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 one company collects a fee from subscribers on behalf of another company under a written agency agreement, who is responsible for charging, collecting, and remitting the Texas sales tax on that fee?
Once a written agency agreement is executed, the agent stands in the principal's shoes: the agent (not the principal) must charge and collect sales tax on the taxable fee it collects from subscribers,…
Does a laparoscopic-surgery trocar system that delivers carbon dioxide gas (not fluids or drugs) into the abdomen qualify for Texas's sales tax exemption for intravenous (IV) systems?
No. The Comptroller ruled that a laparoscopic-surgery trocar system -- an access port, cannula, gas-pressure control device, and connecting tubing that introduces carbon dioxide gas into the abdomen t…
Can a planned Convention Center Annex more than 1,000 feet from the City of Arlington's existing convention center still make a nearby hotel project eligible for the state hotel-project tax rebate, and does a ground lease to a private developer break the required city-ownership link?
Yes to both. The Comptroller ruled that a newly built Convention Center Annex -- located separately from, and more than 1,000 feet away from, the City of Arlington's existing convention center -- will…
Can the City of Nacogdoches get a rebate of state hotel occupancy and sales taxes for a rehabilitated downtown hotel/convention center project, and does it matter whether the city or the developer owns the convention center building?
Yes, but ownership structure controls. The Comptroller ruled the City of Nacogdoches -- as a smaller city qualifying as an 'eligible central municipality' because it hosts a general academic teaching …
Is the fee an amusement park guest pays to use an electronic storage locker a taxable rental of tangible personal property, or a nontaxable storage service -- and did the Comptroller's answer change from an earlier ruling to the same taxpayer?
Nontaxable, but only going forward. The Comptroller ruled that fees amusement park guests pay to use an electronic storage locker are a nontaxable storage service, not a taxable rental of tangible per…
Does building a manufacturing plant inside a federal Foreign Trade Zone let a company defer Texas sales and use tax on the equipment and materials it imports to build it?
No deferral. The Comptroller ruled that a company building a manufacturing plant inside a federal Foreign Trade Zone (FTZ) still owes Texas use tax on the equipment, machinery, and other goods it impo…
Does converting customer-owned natural gas into liquefied natural gas (LNG) under a tolling arrangement -- where the processor never owns the gas -- still qualify as exempt 'processing' for Texas's manufacturing exemption?
Yes. The Comptroller ruled that liquefying natural gas into LNG for export is 'processing' that qualifies for the Texas manufacturing exemption whether the company sells the LNG itself (an F.O.B. arra…
Is converting natural gas into liquefied natural gas (LNG) for overseas shipment 'processing' eligible for Texas's manufacturing exemption, or is it just a taxable transportation-related activity?
Processing, not transportation. The Comptroller ruled that converting natural gas into liquefied natural gas (LNG) -- by changing its chemical composition and compressing/cooling it into a liquid -- i…
Can a petroleum terminal operator claim the sales tax exemption on the natural gas it uses to heat customer-owned fuel oils, on the theory that the heating is part of processing (blending) or part of transporting a material extracted from the earth?
Denied, for lack of proof. The Comptroller declined to rule that a petroleum terminal operator's natural gas -- used to heat and keep warm stored fuel oils awaiting transport -- qualifies for either t…
When a real-property lease for a residential facility bundles in furniture, fixtures, and equipment as part of the rent, does the landlord have to charge sales tax on that bundled tangible personal property?
No sales tax is due. The Comptroller ruled that when a landlord leases real property (land, buildings, and improvements) together with furniture, fixtures, and equipment as part of a single rental cha…
Can a Texas data center count third-party staffing agency employees toward the 20-qualifying-job requirement needed to keep its data center sales tax exemption, and what counts as the required 'shared employment responsibilities'?
It depends on the actual contract terms. The Comptroller ruled that a qualifying data center MAY count third-party contract employees toward its 20-qualifying-job requirement (Tax Code Section 151.359…
If a certified Texas data center occupant expands into a new, physically separate building on the same campus, does that new space count as part of the original certified data center for tax-exemption purposes?
