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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Does a business owe Texas sales tax on candy sold through an honor-system box, where customers take a piece and leave payment on their own?
Yes. The Comptroller ruled that honor-system candy sales are subject to Texas sales tax on the total gross receipts, the seller must get a sales tax permit and file quarterly, and because the candy su…
Do sales/use tax and the oil well service tax apply to well tagging, inter-well tracing, and naturally occurring radioactive material (NORM) testing services performed on oil field equipment?
The well tagging and inter-well tracing services themselves are not subject to limited sales or use tax, but the taxpayer must pay sales tax on the materials and equipment (including radioactive isoto…
Can an out-of-state seller who leases equipment in Texas get credit against Texas sales/use tax for sales tax it paid to another state on that same equipment?
No. This is an internal Comptroller memo explaining that an out-of-state seller cannot apply for a refund or credit against Texas tax collected on leased equipment for tax it separately paid to anothe…
As an independent distributor selling tablets for a direct sales/multi-level marketing company in Texas, do I owe tax on the products I buy from the company to resell?
Yes. The Comptroller ruled that the tablets sold through this direct sales organization are taxable in Texas, and as an independent distributor you must pay tax on your purchase of the product from th…
If we sell oil/gas equipment to overseas customers FOB our Texas plant or FOB an export packer, do we owe Texas sales tax, and when do we have to collect it?
Yes, in most cases. Because title to the equipment passes in Texas under "FOB plant" or "FOB export packer" shipping terms, the sale is a taxable Texas sale, and the seller must collect Texas sales ta…
Can a grocery store chain that prints its own newspaper inserts in its own print shop get a refund of the sales tax it paid on the newsprint and ink?
No. The Comptroller ruled that a grocery store chain printing its own newspaper inserts in its own print shop is not entitled to a refund of sales tax paid on the newsprint and ink. The Sec. 151.319(c…
If my business buys promotional giveaway items like calendars, matchbooks, or rain gauges to hand out for advertising, do I owe Texas sales tax on them?
Yes. The Texas Comptroller confirmed that a business buying tangible items such as rain gauges, imprinted calendars, or matchbooks to give away as promotional items must pay sales tax on those purchas…
Does the Texas Workers' Compensation Insurance Facility owe sales tax on the debt collection services it buys to recover unpaid premiums?
Yes. The Comptroller ruled on January 26, 1993 that the Facility's purchases of debt collection services used to collect delinquent premiums are taxable. The Facility's statutory exemption (Texas Insu…
Can a contractor building a day-care center on an Indian reservation use the tribe's sales-tax exemption to buy construction materials tax-free?
No. The Comptroller ruled that a contractor building an on-reservation day-care center for a Texas Indian tribe cannot claim the tribe's own tax exemption when buying materials. Instead, if the constr…
Do I have to charge Texas sales tax for boarding or training dogs at my kennel?
No. The Texas Comptroller ruled that boarding dogs and training dogs are both nontaxable services, so a kennel does not charge its customers sales tax on those charges. However, the kennel owner must …
Can a contractor rent equipment tax-free to improve real property on a federal construction project like the Superconducting Super Collider?
No. Since October 2, 1984, when the Texas Legislature repealed the prior exemption, a contractor's rental of equipment used to improve real property on a federal government job is taxable. In this cas…
In this January 1993 Texas ruling, an Arkansas printer bought manufacturing equipment in Louisiana tax-free and later brought it into Texas — did Texas use tax apply?
It depends on how long the equipment was used outside Texas first. If the equipment was used in Arkansas for one year or more before being moved to Texas, no Texas use tax is due. If it was used outsi…
Does Texas charge sales or use tax when a company licenses its programming-language source code and specifications to other developers?
No, not automatically. Texas taxes the sale or license of a 'completed computer program,' but licensing raw source code and specifications so a licensee can build its own derived program is not taxabl…
Does an airline owe Texas sales or use tax on peanuts, donuts, and disposable cups, stir sticks, and napkins given to passengers?
No tax is owed on the peanuts and donuts because the airline buys them in bulk, and bulk food purchases aren't taxable. The disposable cups, stir sticks, and napkins used for non-complimentary (paid) …
If I sell equipment to a leasing company and lease it back under an operating lease, is that a nontaxable financing arrangement or a taxable sale?
It depends on whether the leaseback is a true financing lease or an operating lease. In this December 1992 ruling, the Comptroller held that a sale-leaseback where the equipment reverted to the lessor…
Is an electric mobility cart (three-wheel scooter) used in place of a wheelchair exempt from Texas sales tax?
