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 the labor to cut and bevel the production casing on a newly completed oil well taxable under Texas sales and use tax?
No. Cutting off the extra casing and later beveling it while completing a new oil well is treated as new construction, so the welder's labor is not taxable. Because the welder billed a single lump-sum…
Does a 'Material Reimbursement Charge' (also called a 'Texas Price Adjustment' charge) that a well-services provider adds to its invoices to recover sales tax it paid on materials used in a nontaxable service violate Rule 3.324(b)(3)(4)?
No. The Comptroller confirmed that the taxpayer's 'Material Reimbursement Charge' — a separate line-item charge used to recover additional product costs incurred because the taxpayer paid sales tax on…
When a sign company designs, manufactures, and installs signs, when is the job treated as an improvement to realty versus a sale of tangible personal property, and how does that affect sales tax?
It depends on the type of sign and how it is attached. Most signs (since May 1988) are treated as real property, so if the sign company acts as a lump-sum contractor it pays tax on materials and does …
If a contractor performs lead-paint abatement (a taxable repair to real property) and also does air monitoring for the same job, is the air monitoring taxable too, and what about the disposal of contaminated materials?
The repair/remodeling work (paint removal, repainting, and related repairs) is a taxable service, but air monitoring is not taxable when it is a stand-alone service involving direct scientific observa…
If a motor vehicle repair shop separately states a charge for shop supplies on a customer's bill, is the shop the 'seller' of those supplies and required to collect sales tax on them?
Yes. This internal Comptroller memo confirms that, effective October 1, 1991, a motor vehicle repair person who separately states a charge for shop supplies (tangible personal property) is a seller of…
If I provide nontaxable mailing/packaging services (boxing, padding, and shipping items for customers) and pay tax on my own packaging supplies, do I have to charge my customers sales tax on the box, packing materials, labor, and shipping charges?
No. Because mailing services are a nontaxable service, the provider (not the customer) owes sales tax on packaging supplies purchased from suppliers under Rule 3.314(c). In both examples given -- one …
Is beaver trapping and dam removal on timberland taxable as a structural pest control service?
No. The Comptroller ruled that beaver trapping and removal services performed to stop beaver dams from flooding East Texas timberland are not taxable as structural pest control services. Structural pe…
Is a glamour photography studio's session fee (covering wardrobe, makeover, and a private photo session) taxable, even if the customer receives no tangible personal property at the session and only orders photographs — if ever — at a later date?
Yes, the session fee is taxable. The Comptroller ruled that the session-fee services (wardrobe, makeover, private photo session) are part of the sale of any photographs, image copies, negatives, or pr…
When a cable TV company adds new cable lines to utility poles, is that remodeling or new construction — and does it matter whose poles the lines are being attached to?
It depends on whose poles are involved. This internal Comptroller memo concludes that when a cable company adds new lines to poles it already owns, that is remodeling, consistent with prior guidance (…
Is dredging dirt, mud, silt, and sand out of a boat slip or waterway taxable as real property repair/remodeling, or exempt as new construction, and is the fee charged for disposing of the dredged material at a spoils facility taxable?
It depends on what is being dredged. Dredging to create a brand-new slip or dock (as part of new construction) is new construction labor and is NOT subject to sales tax. But dredging an existing man-m…
Is a paper-and-pencil personality profile testing service, used by employers to screen job applicants for honesty and suitability, taxable in Texas as a security service?
Yes, currently — but that changes soon. The Comptroller confirmed that a client's paper-and-pencil personality profile testing service is taxable as a security service under Rule 3.333(a). However, ef…
If a manufacturer buys back equipment from a customer under its own satisfaction guarantee (separate from the retailer's original sale), can the retailer refund the sales tax it collected, or can the retailer get that tax refunded from the state?
No. The Comptroller ruled that the doctors were not due a refund of the sales tax paid to the equipment retailer, and if the retailer refunds the tax to the doctors anyway, the Comptroller will not re…
Is a two-hour boat trip to watch dolphins in the wild a taxable amusement service in Texas?
Yes. The Comptroller ruled that a two-hour dolphin-watching boat trip on the Gulf of Mexico (with no food or drinks provided) is a taxable amusement service under Rule 3.298, because the trip does not…
For a company that has fixed places of business in some cities but also sells from mobile trucks that travel to customers around the state, is local (city/county) sales tax on the truck sales based on the truck's location when the sale happens, or on the company's place of business that supplies/dispatches the truck?
