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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Can a landlord buy construction materials tax-free for a charter-school campus while it's still under construction, under a 25-year lease that hasn't started yet?
Yes. The Comptroller ruled that the charter school's 25-year lease IS an exempt contract under Section 151.311 -- even though construction hadn't reached Substantial Completion and the lease term itse…
Is a charter school's 25-year lease financing a student-housing apartment complex for international students an exempt improvement-to-realty contract?
Yes. The Comptroller ruled that a charter school's 25-year lease financing a new student-housing apartment complex -- built for international students in its Mandarin-immersion program -- IS an exempt…
Is a charter school's 25-year build-to-suit campus lease an exempt improvement-to-realty contract that lets the landlord buy construction materials tax-free?
Yes. The Comptroller ruled that the charter school's 25-year lease IS an exempt contract under Section 151.311, because a 25-year term is sufficiently long relative to the campus's 22-year useful life…
Is an in-store product demonstration and sampling service taxable in Texas, and does the provider owe tax on the supplies it uses even if it bills clients a flat fee for them?
In-store product demonstration and marketing services are NOT taxable in Texas because demonstration services aren't on the statutory list of taxable services -- but the provider still owes sales tax …
Does a company that leases mobile storage units (containers, trailers, office units) to construction contractors qualify for Texas's reduced retail/wholesale franchise tax rate?
No. A company that leases mobile storage units (containers, storage trailers, office units) to construction contractors and other commercial users does not qualify for Texas's reduced retail/wholesale…
When a company that bought an aircraft tax-free for leasing dissolves and distributes the aircraft to its parent for no payment, does Texas sales or use tax become due?
No tax is due. The Comptroller ruled that an LLC's original tax-free resale purchase of an aircraft stays intact because the aircraft was leased out (under third-party operational control) more than 5…
If a company earns a Texas historic-structure rehabilitation tax credit and sells it to another company that later claims it, does the buyer need to make an extension payment, and when does the credit expire?
ALERT: A 2023 law (SB 1013) later moved the certified historic structure tax credit statute from Tax Code Chapter 171 to Chapter 172 and expanded a related federal-tax exception, effective 9/1/2023, a…
What Texas motor vehicle tax applies when federal surplus vehicles go to public agencies, 501(c)(3) charities, or other nonprofits?
Public agencies received federal surplus vehicles exempt from motor vehicle tax. A qualifying 501(c)(3) recipient owed $10 gift tax, while a nonprofit without 501(c)(3) status or another nonexempt rec…
Does a single-member LLC, wholly owned by a tax-exempt IRC Section 401(a) trust and disregarded for federal income tax purposes, still owe Texas franchise tax?
Yes. A single-member LLC that is disregarded for federal income tax purposes (and so files no federal return of its own) is still a separate "taxable entity" for Texas franchise tax, even when its sol…
Can a qualifying Texas city use state mixed beverage tax from a qualified hotel project, along with other project-tax rebates, to pay hotel-project bonds?
No, not for state mixed beverage tax. The city could receive state hotel occupancy and sales tax rebates plus local taxes a governmental body agreed in writing to rebate, but Section 351.102(c) did no…
Which location's local sales tax rate applies when a grocery store's flower outlet sells flowers online for pickup or delivery from a different city than where the order was placed?
Local sales tax on online flower orders is sourced to the location where the order is fulfilled -- meaning the store location from which the flowers are picked up or delivered -- not the location wher…
Is a hospital payment-review service that re-examines already-filed and already-reimbursed insurance claims a taxable insurance service or a nontaxable medical billing service?
Taxable. The Comptroller ruled that a consulting firm's hospital payment-review service is a taxable insurance service (claims adjustment/processing), not a nontaxable medical billing service, because…
Can a contractor buy construction materials tax-free when building a retail shopping center on land owned by a tax-exempt university, if a for-profit university subsidiary is the actual tenant?
Not exempt. The Comptroller ruled that a contractor's purchases of construction materials for a retail shopping center on university-owned land are NOT tax-exempt under Section 151.311, because the fo…
For Texas franchise tax apportionment, is a wholesale wireless reseller's revenue from selling voice/data services to a mobile virtual network operator sourced as an intangible asset (to the buyer's location) or as telecommunications/internet services (to where the service is performed)?
ALERT: This ruling cites Rule 3.591(e)(12) for internet access sourcing, but that provision was renumbered to Rule 3.591(e)(26) effective 1/24/2021 (the amended (e)(13) now covers internet hosting ins…
Can a sports team buy construction materials tax-free for a new city-owned ballpark, if the team purchases the materials and then resells them to the city under the lease deal?
Yes, doubly exempt. The Comptroller ruled that a major league sports team's purchases of construction materials for a new ballpark qualify for the resale exemption (because the team will resell the ma…
Is a fee paid for an electronic data-bridge that connects a loan-origination system to a mortgage-pricing engine a taxable telecommunications service, and can it be purchased tax-free for resale?
