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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Must a direct sales/multi-level marketing company collect and remit Texas state and local sales tax on the sales its independent distributors make, and how should it account for local tax rates that vary by distributor location?
Yes. Under Rule 3.286 and Tax Code § 151.024, a direct sales organization (including a multi-level marketing company) is automatically responsible for collecting and remitting Texas state and local sa…
For customer-owned property like a trade show exhibit booth, what distinguishes taxable 'assembly' labor from nontaxable 'set-up' or 'installation' labor?
The distinction turns on function, not label. 'Installation' — placing property in position without changing its form so it works as intended (e.g., hanging a picture or chandelier) — is not taxable, …
When a single medical device kit bundles a tax-exempt prosthetic component with non-exempt equipment (needles, guide wires, sheaths), is the whole kit taxable or exempt?
It depends on cost, not just contents. When a single-charge kit bundles an exempt item with taxable items, the predominant cost determines the whole kit's taxability: if the taxable items cost more th…
Does a massage therapist who provides lymphatic compressive therapy need a sales tax permit to buy the bandages used in the treatment, and are those bandages tax-exempt?
No exemption, and no resale certificate. Bandages a massage therapist buys and applies while performing lymphatic compressive therapy are taxable purchases — the therapist is the end user/consumer of …
Is a monthly retainer fee an advertising/marketing agency charges to reserve staff and account-management time subject to Texas sales tax?
No. A monthly retainer fee that a marketing/advertising services company charges clients to reserve account-management staff time (not tied to any specific taxable service) is a charge for an intangib…
When a corporation restructures its employees into a partnership's general-partner entity to satisfy an employee stock purchase plan requirement, is that arrangement an exempt staff-leasing arrangement or a taxable one?
The proposed arrangement did NOT qualify for the staff-leasing exemption. Even though the company met two of the three Rule 3.364 conditions (including the new-business exception), its own contract st…
Is oilfield 'swabbing' — running cable and rubber cups down a well to remove hydrostatic water and start/restart production — a taxable service in Texas?
It depends on the specific downhole task. Swabbing done to start or restart a well — running cable with rubber cups to remove hydrostatic water, even with incidental sand or paraffin — is a nontaxable…
Is a $1,500 assessment added to a country club member's required stock equity subject to Texas sales tax, and does it matter whether membership stock is later resold by the departing member or by the club itself?
Likely taxable, based on the facts given. A country club's assessment added to a stockholding member's required equity is generally treated the same as the sale of that mandatory membership stock, whi…
Is electricity used to treat wastewater from a residential community exempt from Texas sales tax, and does it matter whether a third-party treatment company or the landlord itself buys the electricity?
It depends on who buys the electricity. Treating wastewater is a nontaxable service, so the manufacturing exemption under Tax Code § 151.318 doesn't apply to the electricity used to power that treatme…
Which manufacturing-adjacent equipment qualifies for Texas's manufacturing sales tax exemption — hand tools, quality-control gauges, mold-design equipment — and which doesn't?
Mostly no exemption. Disposable epoxy applicator bottles and hand-operated calipers (digital or not) are hand tools and do NOT qualify for the manufacturing exemption, regardless of whether the readou…
Is electricity an agricultural cooperative uses to process its members' farm products exempt from Texas sales tax under the agricultural exemption, or some other exemption?
Exempt, but for a different reason than the cooperative may have assumed. The agricultural exemptions in Tax Code §§ 151.316(a)(7)-(8) and 151.317(a)(5) are limited to farms/ranches and to an 'origina…
What are the requirements for a predominant use study that lets a print shop claim the manufacturing exemption on its natural gas and electricity?
A print shop's electricity/gas can be exempt under the manufacturing exemption if it powers equipment directly used and necessary/essential to manufacturing (§ 151.318(a)(2)), equipment that powers/su…
Does an out-of-state corporation with no other Texas contact create Texas sales tax nexus just by sponsoring/having its logo appear at a charitable event in Texas, without selling or promoting its products there?
No nexus is created by mere sponsorship recognition. A foreign (out-of-state) corporation with no other Texas contacts that hosts or sponsors a charitable event in Texas -- where its logo and name app…
Is labor to restore residential real property damaged by fire, flood, or explosion tax-exempt in Texas, and how has that answer changed over time (pre-1988, 1988-1993, and after October 1993)?
It depends entirely on the timing and the type of disaster declaration. Before the Legislature added Tax Code Section 151.350 (effective October 1, 1993), labor to repair or restore real and personal …
Is a restaurant's scale/dispenser that portions out a fixed weight of uncooked french fries before frying exempt from Texas sales tax as manufacturing equipment?