Local (city and county) sales tax on sales made from the trucks is based on where the truck is when the sale actually happens — that is, the location where the customer looks over the merchandise, sel…
When a Texas repair shop services foreign (Mexican) aircraft — repairing, remodeling, or installing parts and engines — is the labor or the parts subject to Texas sales tax?
Separately stated labor charges to repair, remodel, restore, or maintain aircraft are not subject to Texas sales tax, whether the aircraft is foreign or domestic. Aircraft repair and replacement parts…
Could a Texas vehicle rental company pass county property tax to customers, and was the reimbursement subject to rental tax?
The rental company could recover the cost, but could not tell customers they owed county property tax because only counties collected that tax. Any reimbursement was part of the rental company's taxab…
Is maid/janitorial service provided by a condominium property management company's own employees exempt from sales tax as an employee-wage exclusion, when the cost of that service is bundled into the management company's overall rental commission rather than billed separately?
Generally no. The Comptroller ruled that the maid service employees provide to condominium owners and guests is a taxable real property service, and the wage-exclusion exemption in Rule 3.356(n)(1) do…
Are fenders used by a lightering workboat to protect tankers during a lightering operation exempt from Texas sales tax as a component part of the vessel, even though the fenders are not physically attached to the boat?
Yes. The Comptroller ruled that the fenders (Yokohama Fenders) are an integral part of the lightering workboat and will be considered a component part of the vessel even though not physically attached…
If a bank writes off a customer's unpaid credit-card balance and recourses (charges back) the uncollectible amount to the vendor, can the vendor claim a sales tax bad debt credit?
Only in one of the two scenarios described. A vendor cannot take a bad debt credit just because a bank identifies and recourses the sales tax portion of a written-off account back to the vendor — tax …
Is the compensation a receiving racetrack pays a sending racetrack for simulcasting a horse or dog race, for wagering purposes, subject to Texas sales or use tax?
Yes. The compensation (fees or commission) a receiving racetrack pays a sending racetrack for simulcasting a race — the live audio/video transmission of a race from a sending track to a receiving loca…
If a company places copy machines at retailer locations and charges a monthly fee based on the number of copies sold, is that a lease of the copier, and can the retailer buy paper and toner tax-free with a resale certificate?
Yes, it is a lease. The Comptroller confirmed that a company placing copy machines at various business locations and charging a monthly fee based on the number of copies made (here, 5 cents per copy, …
Is soil aeration (core plugging) performed on golf courses and athletic fields by an independent contractor a taxable service in Texas?
Yes. The Comptroller ruled that punching holes in the soil to aerate turf is "lawn maintenance" as defined in Rule 3.356(a)(5), even if the contractor does not fill the holes afterward. Charges for th…
If an air waybill (bill of lading) covering exported merchandise doesn't itself fully describe the goods, can an attached invoice be used to tie the shipment to the purchase for export tax purposes?
Yes, conditionally. The Comptroller will allow an invoice attached to a bill of lading (air waybill) to identify the goods covered under that bill of lading, but only if the notation tying the invoice…
Do a software developer's Texas sales, installation, and license fees create franchise-tax nexus, and do a franchisor's initial fee and royalties?
Both out-of-state corporations had Texas franchise-tax nexus. A New Jersey software developer with salespeople soliciting sales in Texas had nexus for both the taxable-capital and earned-surplus compo…
Is a fee an ice skating rink charges to rent ice time ('patch ice') to skating instructors and coaches, for use in training their students, taxable as an amusement service, or is it exempt because the activity is instructional rather than recreational?
Taxable. This internal memo from an Office of the Attorney General attorney to a Comptroller Tax Administration official reports that a bankruptcy judge upheld the Comptroller's position that a rink o…
Do sales/use tax exemptions for services performed between affiliated corporations still apply when some of the corporations in the group are non-profit entities that would otherwise be excluded from the federal definition of an affiliated group?
Yes. The Comptroller ruled that a non-profit parent corporation and its subsidiaries are still treated as 'affiliated corporations' under Texas Tax Code Sec. 151.346 and Rule 3.331, even though the pr…
Is natural gas used to fuel boilers at a towel rental (industrial laundry) business exempt from Texas sales and use tax as gas used in processing?
No. The Comptroller ruled the natural gas used to fuel the boilers at a towel rental company was not exempt, because the boilers themselves are not equipment directly used in processing the rental tow…
Can a property management company buy supplies and services tax-free on behalf of FDIC/RTC-owned properties it manages, and can it fix past sales tax it mistakenly paid?
Yes. A property management company acting as agent for the FDIC or RTC can issue a sales tax exemption certificate to its vendors for purchases made for FDIC/RTC-owned properties, as long as it has do…
Is cleaning up an oil spill or remediating contaminated soil at an oil and gas site taxable in Texas?