No, the new building doesn't count as part of the existing certified data center. The Comptroller ruled that Tax Code Section 151.359's data center exemption applies only within the single building ce…
As the owner of a data center campus, does the Comptroller treat a tenant's expansion data halls in a newly built, separate building as part of the same already-certified qualifying data center?
No. In a companion ruling to the one issued to its tenant, the Comptroller told the CAMPUS OWNER the same thing: a tenant's planned expansion data halls, to be built in a separate new building on the …
Does the same 25-year build-to-suit exempt-contract analysis apply when a Texas charter school's new campus houses two combined school campuses under one lease, rather than a single campus?
Yes. In a same-day companion ruling to a single-campus version, the Comptroller reached the identical result for a charter school's 25-year build-to-suit lease covering a facility that combines TWO sc…
Does a 25-year build-to-suit lease for a Texas charter school's new high school campus qualify as an exempt contract, letting the for-profit landlord's contractors buy construction materials tax-free?
Yes. The Comptroller ruled that a build-to-suit lease under which a for-profit landlord constructs a high school campus to a tax-exempt charter school's specifications, then leases it back for 25 year…
When several co-owners jointly act as landlord under a single 25-year build-to-suit lease for a two-campus charter-school facility, does the § 151.311 construction exemption still apply?
Yes. The Comptroller ruled that a build-to-suit lease and purchase option covering two charter-school campuses, where several parties collectively act as "Landlord" under a single 25-year primary term…
When a single landlord builds one facility housing two charter-school campuses and leases it for 25 years with a purchase option limited to years one through four, does the § 151.311 construction exemption still apply?
Yes. The Comptroller ruled that a single build-to-suit lease covering two charter-school campuses built by one landlord and leased back for a 25-year primary term — with the school's purchase option l…
If a charter school already holds legal title to its land but ground-leases it to a landlord entity for construction financing, then leases back the remodeled/expanded campus, does the § 151.311 construction exemption still apply?
Yes. The Comptroller ruled that a build-to-suit lease qualifies as an EXEMPT CONTRACT under Tax Code § 151.311 even where the charter school itself holds legal title to the land but grants a ground le…
If a charter school's build-to-suit lease runs through a chain of separate holding entities (one created just to shield against environmental liability), does the § 151.311 construction-contract exemption still apply?
Yes. The Comptroller ruled that a build-to-suit lease qualifies as an EXEMPT CONTRACT under Tax Code § 151.311 even though the property sits behind two layers of separate holding entities — a non-qual…
When a charter school relocates a campus by having a for-profit landlord build a new facility and lease it back for 30 years, with an option to buy at any time, does the construction contract qualify as a tax-exempt improvement to realty?
Yes. The Comptroller ruled that a build-to-suit lease under which a for-profit landlord constructs a relocated charter-school campus to the school's specifications, then leases it back for a 30-year p…
When a landlord builds a new high-school campus for a charter school and leases it back for 25 years with a purchase option, does the construction contract qualify as tax-exempt under § 151.311?
Yes. The Comptroller ruled that a build-to-suit lease under which a landlord constructs a new high-school campus to a charter school's specifications and leases it back for a 25-year primary term (wit…
A charter school's build-to-suit lease was amended to stretch its term from 20 to 25 years shortly before the ruling request -- does that longer, amended term satisfy the § 151.311 two-prong exemption test?
Yes. The Comptroller ruled that a charter school's build-to-suit lease — which the parties AMENDED on June 12, 2015 to increase its term from 20 years to 25 years — qualifies as an EXEMPT CONTRACT und…
Do Texas motor vehicle gift-tax and community-property exemptions apply equally to same-sex spouses and common-law marriages?
Yes. Same-sex spouses qualified for the $10 motor vehicle gift tax on separate property and for community-property exemptions to the same extent as opposite-sex spouses. Texas-recognized common-law ma…
Texas Private Letter Ruling 201507252L: For the 'large' data center exemption (as opposed to the standard qualifying-data-center exemption), when must the $500 million capital-investment agreement be made, how long does the exemption last, and what equipment and jobs qualify?
The Comptroller ruled on Texas's separate, larger "large data center project" exemption under Tax Code § 151.3595 (distinct from the standard § 151.359 qualifying-data-center exemption): the taxpayer'…
For Texas franchise tax, can a farmer deduct the costs of growing crops as cost of goods sold, and does it matter whether the farmer owns the crops?