Taxable, but resellable tax-free. The Comptroller ruled that fees paid for an electronic data 'bridge' that routes mortgage loan information between a loan-origination system and a pricing engine are …
If a company buys an aircraft tax-free for resale and leases it to its own parent company, does replacing that lease with a lower-payment lease -- or the company later using the plane itself -- undo the resale exemption?
The resale exemption survives all three scenarios. In this companion ruling to 201801014L (same structure, an aircraft purchased about three months earlier), the Comptroller again held the resale exem…
When a contractor demolishes an old septic system and installs a new sewer line tying into the city system, which parts of the job are taxable repair/remodeling and which are nontaxable new construction or demolition?
It's a four-way split. New sewer line installation in a fresh trench is nontaxable new construction; complete demolition of the old septic tank and its pipe is nontaxable; but the labor to tie the new…
If a company buys an aircraft tax-free for resale and leases it to its own parent company, does replacing that lease with a lower-payment lease -- or the company later using the plane itself -- undo the resale exemption?
The resale exemption survives all three scenarios. The Comptroller ruled that the aircraft purchase qualifies as an exempt sale for resale even though the lessee wholly owns the purchasing company; re…
Which mixed-use retail, restaurant, and commercial facilities near a new city-owned convention-center hotel qualify as 'ancillary facilities' whose sales and hotel taxes the city can have rebated to help pay off the project's bonds?
A mixed answer: food/beverage operations and shops that exclusively sell tangible personal property qualify as 'facilities ancillary to the hotel' -- generating rebatable state sales, use, and hotel o…
Which businesses in a city-owned mixed-use development qualify as ancillary facilities for Texas qualified-hotel-project tax rebates?
Restaurants and stores selling tangible personal property may qualify if they meet the ownership and 1,000-foot tests. Medical offices, spas, fitness centers, museums, educational or civic units, and …
After a corporate restructuring creates new subsidiaries with different federal tax filing statuses (S corp, disregarded entities, consolidated C corps), do all the resulting entities still qualify as 'affiliated entities' for Texas's intercorporate services sales tax exemption?
Yes. The Comptroller ruled that after restructuring twelve business divisions into four new subsidiaries, the S-corp parent, its consolidated-filing C-corp subsidiaries, and its disregarded-entity LLC…
Is a live-streaming video platform's paid subscription tier (ad-free video plus enhanced chat features) taxable in Texas as cable television or amusement service?
Taxable. The Comptroller ruled that a live-streaming platform's paid monthly subscriptions -- offering ad-free video, custom chat emoticons, and extended video storage on top of the free service -- ar…
Do refractory materials stacked in layers on kiln cars, which both protect the car and help distribute heat evenly to bricks being fired, qualify for the Texas manufacturing sales tax exemption?
It depends on the layer's function. Refractory materials stacked on kiln cars that serve EXCLUSIVELY to distribute heat evenly during brick firing qualify for the manufacturing exemption -- but the bo…
Does a joint development agreement between two unrelated oil-and-gas companies create a separate taxable entity for Texas franchise tax purposes, and can each company still deduct its own cost of goods sold?
Yes to both. Two unrelated oil-and-gas companies' Joint Development Agreement and Joint Operating Agreement — under which they jointly develop leasehold interests, share expenses, and each take their …
Is a charter school's 10-year campus lease (with renewal options) an exempt improvement-to-realty contract if the campus's useful life is 22 years?
No. The Comptroller ruled that the charter school's 10-year initial lease term is NOT an exempt contract under Section 151.311, because 10 years falls far short of the campus's 22-year useful life -- …
Can an internet-calling and messaging company source its Texas sales tax based on a customer's IP-registration address, and can it advertise a tax-included price without violating the ban on advertising that it 'absorbs' the tax?
Yes to both, with caveats. The company could source sales using the customer's IP-registration address when no business or residential address was available. It could also advertise a tax-included pri…
Are fees for disposing oil and gas waste at a permitted landfill, and separately for washing out the trucks that hauled it, taxable in Texas?
Both nontaxable. The Comptroller ruled that a permitted landfill's oil and gas waste disposal fees are nontaxable because Texas's real property services tax specifically excludes oil and gas waste dis…
Is a single-use spinal implant deployment kit -- where the implant is a small part of the total cost and can't function without the disposable delivery tools -- exempt from Texas sales tax as a medical device?
Exempt, but under a different category than requested. The Comptroller ruled that spinal implant deployment kits are NOT exempt 'prosthetic devices' (the implant can't be separated from the disposable…
Can a wholly-owned LLC subsidiary of a tax-exempt charter school issue sales tax exemption certificates in the school's name when making purchases on the school's behalf?
