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 Ceprate Stem Cell Concentration System, used to prepare a patient's stem cells before high-dose chemotherapy, exempt from Texas sales tax as a health care supply?
No. The Ceprate Stem Cell Concentration System does not qualify for Texas's health care supplies exemption under Tax Code Section 151.313. The product is used in a process called immunoadsorption to r…
Is a monthly standby retainer fee paid to a security firm (to be available if needed, billed separately for hours actually worked) subject to Texas sales tax?
Generally no. A monthly retainer fee paid to a security firm just to be on standby -- separate from hourly billing for services actually performed -- is treated as the sale of an intangible and is not…
Do compressors used in oil and gas processing qualify for Texas's manufacturing exemption, and how does a company refund sales tax collected in error on exempt equipment?
It depends on what the compressor does. Effective January 1, 1995, a manufacturer or processor can claim exemption on machinery and equipment necessary and essential to manufacturing, processing, or f…
Do the foundations and support structures for rock-crushing-plant equipment (a crusher, screens, a logwasher) qualify for Texas's manufacturing exemption?
No. Support foundations for manufacturing equipment -- reinforced concrete slabs, sometimes with concrete piers and anchor bolts to fasten equipment in place -- are considered real property, not machi…
Is the labor to build a new mezzanine floor inside an existing building taxable real property repair/remodeling, or non-taxable new construction, under Texas law?
It's non-taxable new construction. Building a new mezzanine floor -- adding usable floor space where only non-usable empty space existed before -- inside an existing building qualifies as "new constru…
Does a rubber-tired, electrically-powered 'people mover' passenger transportation system, guided by a steel guidebeam rather than running on rails, qualify for Texas's rolling stock sales tax exemption?
No. A rubber-tired, electrically-powered "people mover" passenger transportation system -- guided and powered by a steel guidebeam/rail system rather than running on rails -- does not qualify as tax-e…
Is electricity used in the common areas of a residential condominium complex (sprinkler systems, pools, clubhouses, exterior lighting) exempt from Texas sales tax as residential use?
Yes, if the complex is genuinely residential. Electricity used in common areas (sprinkler systems, swimming pools, clubhouses, exterior lighting) of a residential condominium complex -- one where unit…
Must a forensic engineering firm charge sales tax on fees for investigating the cause of a fire or explosion for a law firm or insurance company pursuing subrogation, as a taxable insurance service?
Yes, these are taxable insurance services. A forensic engineering firm retained by law firms and/or insurance companies to determine the cause of a fire or explosion -- and to provide expert testimony…
Which city's local sales tax applies when an itinerant janitorial service vendor (no fixed place of business) performs services at a homebuilder's job site?
Local tax is due based on the job site. A janitorial service provider that has no place of business where it receives orders -- and instead receives its orders for services at the job site itself -- m…
Is electricity used to pump treated municipal effluent to a pond, and then pump that pond water to irrigate a golf course, exempt from Texas sales tax?
No, it's not exempt. A private country club used one electric meter exclusively to pump effluent from a municipality to a pond, and a second meter exclusively to pump water out of that pond to irrigat…
Are purchases made by federal employees using a government I.M.P.A.C. (GSA SmartPay) Visa credit card exempt from Texas sales and use tax?
Yes, if three conditions are met. Purchases made by federal government employees using a Government Visa credit card (I.M.P.A.C.) are exempt from Texas state and local sales and use tax when: (1) the …
Did a wooden farm wagon count as a motor vehicle for Texas tax purposes?
No. The wooden farm wagons were not designed to carry people or property over the highway, so Texas treated them as tangible personal property rather than motor vehicles. Changing the business's SIC c…
Which of my internet service company's fees -- monthly service, set-up, domain registration, custom web design, extra disk space, audio/video, and secure server -- are subject to Texas sales tax?
Most of the fees an internet service provider charges are taxable, but not all. The Monthly Service Fee, Set-Up Fee, Additional Disk Space Fee, Audio/Video Fee, and Secure Server Fee are all taxed as …
As an advertising agency, which of our 'nonbillable' expenses (items and services we buy but can't fully bill back to clients) owe Texas sales/use tax, and which don't?
It depends on whether the item was resold to the client or just consumed by the agency. If an agency buys a taxable item or service for a client but ends up not billing (reselling) it -- for example, …
If I trade gift baskets to a radio station in exchange for a free radio ad (a tradeout), do I owe Texas sales tax on the baskets?
It depends on what's mostly in the basket, not on the fact that it's a barter. This corrected 1996 Comptroller letter says that if the taxable items (the basket itself and any miscellaneous, non-food …
Is nitrogen used to nitrify drilling mud, and the cementing of a well's casing seat, subject to Texas sales/use tax and the oil and gas well servicing occupation tax?