Yes. The Texas Comptroller ruled that electric powered carts (three-wheel scooters) used in lieu of a wheelchair qualify for exemption from sales tax, and no prescription is required. Repair parts and…
If the Comptroller's office told us a resale certificate was OK on a mid-lease sublease, but that policy later changed, do we still owe sales tax on the sublease we already signed?
Yes, but only for the sublease already in place. The Comptroller's office honored a resale certificate a lessee issued to its lessor for a mid-lease-term sublease because the lessee had relied on verb…
Is infrared inspection of industrial furnace linings taxable, and is refractory brick sold to repair a kiln exempt from Texas sales tax?
The Comptroller ruled that infrared inspection service to check the condition of refractory (heat-resistant) linings inside boilers, furnaces, and kilns is a nontaxable service. Separately, refractory…
If I rent out roll-off garbage containers and charge a $50 setup fee, is the whole charge taxable, and which city's local sales tax applies?
Yes, the entire charge is taxable, including the $50 setup fee to place the roll-off container. If the container comes with garbage collection service, local sales tax is based on where the garbage is…
Texas Letter Ruling 9212685L: Unjust Enrichment/Error Tax — Collected From Customer — Cannot Be Retained By Or Refunded To Retailer/Contractor — Must Be Remitted To State Or Refunded To Customers
If a lump-sum contractor marks a contract 'Inc' in the tax block, the Comptroller treats that as proof tax was collected from the customer, so the contractor cannot keep that money or use it to offset…
Texas Letter Ruling 9211L1204G13: Auctioneer — Sales Made On Behalf Of Federal Government
It depends on who is legally the seller. If a U.S. government agency consigns items to an auctioneer and the auctioneer collects payment and issues the bill of sale, the auctioneer is the seller and m…
Texas Letter Ruling 9211L1204G11: Is stainless steel polish bought by a janitorial service to clean customers' metal restroom dispensers exempt from tax under a resale certificate?
No. The Comptroller ruled that stainless steel polish bought by a janitorial company to clean customers' metal restroom dispensers is taxable at purchase, because the polish is consumed by rubbing and…
Texas Letter Ruling 9210L1205A08: Storage Tank — Above Ground With 500 Barrels Less Or More Capacity — Tpp Vs. Improvement To Realty
Yes, taxable. Each tank in the battery held only 400 barrels, under the 500-barrel line that keeps a tank classified as tangible personal property in Texas. Because it stayed TPP rather than becoming …
Texas Letter Ruling 9210L1197D11: Vessel — Component Parts — Fishing Net/Long — Line Fishing Gear — Component Of Fishing/Shrimp Boat
Long-line fishing gear, fishing nets and repair twine, stored life preservers, and rigging attached to the vessel are exempt as component parts when sold with a proper exemption certificate for a Texa…
Texas Letter Ruling 9209L1195D01: Financing Lease Vs. Operating Lease — Nominal Purchase Option And Fair Market Value
It depends on the purchase option. Texas doesn't require the end-of-lease purchase price to equal fair market value, but if a 10% deposit clearly exceeds the equipment's fair market value at lease-end…
Texas Letter Ruling 9209467L: Chamber Of Commerce — Contract From 10/1/91 — 10/1/93 To Build Building To Be Donated To City
A Chamber of Commerce that qualifies as a tax-exempt organization can issue an exemption certificate to its prime contractors, who can in turn issue resale certificates to subcontractors and suppliers…
Texas Letter Ruling 9209L1196G11: Hot Air Balloon Services — Used For Promotional/Advertising Purposes — Nontaxable Services
The charges billed to the client for travel, equipment, and operating the hot air balloon are not subject to Texas sales tax, because providing the balloon and crew for another company's advertising i…
Texas Letter Ruling 9209L1192G09: Heating Manufacturing/Processing Areas — Gas/Electricity Used
When a shop area is used partly for taxable repair work and partly for exempt re-manufacturing, the natural gas used to heat and cool that area must be allocated. First separate production/repair area…
Does a company owe sales tax on a computer lease it shares with two other companies through time sharing?
Yes, in most cases. If one company leases a computer system and separately charges two other companies for time sharing, sales tax applies to the lease and the time-sharing charges are a taxable data …
Can a mail-order business get its Texas sales and use tax permit cancelled by showing it no longer has nexus in Texas after Quill Corp. v. North Dakota?
Yes, in this case. The Comptroller cancelled the taxpayer's Texas sales and use tax permit after the taxpayer represented, following the U.S. Supreme Court's Quill Corp. v. North Dakota decision, that…
Does a contractor building a new golf course owe Texas sales or use tax on site preparation work like clearing, grading, excavation, and earthmoving for tee boxes, greens, and bunkers?