It depends on location and cause. Cleaning up an oil spill at the well site, or one caused by oil/gas/geothermal exploration, development, or production activity and regulated by the Texas Railroad Co…
Does a Texas health club have to charge sales tax on personal training session fees?
No, not if the training is one-on-one and the trainer actually puts the client through the workout (not just designs a program and shows equipment use). A separately stated charge for that kind of per…
Can a Texas business scan invoices and resale/exemption certificates and store them electronically instead of keeping paper copies?
Yes, with two conditions: the business must keep back-up hard copies of resale/exemption certificates specifically, and it must provide the Comptroller's auditors with sufficient equipment to examine …
Is the labor to install, connect, and calibrate store refrigeration/freezer display units subject to Texas sales tax?
It depends on how the units are wired together. If several self-contained freezer/refrigeration units are connected to share one compressor, the labor to connect them into that single system is taxabl…
Are hospital gowns, urinary drainage bags, cushions, and benzoin swab sticks exempt from Texas sales tax when purchased by a hospital?
It depends on the item. Hospital gowns are taxable. Urinary drainage bags are exempt. The cushions described were found taxable for lack of qualifying information. Benzoin swab sticks are exempt only …
Does Texas sales tax apply to a dialysis re-use machine and a reverse osmosis water-purification machine used in home dialysis treatment?
It depends on how the equipment is used. The Comptroller told this taxpayer that a Dialysis Re-Use machine (used to clean artificial kidneys after dialysis) and a Reverse Osmosis machine (used to puri…
Is adding fiber optic cable to an existing cable TV distribution system taxed as new construction or as taxable remodeling in Texas?
It depends on how the cable is installed. Adding fiber optic cable as a separate line that supplements (not replaces) the existing coaxial distribution plant is treated as nontaxable new construction.…
Does a subcontractor owe Texas sales tax on labor charges for cutting, sawing, coring, or drilling concrete?
It depends on the job. Cutting, sawing, coring, or drilling concrete tangible personal property not yet installed, or existing nonresidential real property, is a taxable service, so the subcontractor …
Does a Texas city owe sales tax on chairs, tents, and other equipment it provides for cemetery funeral services or convention center room rentals?
No. The Comptroller ruled that a city does not have to collect sales tax on equipment (chairs, tents, artificial grass) it provides for graveside funeral services at a city cemetery, because that's tr…
Does a company have to collect Texas sales tax on charges for setting up and supervising a contest?
No. The Comptroller ruled that charges for setting up and supervising a contest are not taxable services, but the company must still collect tax on any materials and prizes it sells to its client.
Does a bareboat rental (no crew) get taxed differently than a boat charter that comes with a captain?
Yes. Renting a 'bareboat' (just the boat, no crew) is a taxable rental subject to limited sales tax, while chartering a boat WITH a captain is normally a nontaxable transportation service (e.g., a fis…
Can a company that buys and sells a chemical used to clean up oil spills issue or accept a resale/exemption certificate on that chemical, and is the oil-spill clean-up service itself taxable?
A retailer that buys the chemical only to resell it as-is may issue a resale certificate to its supplier. But a company that uses the chemical to perform a clean-up service must pay tax on it, unless …
Does a bank have to include 'credit amounts' used to reduce its service charges in its gross receipts for Texas franchise tax purposes?
No. The Comptroller ruled that 'credit amounts' used to calculate bank service charges are not receipts to the bank for Texas franchise tax purposes, because they merely reduce a service-charge expens…
Is labor to build and attach a metering station to an existing pipeline taxable as remodeling, or exempt as new construction?
Taxable as remodeling. The Comptroller ruled that attaching a metering station to an already-existing pipeline is a modification/upgrade of that pipeline, not new construction, so the labor to build a…
A grave-opening/closing service provider for funeral directors asked the Comptroller several questions: is backhoe/truck/driver grave-opening and closing labor taxable, is it a taxable equipment 'rental' if billed separately, how is selling and installing a concrete burial vault taxed, and is setting up a tent and chairs at graveside a taxable rental?
No to all of them, with a billing caveat. Grave opening/closing labor is a nontaxable service, but if you separately state a charge for the backhoe, truck, and trailer (even with a driver), the Comptr…
Is a Texas company's 1-800 toll-free telephone service subject to Texas state sales tax on calls that originate outside Texas but are billed to a Texas address?
No. Under this 1993 Texas Comptroller letter, only 1-800 calls that originate within Texas and are billed to a Texas billing address are subject to Texas state sales tax. Calls that originate outside …
Does a beauty salon or aesthetician owe Texas sales tax on shampoo, tonics, and conditioners it buys and uses on customers?
