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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When a company provides compressors to customers along with transportation, installation, and maintenance, is that a taxable rental of equipment or a nontaxable service?
A taxable equipment RENTAL, not a nontaxable service -- based on who bears care, custody, and control. A taxpayer asked the Comptroller to review two vendors' contracts (COMPANY A and COMPANY B) to de…
Is labor to install, upgrade, repair, or maintain computer hardware taxable in Texas -- and where can a computer repair business point skeptical customers for proof?
Taxable -- and the letter points to the exact rule text a business can show disputing customers. A computer repair business asked for documentation proving that labor/service charges for warranty upgr…
For an independent distributor of prepaid 'Discount Redemption Vouchers,' does the distributor need a sales tax permit, what's the tax base on non-fundraiser sales, and are fundraiser sales through booster clubs/churches/civic groups tax-exempt?
Three-part answer covering permits, tax base, and fundraiser exemption limits. An independent distributor purchases prepaid 'Discount Redemption Vouchers' from a direct-sales parent company (COMPANY A…
When refinery units purchased from another company are dismantled and re-erected at a new location owned by the buyer, does incorporating them into realty count as nontaxable new construction or taxable remodeling?
New construction -- lump-sum labor charges are not taxable. A refinery operator bought refinery processing units from another company, planning to completely dismantle them, move them to a different l…
Can a multi-level-marketing company let its mall-kiosk distributors buy tax-free with a resale certificate, the way a home-based distributor can't?
Yes -- distributors with a real retail outlet (a store or kiosk) can get their own sales tax permit and use a resale certificate, unlike home-based distributors. A multi-level-marketing company sellin…
Does Texas sales tax apply to a sale-leaseback financing of pipeline separators and meters that stay attached to an existing pipeline?
No -- because the separators and meters are attached to and part of a transmission pipeline that Texas treats as real property, the sale-leaseback of them is a real-property transaction, not a taxable…
Does a Texas Water Control and Improvement District need a sales tax permit or number to buy things tax-free?
No -- a Water Control and Improvement District is exempt from Texas sales tax on its purchases as a political subdivision of the state, and it does not need a sales tax number to use an exemption cert…
Can I buy a mattress tax-free in Texas just by getting a doctor's prescription for it?
No -- a doctor's prescription alone doesn't make a mattress tax-exempt; the mattress itself must be specifically designed to alleviate pain or treat a medical condition, not just an ordinary mattress.…
Is engineering and design work for a piping-system prototype a taxable sale of tangible personal property, or a nontaxable professional service, in Texas?
Nontaxable services -- the design, engineering, and management charges are not taxable, though the company still owes tax on the materials and equipment it uses to build the prototype itself. An engin…
Is HVAC remodeling work on a leased Texas airport terminal exempt from sales tax, and does it matter who pays for it or whether the space is used by the public?
It depends on who's paying and who benefits: HVAC remodeling work in areas the public actually uses for air travel is exempt as repair/remodeling of public-use property, but work benefiting only priva…
As an independent distributor for a direct-sales company, am I responsible for Texas sales tax if the parent company isn't collecting it?
The direct sales company itself is legally responsible for collecting and remitting the tax -- but if it fails to do so, the distributor may still owe the tax and can pay it directly to the state. An …
Is a manufacturer's own aluminum casting mold taxable, and does it matter whether the mold is separately billed or the customer owns it on paper?
As of October 1, 1997, the mold used to make these particular castings no longer qualifies for the manufacturing exemption -- but the answer depends heavily on the time period and on whether there's a…
Can a Texas farmer or rancher buy an advertising sign tax-free using a farm exemption certificate?
Yes -- a farmer or rancher can purchase a sign used to market their products (for example, a 'hay for sale' sign) tax-free by giving the seller an agricultural exemption certificate instead of paying …
Can a direct payment permit holder switch to a new inventory accounting system by depleting old tax-paid parts first (FIFO) before reporting tax on new usage?
No -- the Comptroller rejected the proposed First-In-First-Out (FIFO) transition method for depleting old tax-paid inventory before reporting new tax under a direct payment permit. A brewery with a di…
Is a customized medical literature-search service taxable as an information service, even though each report is tailored to one client and can't literally be resold as-is?
Taxable -- customizing the search and binding results into a client-specific report doesn't make the underlying information 'proprietary' to that client, so the service is a taxable information servic…
Can a 501(c)(3) nonprofit buy remodeling work tax-free for a building it leases out to for-profit tenants?