No tax applies to the contractor's own new-construction labor for site preparation, because building a new golf course is new construction and new construction labor isn't taxed. But the contractor ma…
Does an out-of-state company owe Texas use tax on catalogs it directs to be mailed to Texas customers, even though the catalogs are printed and mailed from outside Texas?
Yes. The Comptroller ruled that a company with Texas sales representatives owes Texas use tax on catalogs mailed to Texas consumers on its behalf, because choosing which Texas addresses receive the ca…
Does a Texas shop that sprays a protective polyurethane coating on pickup truck beds have to charge sales tax on the job?
The Comptroller treated spraying a protective polyurethane coating onto a pickup truck bed as motor vehicle maintenance. The coating material itself is taxable, but the labor and skill to apply it is …
Does a Texas company that reclaims land after strip mining (dirt work, fertilizing, planting, and hay production) owe sales or use tax on its equipment, and can the agricultural exemption or resale certificates apply?
The reclamation company owes tax on the machinery and equipment it uses; the agricultural exemption does not apply because the land is being restored after strip mining, not farmed. Reclamation itself…
Does a research and development joint venture's purchase of software with a useful life over six months qualify for the Texas Section 151.348(b) sales tax exemption?
Yes. The Comptroller confirmed that a company qualifying as a joint research and development venture under 15 U.S.C. Section 4301 is exempt from sales tax on taxable items with a useful life over six …
If a Texas trucking company's driver buys a replacement tire in another state and pays that state's sales tax, can the Texas tire dealer credit that tax against the Texas use tax owed when the truck returns to Texas?
Yes. Texas use tax is owed on tires bought outside Texas only if the truck carrying them comes back to Texas within one year of purchase. When it does, the dealer can credit any sales or use tax legal…
An oil and gas services company asked the Comptroller about the sales/use tax treatment of several things: well pressure testing services, flare stack sales and rentals, other rentals/leases of tangible personal property, an environmental/energy-conservation repair exemption, whether Texas has a state income tax, and direct payment permit procedures for contractors.
Well pressure testing services are not subject to Texas sales or use tax, though they may instead be subject to the 2.42% oil well service (occupation) tax under Chapter 191 of the Tax Code. Flare sta…
An out-of-state company leases equipment to customers in Texas, buying the equipment from outside Texas and delivering it to various Texas locations. After the Quill v. North Dakota decision, does this lessor still have to collect and report Texas sales and use tax?
Yes. Because the lessor retains title to the equipment while it is leased and located in Texas, it is considered to have property in the state, which by itself is enough to make it "engaged in busines…
A hotel resells telecommunications services to guests (marking up local and long-distance calls) but also uses the same trunk lines and phone equipment for its own business calls. Can the hotel buy the phone lines and equipment tax-free with a resale certificate, or get a refund of the sales tax it already paid?
No, not in full. A hotel cannot in good faith issue a resale certificate for trunk line service that it also uses for its own business calls — resale certificates may only be issued for lines dedicate…
A company already owns and has paid tax on computer equipment. It then transfers title to a lender for cash (roughly 10 times the equipment's fair market value) and simultaneously leases the same equipment back, keeping possession, depreciation for federal income tax purposes, and all the risks and costs of ownership. Are the lease payments subject to Texas limited sales tax?
No. Because the borrower never gave up possession, risk of loss, or (for federal income tax purposes) title, and the sale price and buyback price were tied to the amount of funds advanced rather than …
Does wearing an item of tangible personal property (like a watch) in Texas before it is exported disqualify it from the sales tax export exemption, and does a particular bill of lading form satisfy the proof-of-export rule?
Yes -- wearing tangible personal property in Texas before it is exported (the letter's example is wearing a watch) constitutes a taxable 'use' in the state, so the item does not qualify for a sales ta…
Does an out-of-state company that uses a Texas-based commissioned sales agent become 'engaged in business' in Texas and responsible for collecting Texas use tax on its sales into the state?
Yes. Using a commissioned agent or salesperson located in Texas -- even one who is an independent contractor rather than an employee -- makes the out-of-state seller 'engaged in business' in Texas und…
Could an electric cooperative formed under Article 1528(b) buy taxable items for its own use without paying Texas sales or use tax?
Yes, if it was formed under the Electric Cooperative Corporation Act, Article 1528(b). Such a cooperative was exempt on taxable items bought for its own use and could give vendors properly completed e…
Did an FDIC or RTC property manager inherit the federal entity's Texas sales-tax exemption, and did a financial institution's tax debt disappear after takeover?