Yes to both. The Comptroller held that sales of nitrogen and drilling mud are subject to Texas sales or use tax, and that a product made by combining the two (nitrified drilling mud) is also taxable. …
If I start a computer-aided design (CAD) drafting business, do I have to charge sales tax on the blueprints I produce, and does it matter whether I'm a licensed architect or engineer?
Yes -- a draftsman (whether drawing by hand or using CAD software) owes sales tax on the delineations and blueprints produced from a customer's specifications, and on additional copies, because produc…
Is a real estate inspection service -- checking a building's structural components like plumbing, wiring, and roof and issuing a condition report -- subject to Texas sales tax?
No. The Comptroller ruled that real estate inspection services -- checking structural components of a building such as plumbing, electrical wiring, HVAC units, and roofs, and issuing a written conditi…
Is equipment sold to hearing-impaired customers, like FM systems, amplified phones, and alarm devices, exempt from Texas sales tax the same way hearing aids are?
Only two specific products in this ruling -- the Williams Sound Pocket Talker and the SoundMate TW6AA Belt Pack Transmitter and receivers -- are exempt outright as hearing aids. A longer list of other…
If my restaurant sells 'bulk food' that needs more cooking or heating before it can be eaten, how do I document that it's not taxable, and what records does the Comptroller expect?
Uncooked, refrigerated, or frozen food that still needs cooking or heating is not 'food ready for immediate consumption' under Rule 3.293(a)(9)(A) and is not taxable, regardless of quantity -- 50 froz…
If I buy natural gas in Texas and ship it out of state by pipeline to generate electricity at my out-of-state plant, do I owe Texas sales tax on the gas?
No. The Comptroller ruled that buying natural gas in Texas and shipping it via interstate pipeline to Pennsylvania, where it is consumed to manufacture electricity, is a noncommercial use of natural g…
Can a non-profit water supply corporation use a sales tax exemption certificate on purchases for a project funded by the Texas Water Development Board's Economically Distressed Areas Program (EDAP)?
Yes, but only for purchases tied to Economically Distressed Areas Program (EDAP) projects. Water Code Sec. 17.921(a) specially defines non-profit water supply corporations as "political subdivisions" …
Does a metal roller-leveling process that flattens coiled metal and changes its hardness count as manufacturing or processing, so the wrapping/packaging and equipment used with it are tax-exempt?
The Comptroller's Tax Policy Director did not agree, on the facts presented, that a metal coil leveler qualifies as exempt manufacturing/processing equipment. He explained that if the leveling-induced…
Does a real estate agent or firm owe Texas sales tax on market analyses, feasibility studies, and property inspection reports sold to clients?
It depends on what the written report actually contains. Compiling data on sold or listed properties (comparable sales, listings for an area or subdivision) is a taxable 'information service.' But a r…
If our medical practice charges patients, insurers, or attorneys for copies of medical records, do we owe Texas sales tax on that charge?
No -- when a medical service provider charges for copies of medical records as part of its professional service (to a patient, an agent, a party in litigation, or an insurance carrier), that charge is…
My client makes and installs custom stone/marble tabletops and wood, vinyl, and stone flooring in homes -- when do I charge sales tax on the materials versus the labor, and can I buy materials tax-free for resale?
Installing tile, marble, stone, hardwood, or wall-to-wall vinyl flooring into a home is treated as an improvement to real property, so residential installation labor is not taxable, but the contractor…
We run an electronic clearinghouse that scans, converts, and transmits medical insurance claims between healthcare providers and payors -- which of our fees (claims conversion, transaction, clearinghouse, archival) owe Texas sales tax, and do we owe use tax on the software and equipment we give customers?
Yes -- nearly all of the clearinghouse's fees are taxable. The Comptroller treated the claims-conversion, one-way transaction, clearinghouse, and archival fees as taxable data processing services (or,…
If I remitted sales tax by 'backing it out' of my total ticket receipts instead of adding it on top, can I get a refund of that tax directly?
No, not directly to the seller in most cases. The Comptroller explains that if a seller calculated tax by dividing total receipts by 1.0825 and treating the difference as tax ('backing it out'), the s…
Do I have to charge sales tax on manual drafting services, or only on computer-aided (CAD) drafting?
Sales tax is due on drawings and blueprints produced by a draftsman regardless of whether they're drawn by hand (pen and pencil) or with Computer Aided Design (CAD) software. The Comptroller corrected…
Are breast prostheses and the special bras that hold them exempt from Texas sales tax?