Yes -- because the rental income from the leased space qualifies as related (tax-exempt) income under IRS guidelines for this organization's exempt purpose, the entire remodeling project can be purcha…
Is a television station's doppler weather radar system exempt from Texas sales tax?
Exempt only if used to generate images for broadcast -- if the same system is instead used for weather forecasting or other non-broadcast purposes, that use is taxable. A television station asked abou…
When a city owns an airport but a private airline finances/contracts the construction, is that construction exempt from Texas sales tax -- and does it matter whether the space is public or restricted?
Yes for public-access areas -- construction of a people mover, bus stations, terminal relocation, and baggage system is exempt under Sec. 151.311 because it's owned by the City, benefits the public, a…
Is a flat monthly fee for an assigned parking space behind my office building a taxable parking service or a nontaxable real property rental in Texas?
Taxable -- a flat monthly fee for an assigned parking lot space is a taxable motor vehicle parking service, not a nontaxable real property rental. A business paid a flat monthly fee for an assigned pa…
Can doctors, dentists, and veterinarians buy prescription pads and other printing tax-free using a resale certificate?
No -- doctors, dentists, and veterinarians perform nontaxable medical services and are not considered to be reselling tangible personal property, so they cannot issue a resale or exemption certificate…
Can a 50/50 joint venture between a 501(c)(3) nonprofit and a for-profit company use a direct payment permit to claim a partial (50%) sales tax exemption?
Yes -- the joint venture may issue direct payment blanket exemption certificates to its vendors, and may then claim a 50% (pro rata) exemption on taxable purchases in keeping with the exempt partner's…
Are pallet rental fees and related delivery/transfer charges taxable for a food manufacturer, given the packaging-supplies exemption for pallets?
Taxable -- the packaging-supplies exemption for pallets doesn't apply here because the pallets are leased on a short-term (daily) basis, not for a period of one year or more. A food manufacturer packe…
For a Texas aircraft engine repair company, which charges are taxable, and does it matter whether the customer is a commercial airline, a repair shop, or a privately/corporately owned aircraft?
It depends heavily on WHO the customer is and HOW the charge is billed (lump-sum vs. separately stated) -- commercial-airline and licensed-carrier work is largely nontaxable, private/corporate aircraf…
Does hosting a web page on a server located in Texas create Texas sales tax nexus, and is server space itself a taxable service?
Yes -- an individual or company that owns, leases, or rents a server located in Texas has nexus in the state because of that substantial tangible property, and must collect Texas tax on taxable sales …
Is Texas sales tax due on teleconferencing/bridging fees when the conference is arranged by an out-of-state company but participants call in from Texas?
It depends entirely on how participants connect: standard dial-in (callers pay their own long distance) has no Texas tax on the bridging fee, toll-free dial-in IS taxable to the extent calls originate…
If a Texas printer stores finished brochures/catalogs in its own warehouse before shipping them to the client's out-of-state customers, is the printing taxable?
Yes, taxable -- storing the printed materials in Texas after printing, even before they're ultimately shipped out of state, counts as a taxable use in Texas by the printer's customer. A printing compa…
Is installing audio/video (home theater/surround sound) wiring and equipment taxable in Texas, and does it matter if it's new construction, residential, or commercial remodeling?
It depends on the type of job: cabling/wiring LABOR is not taxable for new construction (residential or commercial) or for residential repair/remodeling, but IS taxable for nonresidential (commercial)…
Which cardiovascular surgical products (mesh, grafts, blood bags, chest drains, catheters, software) are exempt from Texas sales tax as implanted medical devices?
Only the items actually implanted in the patient's body are exempt -- the mesh and vascular graft qualify, but blood bags, chest drainage units, thoracic catheters, and patient database software are a…
Is a Texas recording studio's charge to musicians taxable as equipment rental, or nontaxable as a manufacturing/production service -- and does it depend on who operates the equipment?
It depends on who operates the equipment: if the studio hands over full operational control to the producer/musician with no studio personnel operating it, that's a taxable equipment rental; if studio…
Which of an armored transport company's many services (ATM cash replenishment, ATM repairs, vault storage, coin wrapping) are taxable in Texas?
Mostly taxable as security services, with two notable exceptions: coin wrapping and true maintenance (as opposed to repair) of real-property ATMs are not taxable if separately billed. An armored trans…
Can a Texas retailer refuse to accept a foreign shopper's export certificate from any customs broker except the one it exclusively works with?
Yes -- Texas law does not require a retailer to accept every licensed customs broker's export certification, and does not prohibit a retailer from having an exclusive arrangement with one particular b…
Are gaming lessons, casino-themed practice time, private casino-night party rentals, and a 'High Roller Club' membership taxable in Texas?