Taxable, but only since a rule change. A restaurant scale/dispenser that measures out a fixed weight (e.g., one or one-and-a-half pounds) of uncooked french fries into a frying basket was EXEMPT befor…
Is a calligrapher's labor charge to address wedding envelopes and fill in marriage certificates -- using materials the customer provides -- subject to Texas sales tax?
Yes. A calligrapher's labor charge to address wedding invitation envelopes or fill in names on marriage certificates is subject to Texas sales and use tax, even when the customer supplies the item bei…
Is the sale of an individual boat slip at a marina, sold by bill of sale without an interest in the adjacent land, subject to Texas sales tax?
No. The Comptroller ruled that a charge for the sale of a boat slip is the sale of real property and is not subject to Texas sales and use tax, even though the slip was conveyed by a bill of sale iden…
When exempt nutritional supplements are packaged and sold together with taxable business tools for a single charge, how is the bundle taxed?
It depends on which item is the package's 'essential character.' If the taxable business tools are the PRIMARY component of a package sold for one price, the ENTIRE sales price is taxable. If the exem…
Is natural gas sold for residential use subject to a special purpose district's local sales tax, even though the utility had been advised to collect it?
No. Natural gas consumed for residential use is exempt from ALL layers of Texas sales and use tax on the transaction -- state, county, metropolitan transit authority/city transit department (MTA/CTD),…
Are concert ticket sales and food/beverage sales at the concert taxable when the concert is put on by a 501(c)(3) tax-exempt organization?
Generally, concerts (amusement services) are taxable under Tax Code Sections 151.0101(a)(1) and 151.0028 and Rule 3.298(a)(1)(A), and food/beverage sales are separately taxable under Section 151.314(c…
Is nitrous oxide and other medical gas sold to a dentist exempt from Texas sales tax the same way it is when sold to a hospital?
Yes. Nitrous oxide and other medical gases sold to a dentist qualify for the same sales tax exemption as sales to a hospital, because the Comptroller treats dentists as licensed practitioners of the h…
Are 'Hollywood 48-Hour Miracle Diet' and 'Hollywood Daily Miracle Diet' weight-loss products subject to Texas sales tax?
No. Neither the Hollywood 48-Hour Miracle Diet nor the Hollywood Daily Miracle Diet is subject to Texas sales tax. The Comptroller's official STAR subject line for this letter notes the products fall …
Under Texas's deregulated electric utility market, which separately stated charges on a retail customer's electric bill (transition, nuclear decommissioning, system benefit fund, competition transition, transmission/distribution) are subject to sales tax?
It depends on the specific charge. Transition charges, nuclear decommissioning charges, and system benefit fund fee charges are NOT taxable when separately stated on a retail electric customer's bill.…
Are charges for recruiting and placing foreign-educated nurses with hospitals -- including visa processing, document handling, medical exams, and travel arrangements -- subject to Texas sales tax?
No. Charges for providing recruitment and placement services of foreign-educated nurses to hospitals -- including advertising, recruiting, pre-selecting, processing/documenting applicants, handling vi…
Are the mileage, labor, and parts charges to repair a freestanding farm platform scale used to weigh grain exempt from Texas sales tax the same way the scale itself is?
Yes, as of this 2001 ruling: a freestanding above-ground platform scale used exclusively to weigh grain before storage on a farm qualifies for the agricultural exemption as tangible personal property,…
Can a meat processing plant buy aprons/frocks, refuse receptacles, and liquid soap/disinfectants tax-free under the public-health-compliance manufacturing exemption?
Mixed result across three items. LIQUID SOAP AND DISINFECTANTS for hand/equipment cleaning ARE exempt under Section 151.318(a)(10), because 9 C.F.R. Section 307.2(f) affirmatively requires them for sa…
Are green fees taxable at a city-owned golf course when the course is actually operated day-to-day by an independent contractor, even though revenue flows to the city and the city closely controls operations?
Yes, taxable. Amusement services are exempt from Texas sales tax only when EXCLUSIVELY provided by a governmental entity (the state, a municipality, county, school district, special district, or other…
Is a charge to play a for-fun blackjack table at a bar -- where players buy chips but can't win money, keep chips, or receive prizes -- taxable as an amusement service?
Yes. A charge for admission to play blackjack, or a charge for the chips used to play, is subject to Texas sales tax as an amusement service under Rule 3.298 -- even though the game is purely recreati…
Does a restaurant owe sales tax on a gift certificate that expires unredeemed, and does charging a monthly maintenance fee that reduces the certificate's value to zero change the answer?