Yes. The Comptroller ruled that a charter school's wholly-owned LLC subsidiary (a disregarded entity for federal tax purposes) may issue sales tax exemption certificates in the school's name when acti…
Can a licensed customs broker use a smartphone app to remotely verify a foreign shopper's export tax refund claim instead of meeting the shopper in person?
No. The Comptroller ruled that a proposed smartphone app is NOT a valid export verification method, because Texas law requires the foreign purchaser and the customs broker to be physically present wit…
Are a homeowners association's membership dues, guest fees, and golf-related charges taxable as amusement services, and does that change for a golf cart rental fee?
Split result. The Comptroller ruled that a nonprofit homeowners association's membership assessments, guest fees, green fees, and trail fees ARE amusement services but are EXEMPT because the associati…
Is electricity used to power refrigeration equipment that merely stores already-exempt food products (with no processing) exempt from Texas sales tax?
Taxable. The Comptroller ruled that electricity used to power refrigeration equipment that only stores food products (even food that is itself exempt from sales tax) is taxable, because Texas's electr…
Is installing, maintaining, or repairing a residential mosquito misting system taxable in Texas, and does it matter whether pesticide is involved or who originally sold the system?
Split by whether pesticide is involved. Selling/installing a mosquito misting system and adding pesticide to one are TAXABLE structural pest control services (tax on the whole charge, even separately-…
Are separately-billed CRM platform advisory/consulting services taxable as part of the taxable data processing service, even though consulting isn't itself a taxable service in Texas?
Taxable. The Comptroller ruled that a CRM software company's advisory/consulting services -- though separately billed and not themselves a taxable service category -- are taxable as part of the price …
When an out-of-state holding company with no Texas nexus sells the stock of its Texas subsidiary, does the gain from that stock sale get counted in the combined group's Texas-apportioned receipts?
No, not fully. When an out-of-state holding company that has no Texas nexus of its own sells the stock of its Texas subsidiary, the combined group must still include the net gain from that sale in its…
Do six separate 25-year build-to-suit leases with six different landlords, financing six new charter-school campuses at once, all qualify as exempt improvement-to-realty contracts?
Yes, all six. The Comptroller ruled that all six of a charter school's separate 25-year build-to-suit leases -- covering six new campuses financed by six different landlords -- qualify as exempt contr…
Are 'Cross-Connect' fees that a data center charges customers for access to permanently installed fiber optic cable subject to Texas sales tax as a telecommunications service?
Not taxable. The Comptroller ruled that a data center's separately-stated 'Cross-Connect' fees for customer access to fiber optic cable are NOT subject to Texas sales tax, because the cable is permane…
When a state-contracted data center operator procures software licenses on behalf of tax-exempt government agencies, does the operator owe sales tax on those purchases?
No — when a company operating a state data center under contract procures business application software at a governmental customer's request, and the software vendor licenses the software directly in …
When a landlord builds two new K-8 charter-school campuses and leases them to the school for 25 years each, can the construction contracts qualify as tax-exempt, and can the landlords' suppliers avoid paying sales tax on materials used in the build?
Yes — build-to-suit leases under which landlords construct two new K-8 charter-school campuses and lease them to a tax-exempt charter-school operator for 25-year primary terms qualify as exempt constr…
When a landlord builds a new charter-school campus and leases it to the school for 25 years, can the construction contract qualify as tax-exempt, and can the landlord's suppliers avoid paying sales tax on materials used in the build?
Yes — a build-to-suit lease under which a landlord constructs a new charter-school campus and leases it to a tax-exempt charter-school operator for a 25-year primary term qualifies as an exempt constr…
When a landlord builds a new charter-school campus and leases it to the school for 25 years, can the construction contract qualify as tax-exempt, and can the landlord's suppliers avoid paying sales tax on materials used in the build?
Yes — a build-to-suit lease under which a landlord constructs new charter-school campuses and leases them to a tax-exempt charter-school operator for a 25-year primary term qualifies as an exempt cons…
For Texas sales tax, is labor to replace or abandon a natural gas pipeline taxable real property repair, or non-taxable new construction/demolition?
It depends on depth and method, ruled across twelve fact scenarios: labor to lay a new pipeline in a new trench beside the old one, or at a depth at least one-third greater or shallower than the old p…
For Texas sales tax, is a cloud-based business texting platform a taxable data processing service, and is a separately billed printer rental fee taxed the same way?
Two different tax treatments for two separately billed charges — a cloud-based (SaaS) texting and messaging platform that stores, retrieves, and analyzes customer message data is a taxable data proces…
For Texas sales tax, is a restaurant's monthly charge for tabletop ordering devices a taxable equipment rental or a nontaxable service, and are patron fees for premium content on those devices taxable?
