What did the 1995 internal Comptroller memo say about whether inventory counting services are taxable data processing services?
This is NOT a taxpayer-specific letter ruling — it's an internal February 23, 1995 audit memo from Ledford Kelly (via Harold Lee, Audit Headquarters) telling all managers, supervisors, and auditors th…
Can an aircraft engine and components/accessories overhaul company claim the sales tax electricity exemption for processors, or is what it does considered repair instead?
No — the company cannot claim the electricity exemption, because the Comptroller determined it is a repairer, not a processor. The company restores existing turbine engines and components to as close …
Is a lump-sum charge to repair a motor vehicle tire, such as fixing a flat or retreading a customer's own tire casing, subject to Texas sales tax?
No. A lump-sum charge to repair a motor vehicle — including a flat tire repair or retreading a customer's own tire casing — is not taxable; the repair person instead owes tax on the materials and supp…
Is translating documents (assembly instructions, labels, tags, price lists, and legal documents) from English to Spanish a taxable service in Texas?
No. The Comptroller's Tax Policy Division ruled that translation services — translating assembly instructions, labels, tags, price lists, and legal documents from English to Spanish — are not taxable,…
For an interior designer/decorator in the Houston area, what local sales tax rate applies, and how is tax collected on wallpaper, drapery/blinds, carpet, delivery charges, and painting labor depending on whether the work is new construction, residential repair/remodeling, or nonresidential repair/remodeling, and whether the invoice is lump-sum or separately stated?
The Comptroller confirmed the local tax rates for Houston (8.25%), Katy (8.25%), and Sugar Land (7.75%), explained that interstate deliveries are exempt from Texas tax, and then walked through eight s…
Is a company taxable on its services when it acts as an intermediary reviewing medical bills and charges submitted by health care providers to insurance companies?
Yes, it is taxable. The Comptroller confirmed that when a company is contacted by insurance companies or health plan administrators to act as an intermediary reviewing and clarifying charges and codin…
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…
Are non-dairy milk-substitute drinks (soy and rice beverages) taxable or exempt under Texas sales tax?
They are nontaxable. The Comptroller reviewed labels for nine specific non-dairy soy and rice beverage products marketed as milk substitutes and found all nine nontaxable, because they qualify as, and…
During a scheduled refinery turnaround, is replacing machinery and equipment that was still working taxable 'restoration,' or nontaxable 'maintenance'?
It counts as nontaxable maintenance. The Comptroller ruled that, during a scheduled and periodic refinery turnaround only, replacing functioning and operable machinery or equipment that is attached as…
Is proof coil chain used to lower and dip raw materials into cleansing and galvanizing vats exempt from Texas sales/use tax as manufacturing equipment, or is it taxable intraplant transportation equipment?
It is taxable. The Comptroller ruled that proof coil chain used to lower and dip raw material into chemical cleansing and galvanizing vats is excluded from the manufacturing exemption as intraplant tr…
Is electricity used to power a telephone on a farm or ranch exempt from Texas sales tax under the farm/ranch exemption?
No. The Texas Comptroller ruled that while Tax Code Section 151.316 exempts a variety of items used on a farm or ranch from sales tax, telecommunications services do not qualify for that exemption, so…
How does a mortgage lender apportion the proceeds from selling mortgage loans, and where are its loan-servicing receipts sourced, for Texas franchise tax?
If the mortgage loans are the corporation's inventory, the gross proceeds from selling them are gross receipts (not just the net gain), and because loan sales are sales of intangibles they are sourced…
Is Texas sales tax due on satellite telecommunications services — including rental of outbound/inbound frequencies, hub monitoring services, and hardware/software maintenance — and if so, how is local sales tax apportioned across remote locations?
Yes, but the rules differ by component. Texas sales tax applies to the 5 outbound satellite frequencies, with local tax apportioned by time (or, if unavailable, by count) of Texas remote locations ver…
Is a fee for copying and providing a government agency's audio or video tape recording under the Texas Open Records Act subject to sales tax?
No. The Comptroller ruled that charges for audio or video tapes provided by a government agency under the Open Records Act, where the fee just covers the cost of duplicating the tape, are sales of gov…
Is a Texas company's computer trading system for natural gas subscribers — including the software license, monthly access fee, advertising-space charge, and sales commissions — taxable under Texas sales and use tax?
It depends on the charge. The software license is taxable when sold and delivered to Texas subscribers (but not to out-of-state subscribers); the monthly access fee and the advertising-space charge ar…
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 …
When exporting goods to Mexico, can a customer combine multiple purchases onto one Licensed Customs Broker's Export Certification ('shipper'), and when can a customs broker issue that certification?
Multiple invoices can go on a single export certification ('shipper') only if all the listed items were exported at the same place, date, and time; purchases made on different dates each need their ow…
Are charges for title searches, title plant information, and related wiring/fax fees taxable under Texas sales tax?
Yes, generally. The Comptroller told the firm that charges for title information sold to attorneys and others are taxable information services, whether the information comes from the firm's own title …
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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.