Yes, in part. A beauty salon or aesthetician owes Texas use tax on supplies (like shampoo, tonics, and conditioners) it uses to perform nontaxable services such as facials, and must also collect and r…
Does a property management company owe sales tax on an 'overtime air conditioning' fee it charges tenants?
No. The Comptroller ruled the overtime air conditioning charge is not taxable, because the property management company already paid sales tax to the electric or gas utility and is using the utility se…
Does Texas sales tax apply to food purchased for a guard dog?
No. Texas sales tax does not apply to food for guard dogs, as long as the dog has been professionally trained for guard duty by someone in the business of training guard dogs and is not kept as a pet.
Is electricity used to show a vacant model home or house exempt from Texas sales tax as residential utility use?
No. Electricity a real estate agency buys for a vacant home used to show or demonstrate the property to prospective buyers is taxable as commercial use, not exempt residential use — the same is true f…
Was the United States Postal Service exempt from Texas motor vehicle tax, and did its vehicles need exempt license plates?
Yes, the United States Postal Service was exempt as an instrumentality of the federal government. Vehicles owned by the United States or its instrumentalities were not required to display exempt licen…
Are Kool-Aid Kool-Pumps, popsicles, snow cones, and individually sold ice cream novelties subject to Texas sales tax?
Yes. The Comptroller ruled that Kool-Aid Kool-Pumps are not a food product and are taxable whether sold individually or in a box of six, and that popsicles, snow cones, and individually sold ice cream…
Do admission charges for amusement events at a venue listed in the National Register of Historic Places owe Texas sales tax, and can collected tax on those tickets be refunded?
No sales tax is due on admission to amusement services held exclusively at a place listed in the National Register of Historic Places, but any tax already collected from patrons on ambiguously-worded …
Is an Ottawa yard tractor (a yard-spotting tractor used to move trailers around a yard) a taxable motor vehicle or is it subject to Texas limited sales and use tax?
An Ottawa yard tractor is subject to Texas limited sales and use tax, not motor vehicle sales tax, because it is not a motor vehicle and not rolling stock. The Comptroller confirmed that yard tractors…
Are multi-part 'bill of lading' shipping forms, sold to a manufacturer's client, exempt from Texas sales/use tax as packaging supplies?
Corrected answer (April 12, 1993): a manufacturer-client may issue an exemption certificate for the bill-of-lading forms, but must then self-assess use tax on the cost of any part(s) of the form that …
How did Texas handle vehicle tax when a lemon-law vehicle was refunded, upgraded, downgraded, replaced, or leased?
An actual trade-in toward an upgraded replacement was taxed on the price difference; otherwise the new vehicle was taxed in full and a refund claim filed for the returned vehicle. A trade-down created…
Does a trucking company owe Texas sales tax on satellite-tracking data fees, fuel-card billing fees, or a work-injury medical services retainer, and how should it apportion its Interstate Motor Carrier (IMC) tax?
It depends on the charge. A California company's satellite-tracking/messaging fees are not subject to Texas sales tax if the transmissions don't originate in Texas (they are taxable if the transmittin…
Were asphalt pump-kettle units subject to Texas motor vehicle tax or limited sales tax?
Limited sales tax applied. Although local officials viewed the units as trailers, the Tax Administration Division found they were not designed and built to transport people or property on highways, so…
Do I have to charge Texas sales tax on drafting or CAD design services, like drawings and blueprints made from a client's specs?
Yes. Texas sales tax is due on drafting delineations and blueprints, including CAD drafting, when the draftsman works from specifications the customer supplies, and on any additional copies of the fin…
If I rent my Texas condo out short-term part of the year and use it as my residence the rest of the year, is repair and remodeling work on it taxable?
Yes. The Comptroller told this condo owner that because the unit was rented on a daily or weekly basis part of the year (taxable under the Hotel Occupancy Tax) and used residentially the rest of the y…
Is a scale used to weigh cattle at a farm or ranch exempt from Texas sales tax as agricultural equipment?
It depends on installation: a free-standing scale used exclusively on a farm or ranch to weigh livestock can qualify for the Texas agricultural exemption as farm equipment, but a scale that becomes pa…
Does a repairman owe Texas sales/use tax on warranty forms and cards bought from an out-of-state retailer, or can the repairman use an exemption certificate instead?
Yes, tax is owed. A repairman must pay sales or use tax on warranty forms and cards because they are consumable supplies used to perform the repair, not parts transferred to the customer, and a repair…
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.