Yes. The Comptroller ruled that silicone breast prostheses, breast forms, and breast pads that replace a missing breast are exempt from Texas sales tax as prosthetic devices under Rule 3.284(a)(10). B…
Is a Cell Tech 'Super Sun Smoothie' blue-green algae drink mix exempt from Texas sales tax as a food product if it's used as a meal replacement?
Yes, in this case. The Comptroller had previously told this seller that the Cell Tech Super 'Sun' Smoothie product was taxable, but after receiving additional information showing the product can be us…
Is renting a university recording studio, including a technician's time, subject to Texas sales tax, and what about the tapes used during the session?
No, the hourly charge for using the university's recording studio is not taxable, and the charge for the technician's time is not taxable either. However, the charge for the materials provided during …
If our company manages a jail or prison under contract with a government agency, can we buy materials and utilities tax-free using a resale certificate?
Yes, but only if set up correctly. A private company (ABC) managing prison facilities for exempt governmental entities can issue resale certificates to its vendors for materials that will pass to the …
Is a vehicle tracking/personal security monitoring service, sales of the tracking device itself, and 'extra' per-minute services (like remote unlock or directions) subject to Texas sales tax?
Yes, in part. Installing and monitoring a personal security/vehicle tracking device requires a private investigator/security license, so those monitoring charges are taxable as a Security Service unde…
If a tax-exempt agency like a Private Industry Council or the Texas Rehabilitation Commission pays for a sponsored student's books, tools, and meal tickets at our college bookstore, should we charge sales tax?
It depends on who is actually billed as the purchaser. If the exempt or governmental agency (like a PIC or the Texas Rehabilitation Commission) is invoiced directly and pays the college or bookstore i…
Five scenarios about bands playing at a club for door fees, tip-jar money, or free drinks instead of straight cash pay: which payments are taxable, and who -- the band or the club -- owes the tax?
PARTIALLY SUPERSEDED as to Scenario 1 (see note below). Five 1996 scenarios: (1) [SUPERSEDED] a band collecting and keeping its own door entry fee, with the club having no knowledge of the amount, was…
Does a state university have to collect sales tax on parking permit fees charged to its faculty, staff, and students?
No -- per this 1996 letter, a state university does not have to collect sales tax on parking permit fees charged to its own faculty, staff, and students, extending a previously issued policy that cove…
Does a nonprofit club that operates concession stands under a license from a school district have to collect sales tax on its concession sales?
Yes. Even though the club is an exempt organization, sales of taxable items it makes -- like concession stand food and drinks -- are still subject to sales tax. Per Rule 3.322(g)(1), the club can buy …
Is sales tax owed on cleaning, polishing, and restoring granite, marble, and terrazzo floors, walls, vanities, and tabletops?
It depends on what kind of work is done and on what type of property. Cleaning, polishing, waxing, and sealing natural stone surfaces (residential or nonresidential, or on furniture) is always a taxab…
Are specialized therapeutic beds and mattress overlays that a company rents out exempt from Texas sales tax as hospital beds?
Mostly yes: the Comptroller found that most of the specialized beds and pressure-relieving mattress/flotation systems the company rents out qualify for Texas's hospital bed exemption under Tax Code § …
Is a pay-per-view order-verification and database service that a company runs for cable operators taxable as a Texas 'data processing service'?
Yes. The Comptroller ruled that a company operating a National Transaction Center to verify and route cable pay-per-view orders -- identifying callers via ANI, checking eligibility, compiling transact…
Is a university's alumni newsletter subscription fee, its $50 alumni placement-office registration fee, and its $100 lump-sum career-fair fee to companies subject to Texas sales tax?
Mixed answer for a university with three separate fees. (1) Charges for alumni/general-public newsletters -- whether sold by single copy or by subscription -- are taxable. (2) The $50 fee alumni pay t…
Is a BiPAP breathing machine (face mask, head strap, and air-compressing pump) exempt from Texas sales tax as a prosthetic device?
No -- the Comptroller ruled that a BiPAP STD breathing unit (a face mask with a head strap connected by hose to an air-compressing pump) does not qualify for Texas sales tax exemption as a prosthetic …
If my company moves, disassembles, and reassembles office furniture, and also sells, delivers, or repairs furniture, which of these charges are taxable in Texas?
A pure moving service -- relocating a customer's modular furniture, even if you must disassemble and reassemble it to do so -- is not taxable in Texas. But if you are selling, renting, repairing, or r…
If I store business forms I sold to a customer in my warehouse and later ship them out one box at a time, do I owe sales tax on the freight and handling charges billed separately later?