Yes, but only if the farmer owns the crops he sells — a farmer who owns and sells crops he grows is the "producer" of those crops and may deduct as cost of goods sold all allowable direct production c…
Does Texas tax an optional extended warranty or service contract sold with a motor vehicle, and are parts used for covered repairs taxable?
The separately invoiced optional warranty or service contract was not taxable whether the vehicle was sold or leased. However, repair parts used to perform work under the contract remained subject to …
Is the sale of an extended warranty or service contract on a motor vehicle taxable in Texas, and can the warranty provider buy replacement parts tax-free using a resale certificate?
No, the sale of an extended warranty or service contract on a motor vehicle isn't itself subject to Texas sales/use tax or motor vehicle tax, whether the vehicle is sold or leased -- but the used-car …
Is a 'bead blasting' service that removes stubborn scale build-up from swimming pool tile ordinary nontaxable pool cleaning/maintenance, or taxable real property restoration -- and does the answer change for a residential vs. a commercial pool?
Restoration, not routine cleaning -- and the tax result differs by property type. The Comptroller ruled that a 'bead blasting' service (using microscopic glass beads sprayed by an air compressor to re…
Amended Texas Private Letter Ruling: Is converting pipeline-quality natural gas into liquefied natural gas (LNG) at a new Texas LNG plant exempt manufacturing 'processing,' or is it all just excluded 'transportation' activity because the gas is being prepared for overseas shipment?
AMENDED RULING (corrects typographical errors in a December 19, 2014 original). At least some of the activities that convert pipeline-quality natural gas into liquefied natural gas (LNG) at a planned …
Is a hospital vendor-credentialing service -- compiling vendor documents and issuing access badges -- a taxable 'data processing service' in Texas, and can the credentialing company buy the access badges tax-free?
Taxable data processing, not a nontaxable security service. The Comptroller ruled that a company's healthcare-facility vendor-credentialing service -- compiling vendor-submitted documents and accredit…
For Texas franchise tax, can a concessionaire exclude the percentage-of-receipts payments it makes to a venue owner or event promoter from total revenue as 'flow-through funds,' or deduct them as cost of goods sold?
No — a food-and-beverage concessionaire's payments to facility owners or event promoters under a concession agreement are NOT excludable from total revenue as 'flow-through funds mandated by contract'…
Is a company's fee for representing claimants in Social Security disability applications and appeals a taxable 'insurance service' in Texas?
No. The Comptroller ruled that a managed-care company's division providing Social Security disability (SSDI) representation services -- completing applications and appeals, gathering medical records, …
When a company installs a custom VIP interior into a 'green' (interior-less) aircraft that a customer already bought from the manufacturer, is that manufacturing (with its sales-tax exemption) or taxable remodeling -- and does it matter that the FAA issues a new Standard Airworthiness Certificate only after the interior goes in?
Remodeling, not manufacturing -- and an FAA airworthiness certificate or pilot's license proves nothing about Texas tax status. The Comptroller ruled that a company hired to design and install a custo…
If a charter school sells undeveloped land it already owned to a single landlord LLC, who then builds a new campus and leases it back for 25 years, does that sale-leaseback structure qualify for the § 151.311 construction exemption?
Yes. The Comptroller ruled that a build-to-suit lease and purchase option qualifies as an EXEMPT CONTRACT under Tax Code § 151.311 where the charter school first SOLD undeveloped land it already owned…
If a charter school already owns undeveloped land it can't afford to build on, SELLS it to landlord entities who then build the campus and lease it back for 25 years, does that sale-leaseback financing structure still qualify for the § 151.311 construction exemption?
Yes. The Comptroller ruled that a build-to-suit lease and purchase option qualifies as an EXEMPT CONTRACT under Tax Code § 151.311 even where the charter school first SOLD undeveloped land it already …
When a 17-campus charter-school network has three out-of-state LLCs jointly acquire land and build a new campus, then lease it back for 25 years with a purchase option in years 2-5, does the construction qualify as exempt under § 151.311?