No on both points. A private manager did not become tax-exempt merely by working for FDIC or RTC, though a written purchasing-agency arrangement could change the purchase result. A financial instituti…
Could a shipping business avoid Texas tax on packaging supplies delivered to Texas customers for use in interstate shipments?
No. The Comptroller said the packaging supplies were taxable because they were put to their intended business use when delivered to customers in Texas, rather than merely stored for later shipment out…
Did a federal service contractor owe Texas tax on equipment and supplies charged to a contract or titled to the U.S. government?
Yes. The contractor owed tax on equipment and consumable supplies used to provide services, even when costs were charged directly to the government or the government took title at acquisition.
Was transferring an Oregon corporation's operating assets to a related Texas corporation subject to Texas use tax?
Not if the transfer was a capital contribution with no consideration. Cash, stock issued where ownership was below 100%, or debt forgiveness or assumption could make it a sale; a transfer of all opera…
Did the City of Dallas have to collect sales or use tax on a floodplain-reclassification application and permit fee?
No. The $750-to-$1,400 city application and permit fee was not a sale of tangible personal property or a taxable service, so it was not subject to Texas sales or use tax.
Did a seller owe Texas sales tax when a Texas buyer accepted an aircraft and took title in South Carolina before bringing it to Texas?
No Texas sales tax applied to the South Carolina sale, but the buyer owed Texas state and applicable local use tax when the aircraft entered Texas for use. The buyer could claim credit for legally due…
Were purchases and transactions connected with a private contractor's operation of a federally funded Job Corps Center exempt from Texas sales and use tax?
Yes. The letter said private for-profit and nonprofit contractors were not required to collect or pay state or local sales and use tax on property, services, or other items connected with operating a …
Were intraocular lenses sold in Texas exempt from sales and use tax as prosthetic devices?
Yes. The Comptroller classified an intraocular lens as a prosthetic device and said it was exempt from Texas sales and use tax.
Were liquid eggs, frozen eggs, egg substitutes, and unheated hard-boiled eggs exempt from Texas sales and use tax?
Yes. Liquid and frozen eggs and egg substitutes were exempt food. Hard-boiled eggs were also exempt when sold unheated and without eating utensils. A seller with no taxable Texas sales did not have to…
Was a jointly funded artificial-intelligence software-development agreement a taxable custom-software sale or nontaxable contract programming?
The developer's retained legal rights controlled: retaining rights made the arrangement a custom-software sale taxable to the extent used in Texas; retaining no title made it nontaxable contract progr…
Did Texas's new boat and boat-motor tax apply to canoes, kayaks, rowboats, rafts, paddle craft, and electric motors?
No. The new 6.25% boat tax excluded vessels designed for paddles, oars, or poles, including canoes, kayaks, rowboats, and rafts, and it excluded electric motors.
When did Texas sales or use tax apply to flexible food packaging bought from Texas or out-of-state suppliers?
Manufacturers and processors could buy qualifying packaging with an exemption certificate. Other Texas buyers owed sales tax or, for out-of-state purchases, use tax; seller-shipped out-of-state orders…
Were Texas seminar fees taxable, and who owed tax on books, audiotapes, and course materials distributed to participants?
Seminar and training fees were not taxable, but book and audiotape sales were. The provider owed tax on free materials and had to collect Texas tax because its representatives created Texas business p…
Did Texas-based independent salespeople require an out-of-state seller to collect tax, and what resale or exemption documents could the seller accept?
Yes. Commissioned independent salespeople created Texas business activity, requiring a permit and tax collection or valid certificates. A permit copy was not a certificate; Texas required separate res…
Who had to collect and report Texas state and local sales tax on retail sales made by a Utah network-marketing company's independent distributors?
The direct-sales organization, CORP A, was responsible under Rule 3.286(a)(3). Tax reporting depended on whether distributors took customer orders before buying from CORP A or stocked products first, …
Was Texas use tax due on a Mexican company's bagged mineral product delivered to Texas customers, and who had to collect it?
Yes. The Mexican seller had to collect and remit use tax; an agent handling billing and collections had to collect it, and customers remained liable if it was not collected.
Was equipment temporarily assembled in Texas before shipment for use solely in Oklahoma subject to Texas sales or use tax?
It depended on origin. Out-of-state equipment could qualify for the temporary-storage use-tax exclusion, but equipment shipped from within Texas remained subject to sales tax.
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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.