Both charges are taxable, for different reasons — the restaurant's monthly per-unit charge to its vendor for tabletop ordering devices is taxable as the rental of tangible personal property (the 'esse…
Does a franchised car dealer owe Texas sales tax on a ground lease for the land where it operates its dealership and stores vehicle inventory?
No — a franchised motor vehicle dealer's ground lease of the real property where it operates its dealership (including storing inventory per TxDMV licensing requirements) is a nontaxable lease of real…
Does a cash-basis landscaping company owe sales tax when it collects a refundable customer deposit, or only later when it invoices completed work?
No, not at the time the deposit is received — a seller using the cash basis of accounting does not have to report and remit sales tax on a refundable customer deposit when it's collected; tax is due o…
Can an LLC buy an aircraft tax-free as a sale for resale and lease it back to its own parent company, and does later using the aircraft itself trigger sales tax?
Yes, with a one-year condition — a company that buys an aircraft to lease it to another party (even a related party, like its own parent) qualifies for the sale-for-resale exemption from sales/use tax…
Does selling recovered salts and minerals as a byproduct disqualify a water desalination company's equipment purchases from the Texas desalination sales tax exemption?
No — a company's equipment, services, and supplies used in desalinating water remain exempt from Texas sales and use tax under the desalination exemption even if the company sells the recovered salts …
Is a dealer's vehicle depreciation-protection membership taxable, and is its payment toward a replacement vehicle included in taxable consideration?
The membership fee was not a taxable insurance service or part of the original vehicle's taxable price. But when the program paid a benefit toward a replacement vehicle after theft or total loss, that…
Are 'dial before you dig' underground-utility notification centers providing a taxable information service to the utility operators who fund them?
No — a statewide 'dial before you dig' notification center that alerts underground utility operators when excavators plan to dig near their lines is NOT providing a taxable information service, even t…
Is a dealership membership program that pays a car buyer's depreciation loss (beyond their insurance settlement) after a total loss or theft taxed as insurance, and does the benefit affect motor vehicle sales tax on the replacement car?
Three separate answers for three separate charges — the membership fee a car buyer pays to join a dealership's vehicle depreciation-protection program is NOT a taxable insurance service (because the p…
Is a lender's insurance-tracking vendor providing a taxable data processing or insurance service when it monitors whether borrowers maintain required hazard/flood insurance?
No — a company that monitors whether a lender's borrowers maintain required hazard and flood insurance coverage, using its professional insurance-industry knowledge plus an automated system to process…
Is a fraud-detection service that compares an online shopper's device data against a fraud database and returns an 'Allow/Deny/Review' recommendation a taxable information service in Texas?
No. The Comptroller ruled that a fraud-detection service — which gathers data from a shopper's device, compares it against the provider's own fraud database, and sends the retailer a recommendation to…
Is an SSL certificate subscription — which authenticates a website owner's identity and lets browsers verify the certificate is valid — subject to Texas sales and use tax as tangible personal property, data processing, an information service, or a telecommunications service?
Not taxable. The Comptroller ruled that SSL Certificates — the bundled authentication service, digital certificate, and resolution (validity-check) service sold by subscription — are not tangible pers…
When a Texas company sells substantially all of its business assets, how does it apportion the gross receipts among tangible personal property, contract rights, and other intangibles for Texas franchise tax purposes?
It depends on the asset type — when a company sells substantially all its business assets, Texas sources the gross receipts asset-by-asset: tangible personal property (TPP) delivered/possessed in Texa…
Does a Texas cotton gin need its own individual utility (predominant-use) study to claim the sales tax exemption on the electricity it uses to run the gin?
No individual study is needed. The Comptroller ruled that a cotton gin may claim the sales and use tax exemption on 100% of the electricity it purchases through a dedicated meter to power the gin, rel…
Is a taxable 'asset management' service that monitors oil-and-gas equipment and lets customers view collected data taxable data processing, or an exempt proprietary information or monitoring service?
Taxable, but with a 20% exemption. The Comptroller ruled the asset management service — which collects, stores, and lets a customer retrieve monitoring data from its oil-and-gas equipment — is a taxab…
For Texas franchise tax, can a company include wages paid to employees at its foreign offices in its compensation deduction if those wages are reported on a foreign government form instead of an IRS Form W-2?
Yes, but only for actual employees — a company may include in its Texas franchise tax compensation deduction the wages and cash compensation it pays to employees at international offices, as long as t…
Does the City of Round Rock qualify for the state's hotel-project tax rebate under Tax Code Section 351.102(b), even though it isn't a 'qualified hotel project' city like Houston?
Yes. The Comptroller ruled that the City of Round Rock qualifies under Tax Code Section 351.102(b) — a broader, separate hotel-project rebate category than the 'qualified hotel project' definition tha…
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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.