Yes. Because the seller stored the pre-purchased business forms in its own Texas warehouse rather than shipping them directly to the customer under the sales contract, the sale was already taxable in …
If a Texas remodeling contractor isn't registered to collect sales tax and doesn't collect it on a lump-sum job, can the customer be assessed the tax instead?
Yes. Once Texas began taxing remodeling services directly, the old rule that only the contractor owed tax on a lump-sum job (based on its material costs) no longer applied. Remodeling services are now…
Is labor to replace a failed electrical ballast in a light fixture taxable in Texas, and does it matter whether the building is a residence or a commercial building?
Labor to replace a failed or failing electrical ballast in a commercial building is taxable as real property repair, because ballast replacement normally requires a licensed electrician. The same labo…
My form-work company buys plywood that's used up on jobsites for exempt organizations -- can I buy those materials tax free or get a refund of the tax I paid?
No. The Comptroller ruled that a company doing form work (erecting and removing concrete forms and centering materials without incorporating any tangible personal property into the realty) is a nontax…
Do I owe Texas sales tax on sports cards sold through vending machines, including the chance cards redeemable for an autograph?
Yes -- receipts from sports card vending machines are subject to Texas sales tax because the cards are tangible personal property, not an amusement activity. These machines are not treated as skill-or…
Does Texas sales tax apply to charges for computer consulting, hardware setup, software installation, training, and computer repair/maintenance?
It depends on the specific service. Business/computer consulting, evaluating a client's computer setup, installing software or peripherals you didn't sell, and training employees are NOT taxable. But …
Can a city that has adopted a Municipal Crime Control District sales tax repeal the Section 323.208 exemption for telecommunications services and tax them under that local tax?
A qualified yes. A city that has adopted a Municipal Crime Control District sales tax may repeal the Section 323.208 Tax Code exemption for telecommunications services and tax those services under the…
Do we have to charge sales tax on commercial wastewater treatment services, and on the hauling charges when we pick up the water ourselves?
No -- treating a customer's wastewater to remove oil and contaminants before it's discharged to a municipal sewer system is not a taxable service, because water itself is exempt from Texas sales tax a…
If a Texas seller with Texas nexus sells to an out-of-state buyer who has no Texas nexus, and the buyer resells to a third party, does the Texas seller need to collect Texas tax, and what documentation does it need from the buyer?
A Texas seller does not have to collect Texas tax on a sale to an out-of-state buyer if the buyer gives the seller a valid Texas resale certificate showing the buyer is a bona fide retailer reselling …
If I'm a developer building streets, roads, or sewer/water lines in a subdivision that I plan to donate to the county, can my contractor buy materials tax-free?
Yes, but only if the dedication and government acceptance happen before construction starts. A developer donating subdivision infrastructure (streets, roads, sewer/water lines, etc.) to a governmental…
If our pharmaceutical company gives free prescription and nonprescription drug samples to physicians and hospitals in Texas, do we owe sales or use tax on them?
It depends on who receives the sample and whether it's prescription or nonprescription. Prescription and nonprescription drug samples given free to physicians (to be dispensed to patients) are exempt …
If my appliance repair customer pays only for an estimate and decides not to go ahead with the repair, do I have to charge sales tax on that estimate/service call fee?
No -- if a customer only pays for a service call or estimating fee and decides not to have the appliance repaired, that fee is not taxable because no repair (a taxable service) actually took place. Bu…
Do I have to charge sales tax on sodium bentonite clay that I sell for different uses — animal feed, cat litter, well-plugging, pond/landfill sealant — and on delivery charges for it?
Sodium bentonite clay is taxable when sold to an end user no matter how it's used -- as animal feed additive, cat litter, well-plugging material, or a pond/tank/landfill sealant. The seller only needs…
Is an air compressor that powers pneumatic tools exempt from Texas sales tax under the manufacturing exemption?
Yes, conditionally: the Comptroller ruled that an air compressor used to power pneumatic tools qualifies for Texas's manufacturing exemption, but only if the pneumatic tools themselves are used for as…
Is my company's charge for online continuing-education courses and certification testing subject to Texas sales tax?
No -- charges for providing continuing education courses and testing over the Internet are not subject to Texas sales tax. However, if the company pays its Internet Service Provider separately for mai…
Is a service that compiles and reports weekly underground natural gas storage capacity data from multiple subscribers a taxable information service, or does it qualify as a nontaxable proprietary compilation or geophysical survey?
No exemption applies -- the Comptroller ruled that a company's weekly reports on underground natural gas storage capacity, compiled from data submitted by storage operators and sold to industry subscr…
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.