No sales tax liability in either scenario. A restaurant does not owe sales tax when a sold gift certificate expires unredeemed, because Tax Code Section 151.051(a) taxes sales, and Section 151.005(6) …
Does incinerating waste into ash for disposal count as tax-exempt 'processing' or 'manufacturing' of tangible personal property, or is it a nontaxable waste-disposal service instead?
Not processing/manufacturing, as structured in this case. A limited partnership that incinerates waste into ash, where the operation's purpose is waste disposal (not creating a marketable product) and…
Does a multi-level marketing company or its independent distributors have to collect and remit Texas sales and use tax on distributor sales?
The direct sales organization itself — not its independent distributors — is legally the retailer responsible for collecting and remitting Texas state and local sales and use tax on sales its distribu…
Does a Texas car dealer owe use tax on parts used for a free repair when there's no written warranty, but the repair happens right after the sale?
A Texas motor vehicle dealer that makes a free repair within seven calendar days of selling the vehicle, where the repair isn't covered by any written warranty, owes no use tax on the parts because th…
Is work on a private alley or drive tax-exempt just because the owner plans to eventually dedicate it to the city?
No. Work on an alley or drive is only exempt as work performed for a city on city property if the property has actually been dedicated to and accepted by the city (even conditionally or as of a future…
When the IRS revokes a Texas nonprofit's federal 501(c)(3) status but the nonprofit appeals, what happens to its Texas sales-tax and franchise-tax exemptions, and from when?
The state exemptions continue during a bona fide federal appeal, and any loss is prospective from the IRS notice date. The Comptroller normally accepts the IRS's final determination and automatically …
Does a car dealer owe Texas sales tax on a monthly subscription fee paid to an internet lead-generation service that connects potential buyers to dealers?
No. The Comptroller ruled that a flat monthly subscription fee car dealers paid to an internet-based service that connected potential buyers to the nearest subscribing dealer was a charge for nontaxab…
Does a waste hauler have to charge Texas sales tax on industrial solid waste that's mixed in with regular taxable garbage, and what proof does a customer need to claim the exemption?
Disposing of industrial solid waste (as defined by the Health and Safety Code) is not a taxable waste collection service in Texas, even when it's mixed with taxable garbage or municipal solid waste — …
Is the delivery charge for hauling dirt, sand, caliche, or rock taxable in Texas, and does it matter if the rock itself is taxed?
A delivery charge for hauling rock, sand, caliche, or dirt is taxable only if the material itself is taxable (and then only if the seller of the material bills the delivery); delivery of nontaxable ma…
Are membership and sign-up fees at a women's weight-loss fitness center taxable in Texas, even with no pools or classes?
Yes. Membership and sign-up fees at a fitness center — even a weight-loss-focused facility with only hydraulic resistance machines and no pool or classes — are taxable as amusement services under Comp…
Is adding fiber optic cable to an existing coaxial cable TV system taxed as new construction or as taxable repair/remodeling?
Adding fiber optic cable to an existing coaxial cable television system, from the head-end to a new node, is treated as nontaxable new construction — not taxable repair/remodeling — because it provide…
Do foreign visitors to Texas get a sales tax refund on items they bought and take home with them?
There's no general upfront sales tax exemption or pre-departure tax return for foreign visitors — a visitor pays Texas sales tax at purchase like anyone else, and can only seek a refund afterward from…
Is repairing semi trucks, heavy machinery, or overseas shipping containers taxable in Texas, and does having an ICC number change anything?
Having an ICC (interstate carrier) number doesn't change sales tax treatment. Labor to repair motor vehicles, heavy machinery, and commercial trucks is not taxable, but the materials used are taxable …
Can an auto body shop claim the Texas manufacturing exemption for equipment like a fire suppression system in its paint spray booth?
No. An automobile body shop that repairs or remodels customers' vehicles is not a "manufacturer" under Tax Code § 151.318, so it cannot claim the manufacturing exemption for equipment like an automati…
If a cabinet maker's invoice lists separate prices for different cabinets plus one installation charge, is that a taxable separated contract or an untaxed lump-sum contract?
An invoice for custom cabinets that lists a separate price for each type of cabinet (base, upper, vanities) plus one installation line is still treated as a lump-sum contract, not a taxable separated …
Is a boat storage facility's charge to store a boat taxable in Texas, and does it matter if the boat is on a trailer?
A charge to store a boat is not subject to Texas sales tax, regardless of whether the boat sits on a stand or on a trailer — but a charge to store a trailer alone, with no boat on it, is subject to Te…
Can a semiconductor manufacturer use dedicated electrical submeters, instead of a full predominant-use study of every piece of equipment, to claim the Texas manufacturing electricity exemption?