It varies by activity: gaming lessons are not taxable, informal practice time IS taxable as an amusement service, renting the whole facility for a private casino-night party is a nontaxable real prope…
Is a teleconferencing company's bridging fee taxable in Texas when its bridging equipment is located entirely out of state, even though Texas participants call in?
Not taxable -- because the bridging equipment that actually links participants together is located entirely outside Texas, the company's bridging service charges are not subject to Texas sales tax, ev…
Is building, equipping, and repairing an agricultural greenhouse exempt from Texas sales tax, and does an agricultural exemption certificate cover the repair labor too?
New construction of the greenhouse itself is not taxable (labor) and its materials can be bought exempt, but once built, repair LABOR on the greenhouse is always taxable -- only the separately-billed …
Is a telephone company's Universal Service Fund (USF) surcharge passed on to customers subject to Texas sales tax?
Yes, taxable -- the USF reimbursement charge is part of the sales price of the telecom service itself and is taxed the same way the underlying service is. A telephone cooperative that owns a cellular …
Does Texas's manufacturing exemption for water-reduction/wastewater equipment cover the connecting piping, and are lubricants used to maintain exempt manufacturing equipment also exempt?
Piping only qualifies for the water-use-reduction exemption if it's a genuine component PART of a single piece of exempt equipment (not general intraplant transport piping), and lubricants/chemicals u…
For a company selling check-processing hardware/software to Texas banks and government agencies, which specific charges (hardware, software, installation, training, maintenance, travel) are taxable?
Most charges are taxable, but a few specific ones are not: installation performed by an unrelated third party (for software that party didn't sell), on-site or out-of-state training (if separately sta…
Is a restaurant's ice machine exempt from Texas sales tax if it makes ice served directly to customers in drinks?
Yes, exempt -- but only if the ice machine is used exclusively to produce ice served to customers in their drinks; any other use (like ice for a salad bar or drink coolers) is a divergent use that tri…
Can a company leasing purifier/vaporizer/piping/storage-tank equipment to a semiconductor manufacturer buy it tax-free and lease it tax-free too?
Yes on both ends -- the equipment can be purchased tax-free with a resale certificate, and the monthly facility fee charged to the semiconductor manufacturer can also be exempt if the manufacturer pro…
Is a 16-ounce packaged jar of hot sauce subject to Texas sales tax?
No. A 16-ounce jar of hot sauce is presumed to be sold for home consumption rather than immediate consumption because of its packaging and size, so no Texas sales tax is due on the sale.
If a subcontractor never gets a resale certificate from the general contractor on a separated construction contract, who owes sales tax on the materials -- even though the ultimate customer holds a direct-pay permit?
The subcontractor (Company B) must bill and collect sales tax on the materials under the separated contract, because it never received a valid resale certificate from the general contractor (Company A…
How does a refinery or chemical plant prove that turnaround maintenance work qualifies as tax-favorable "scheduled periodic" maintenance rather than taxable repair, especially before a repeat pattern has been established?
To support the "scheduled periodic" element under Rule 3.357(a)(4) even without an established repeat pattern, either the same work must be performed at each turnaround, or the turnaround contract its…
Is compensation an employer pays employees for using their own personal tools on the job subject to Texas sales tax as a taxable lease or rental?
Not automatically. The Comptroller's longstanding position is that additional compensation or reimbursement paid to employees for using their own personal tools is NOT taxable, as long as the employee…
If a bulletin-board-service (early internet) provider mistakenly paid sales tax for years on dedicated phone lines it actually bought tax-free for resale, how does it get that overpaid tax refunded?
The dedicated telephone lines were purchasable tax-free for resale under Tax Code § 151.006(1), since the provider was reselling the taxable telecommunications service to its bulletin-board clients. H…
Can a private developer get a refund of sales tax paid on materials used to build an office building that it then leases to the State of Texas under a lease-with-option-to-purchase?
No refund here. Section 151.311 exempts materials incorporated into realty improvements built for the primary use and benefit of an entity exempt under § 151.309 (governmental) or § 151.310, but on pr…
Is acid used to clean out a farm/ranch irrigation well, or the well-bailing service itself, exempt from Texas sales tax as agricultural machinery repair?
Yes, both are exempt. Bailing sand out of a farm/ranch irrigation well is nontaxable as the repair of agricultural machinery or equipment, and the acid sold to clean out the well for that purpose is l…
Does a funeral home need to collect sales tax on additional prayer cards, crucifixes, flowers, or motor escorts that get added to and separately invoiced under an existing itemized funeral service contract?