Yes. The Comptroller ruled that a build-to-suit lease and purchase option under which three Idaho LLCs, acting jointly as "Landlord," acquire previously unimproved land and construct a new campus to a…
When a landlord renovates a former retail building (a furniture store) into a charter-school campus and leases it back for 30 years, does that renovation contract qualify as exempt under Tax Code § 151.311 -- the same as new ground-up construction?
Yes. In what the Comptroller describes as a question of first impression not previously addressed with these precise facts, the Comptroller ruled that a build-to-suit lease and purchase option under w…
For an existing Texas cloud-computing data center planning a 100,000+ square foot expansion, seven questions: does hosting customer data violate the exemption's single-occupant rule; is the pre-2013 existing center itself exempt; can the expansion qualify on its own; can shared jobs/investment/electricity/equipment be split between the old and new parts; do contractor-staffed jobs count; does providing some telecom service disqualify the project; and is a backup generator outside the building eligible?
A foundational, seven-question ruling on the qualifying data center exemption (Sec. 151.359). Key holdings: (1) hosting customers' data and letting them run their own programs on the operator's own se…
When a state university system (the exempt party) is the LANDLORD and a non-exempt LLC is the TENANT building student housing on university land -- the reverse of the usual exempt-tenant/taxable-landlord setup -- does the construction still qualify as an exempt § 151.311 contract, and who can issue the exemption certificates down the contractor chain?
Yes, exempt -- but under a different legal test than the familiar two-prong lease-term test. The Comptroller ruled that a 514-bed student-housing facility built on Texas A&M University System land und…
Can a PRIVATELY owned hotel next to Houston's George R. Brown Convention Center still qualify as a 'qualified hotel project' entitled to a 100% state tax rebate for 10 years, even though a private company (not the city) owns the hotel itself?
Yes. The Comptroller ruled that a Houston convention-center hotel PRIVATELY owned by an LLC can still qualify as a 'qualified hotel project' entitled to the 10-year, 100% state sales/use and hotel occ…
For a city developing two separate convention-center-area hotel projects (with ancillary restaurants/shops), when can each qualify as a separate 'qualified hotel project' entitled to a 10-year 100% state and local tax rebate, and how do ancillary businesses sign up for and split that rebate?
A single, combined ruling covering two separate City of Irving hotel developments (the 'Northshore Project' and the 'City Project'). Key holdings: (1) two hotels within 1,000 feet of the same conventi…
Can a luxury movie-theater chain with dine-in food and bar service use the reduced retail/wholesale franchise tax rate for years when most of its revenue comes from food and beverage sales, and does it have to reclassify as a "dinner theater"?
ALERT: This ruling's specific Tax Rates, Compensation Deduction Limits, No Tax Due Thresholds, and Total Revenue Thresholds may be outdated -- see STAR Accession No. 202112002L or 202308006L for curre…
Is Texas motor vehicle sales tax due when someone barters parts for a street-legal motorcycle, and can the parts count as a trade-in?
Yes. Exchanging parts for a street-legal motorcycle was a taxable sale even though no cash changed hands. The parts were consideration, not a motor vehicle trade-in, so tax was based on their value or…
Is Texas motor vehicle tax due when a taxicab owner adds the cab company to the title solely to satisfy an operating agreement?
No. Under the submitted Dual Title Agreement, the individual kept beneficial ownership and added the cab company only to satisfy operating and financial-responsibility requirements, with sole title re…
Is a Texas local government corporation created under Transportation Code Chapter 431 exempt when it buys vehicles and other property?
Yes. The corporation's acquisition of property was exempt under Transportation Code § 431.102(b) and Local Government Code § 394.905, covering motor vehicles and other property. It was not a public ag…
Does Texas accelerate seller-finance motor vehicle tax when notes move from one related finance company to a second qualifying RFC?
No. On the stated facts, transferring notes from the dealer's first registered related finance company to a second qualifying RFC did not accelerate the remaining motor vehicle tax. The dealer continu…
Does the $10 Texas vehicle gift tax apply when the sole owner of a used-car dealership transfers a dealership vehicle to a brother?