Yes, but with conditions. A semiconductor manufacturer can qualify for the Texas sales tax exemption on electricity based on predominant use measured by dedicated submeters — without listing the kilow…
Is installing internet wiring and wall plugs in a building taxable in Texas, and does it matter whether the building is residential or commercial?
Labor to install internet wiring and wall plugs as part of new construction, or as a repair/remodel of a residential property, is not taxable if billed lump-sum (though the installer pays tax on the w…
Does a self-employed lawn mowing person have to charge sales tax if they only make a small amount of money and don't sell materials?
Lawn mowing and yard maintenance are taxable real property services in Texas even when no materials or supplies are billed — but Tax Code § 151.347 exempts a self-employed individual whose total recei…
When a pipeline spill job involves backhoe work, pipeline repair, and hazardous waste removal billed by one contractor, does everything get taxed as one improvement-to-realty charge, or can each service be taxed separately?
A contractor's single pipeline-spill job that bundles backhoe/excavation services, pipeline repair, and hazardous waste removal is not automatically taxed as one lump improvement-to-realty charge just…
When a medical kit bundles taxable items (like gloves or scissors) with exempt items (like wound dressings), is the whole kit taxable or exempt?
A bundled medical, dental, or first-aid kit's overall taxability is determined by the predominant cost of its contents: if the taxable items in the kit cost more than the exempt items, the whole kit i…
Does incinerating waste into ash for disposal count as tax-exempt manufacturing/processing under Texas law?
No. Incinerating waste material into ash purely for disposal purposes is not tax-exempt "processing" under Texas Tax Code § 151.318, so a related-party limited partnership performing the incineration …
Is renting a portable sign trailer taxable as equipment rental, or nontaxable advertising, in Texas?
Whether a portable sign — trailer-mounted or not — is a taxable rental of tangible personal property or a nontaxable advertising service depends entirely on who controls the sign's message: if the sig…
Is it taxable to hire a vendor to dismantle manufacturing equipment out of state, move it to Texas, and reinstall it?
Charges to dismantle, move, and reassemble manufacturing equipment relocated to Texas are a nontaxable moving service — not taxable, and a lump-sum vendor doesn't need to break the invoice down line-b…
When a utility separately bills customers for the city gross receipts tax, does that add-on charge itself get taxed again?
Yes. If an electric utility separately bills a customer a line-item for the Tax Code § 182.022 gross receipts tax (the tax on the utility's receipts from using city property) in addition to the electr…
Is charging customers to take a class over the internet, or to build a custom e-learning course, taxable in Texas?
Charging a customer to take a class over the internet is not subject to Texas sales tax, and neither is a charge to write original course content or lesson plans. Developing a custom interactive cours…
Can a caterer claim the manufacturing exemption on the gas and electricity its stoves and ovens use to prepare meals for events?
No. Gas and electricity used by a caterer to prepare or store food for immediate consumption do not qualify for the sales tax exemption under Tax Code § 151.317(a)(3), because a caterer that prepares …
Is a chemical solvent that an oil and gas operator injects into a marginal well, and which stays in the produced oil/gas, exempt from Texas sales tax?
Yes. Micelle mutual solvent — a chemical injected into a marginal well to boost production, which becomes part of the hydrocarbons removed from the well and is sold along with the oil or gas — is exem…
Are tickets to a nonprofit sports league's championship game exempt from Texas sales tax, and does hiring a for-profit company to help produce the event jeopardize that?
Tickets to a championship game sold by a 501(c)(6) nonprofit sports league qualify for the Texas sales tax exemption for amusement services exclusively provided by a nonprofit under Tax Code § 151.310…
Is charging a client to integrate their software onto a company's web-hosting server a taxable data processing service, and does the seller's cash-basis sales tax reporting matter?
Software integration charges are taxable as part of a web-hosting/data-processing engagement — not a nontaxable professional service — when the integration work is performed in connection with placing…
Can a joint venture that tolls (processes) a gas stream owned by the federal government — extracting and cleaning a specific gas molecule — claim the manufacturing exemption on its processing equipment, even though it never owns or sells the gas itself?
Yes. A joint venture that operates a tolling facility — extracting, separating, and cleaning a specific gas molecule (helium) from a gas stream owned by the federal government, and returning the extra…
If a computer's price is discounted at checkout because the buyer agrees to subscribe to a specific internet provider, is sales tax owed on the original price or the discounted price?
Sales tax is due only on the discounted price actually charged for the computer, not the original pre-discount price — when a retailer reduces a computer's sale price at the point of sale in exchange …
Browse Texas rulings by topic
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.