No, the funeral home does not have to collect and report sales tax on those additional items, because they are furnished under the original itemized funeral service contract (as required by state and …
Is a company's business of standardizing and structuring MRO (maintenance, repair, and operating) materials descriptions for clients a taxable data processing service in Texas, even for the parts of the work not actually done on a computer?
Yes. Providing customized materials cataloging is a taxable data processing service under Tax Code § 151.0035 and Rule 3.330(a), which cover information compilation and computerized data manipulation …
Is a gas compression service taxable, and does it matter whether the compressor is instead leased or rented out to the customer?
Gas compression services performed under a contract where the provider never transfers possession or control of the compressor to the customer are NOT taxable -- it's a service, not a rental or lease,…
Is the sale of a house that a house-moving business removes from one lot and relocates to another taxable, and does it matter how the contract itemizes the house price, moving cost, and foundation work?
A house attached to realty is generally not taxable to sell, but once it's detached from realty and sold WITHOUT installation, it becomes a sale of tangible personal property, and sales tax is due on …
Does Farm Credit Bank of Texas have to charge and collect Texas sales tax on the payroll, appraisal, marketing, and other administrative support services it provides to farm credit associations across the state?
No -- the Comptroller cannot require Farm Credit Bank of Texas to charge and collect Texas sales and use tax, because it and its chartered associations are instrumentalities of the United States Gover…
Is a long-standing workforce-provision contract for a chemical plant's operational staff nontaxable as staff leasing, even though the contractor directs supervision, assumes liability, and can subcontract work?
No -- based on the contract terms described, this arrangement is an independent-contractor services agreement, not staff leasing, so Rule 3.364(c)'s staff-leasing exclusion doesn't apply. Tasks perfor…
If a club's mandatory 18% gratuity is split between direct employee payments and employee benefits, does retaining part of it for benefits make the whole gratuity taxable -- and can "total direct compensation" include those benefits to satisfy the full-disbursement test?
A club charged an 18% mandatory gratuity on food and beverage sales, paying 15% directly to service employees and crediting the remaining 3% toward employee benefits (health/life insurance, holiday ti…
Does the NATO Status of Forces Agreement exempt foreign (e.g., UK) military personnel stationed in Texas from Texas sales tax on their personal purchases?
No. The Comptroller's legal staff reviewed Article X of the NATO Status of Forces Agreement (Treaty) and determined it does NOT exempt foreign military personnel covered by it -- including a UK citize…
Is a voice-activated environmental control system, prescribed by a doctor for a quadriplegic individual to independently operate a telephone, TV, lights, and electric hospital bed, exempt from Texas sales tax?
Yes. The Comptroller treated the voice-activated environmental control system -- which lets a quadriplegic individual with no use of his upper or lower extremities independently control his telephone,…
Is a legal-support business that obtains records from non-parties via subpoena and deposition-by-written-questions (issued through a notary public) exempt from Texas sales tax, and are its various fees and shipping charges taxable?
The entire service is exempt. Section 151.353 exempts court reporting services related to preparing a document/record in a civil or criminal suit by a notary public or licensed court reporter, as long…
For an internet service provider selling email, web hosting, CGI access, secure server access, and disk space, which charges are taxable Texas data processing/telecommunications services, and is an out-of-state customer's billing address enough to avoid Texas tax?
It splits by service type. EMAIL is a telecommunications service, and telecommunications services that originate outside Texas are not subject to Texas sales tax. WEB HOSTING, CGI access, secure serve…
A 1997 law change removed the private-investigator license requirement for obtaining public records as of September 1, 1997 -- does that also make a pre-employment background screening service tax-exempt after that date?
No. The 75th Legislature's amendment to the Private Investigators and Private Securities Agency Act (Article 4413(29bb), § 3(a)) removed the licensing requirement for obtaining information classified …
A mobile MRI provider believed its own arrangement with medical providers was a taxable equipment lease/rental -- but is furnishing a mobile MRI unit with a technician and full operational support actually a taxable lease, or a nontaxable medical service?
Contrary to what the company itself argued, this is a NONTAXABLE medical service, not a taxable equipment lease/rental. Rule 3.294(c)(2) presumes that furnishing tangible personal property WITH an ope…
When a seismic-data library company sells exempt geophysical information but separately bills for copying it onto tapes, the tapes themselves, and shipping, are those add-on charges also covered by the geophysical-services tax exemption?
Yes for the customer's price, but the provider still pays tax on its own supplies. The sale of nontaxable geophysical/seismic data under Rule 3.342(d)(2) includes the tapes in its sales price, so the …
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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.