It depends on the business form. A sole proprietor and the dealership were legally the same, so a vehicle given to the owner's brother qualified for $10 gift tax. A corporation or LLC was separate, so…
Can a horse or livestock trailer with built-in human living quarters qualify for Texas's farm-trailer motor vehicle tax exemption?
Only with strict proof. A livestock trailer with human living quarters was presumed taxable and had to be used at least 80% for qualifying transport by an agricultural producer. Trips to races, rodeos…
When a customer returns a vehicle under a satisfaction guarantee, what refund is required before Texas motor vehicle sales tax can be refunded?
The buyer had to return the vehicle and receive a full refund of total consideration, including dealer-installed accessories, before motor vehicle sales tax could be refunded. Nonrefundable statutory …
Was a federal Cash-for-Clunkers voucher received by a Texas new-car dealer included in the vehicle's motor vehicle sales-tax base?
No. The federal Car Allowance Rebate System voucher paid to the selling new-car dealer was not subject to Texas motor vehicle sales tax. The dealer was instructed to show it on Form 130-U's trade-in l…
Can a Texas county issue vehicle title without collecting tax again when a closed dealer took the buyer's tax but failed to remit it?
Yes. The county could accept the title application without collecting tax again if the buyer documented payment to a licensed Texas dealer and the county notified the Comptroller in writing by the 31s…
Does Texas motor vehicle tax apply when a limited partnership converts into an LLC under an approved statutory conversion plan?
No. Under an approved Texas statutory conversion, the limited partnership continued as an LLC and its vehicles remained owned by the converted entity without a transfer or assignment, so retitling and…
When is a rental vehicle considered destroyed so a self-insured Texas rental company is relieved from minimum tax liability?
A rental vehicle qualified as destroyed when its title was surrendered for a salvage or nonrepairable title under Transportation Code § 501.091 and the vehicle was removed from normal operation. That …
A hotel and its on-site restaurant are commonly owned but separately incorporated. Guests can pay one bundled price for room-plus-meal (with the hotel doing an internal 'book transfer' payment to the restaurant), or a lower room-only price. Is hotel tax or sales tax due, is the internal book transfer itself taxable, and can the hotel give the restaurant a resale certificate for it?
Three related answers for this commonly-owned hotel-and-restaurant American Plan setup: (1) if the guest's invoice does NOT separately state the meal charge, hotel occupancy tax is due on the ENTIRE b…
How is Texas motor vehicle sales tax calculated when a mechanic or storage facility takes or auctions a vehicle under a possessory lien?
Forgiving the unpaid mechanic or storage debt in exchange for the vehicle was taxable consideration. If the lienholder took title, tax generally used the noticed charges; a separate auction buyer paid…
A new commercial hunting lodge will charge guests for overnight rooms, meals, guided hunts, and gear rental/sales. Which parts are hotel occupancy tax, which are sales tax, and which aren't taxed at all?
A four-way split depending on what's charged and how it's billed. LODGING is subject to state HOTEL OCCUPANCY TAX (6%) under Tax Code Sec. 156.001's 'hotel' definition. If lodging, meals, and hunts/gu…
Which Texas tax applies to a park-model trailer: motor vehicle tax, manufactured-housing tax, or ordinary sales and use tax?
STAR says the rule changed on November 14, 2013: park models became subject to Chapter 152 motor vehicle tax and left Chapter 151 sales tax. Historically, the 2008 letter treated qualifying industrial…
Is a Texas economic development corporation exempt from motor vehicle sales tax because it has other state sales-tax exemptions?
No. The economic development corporation's limited sales-tax exemption did not make it a political subdivision or exempt it from every state tax, and the motor vehicle tax chapter contained no compara…
Can someone use a vehicle titled to another consenting owner as a trade-in, or trade a personally owned vehicle toward a new lease?
Partially superseded. The letter's answer about untaxed out-of-state vehicles is no longer valid. Its remaining guidance allows a titled owner to consent to another buyer's trade-in and lets a lessee …
How did Texas treat seller-financed vehicle accounts transferred to related finance companies before and after the 2007 law change?
Partially superseded. The 2007 law let qualifying registered related finance companies receive transfers without immediate tax acceleration, while the dealer remained responsible for tax collection an…
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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.