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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Was Texas use tax due on out-of-state stone processing and freight when the processed stone entered Texas for construction?
Yes. The raw stone purchase was exempt, but the New Mexico processing charge and billed freight were taxable when the stone entered Texas for a lump-sum construction job.
Could a direct-payment permit holder choose which purchases and suppliers its certificate covered, and how were uncovered taxes handled?
Yes. The holder could use blanket, item-specific, or supplier-specific certificates, but had to pay or accrue all state and applicable local tax on other purchases.
When did a direct-payment-permit holder owe use tax on taxable items bought tax-free and stored or used in Texas?
If Texas use was known, tax was due when the items were first stored, used, or consumed. If destination was unknown, the holder could consistently elect storage or withdrawal.
How did Texas apply sales and use tax to demolition, site preparation, equipment, freight, and contracts for a new manufacturing project?
The treatment varied: complete demolition and new-construction labor were generally nontaxable, while debris removal, taxable materials, equipment, and some installation charges were taxable.
Did arranging engineering and equipment-installation work in Texas require an Illinois seller to collect Texas tax?
Yes. Engineering and installation performed in Texas on the seller's behalf meant it was doing business in Texas and had to obtain a permit and collect applicable state and local tax.
Did Texas tax software delivered to an affiliated company outside Texas or data-processing access sold to its Texas affiliate?
Out-of-state software delivery and related out-of-state services were not taxable; intercompany data processing was exempt only if the affiliates qualified under § 151.346.
Was a Texas periodical-subscription agency the taxable seller of magazines it ordered for libraries and corporate customers?
No. The agency provided a nontaxable service and never owned or possessed the periodicals; the publisher sold the subscription to the customer.
Were nitrogen and carbon dioxide taxable when injected into a formation to maintain pressure during natural-gas production?
Yes. The gases served no identified exempt function and were not resold, so Texas treated both nitrogen and carbon dioxide as taxable in the described use.
How did Texas tax sold coupons and memberships that provided free video rentals?
A sold coupon was a nontaxable intangible right, but the retailer paid tax on printing and use tax on the tape's fair-market rental value during customer use.
Could federal credit union employees and volunteer directors claim Texas tax exemption while traveling on official business?
Only when the credit union paid the purchase directly and supplied a purchase voucher; personal payment followed by reimbursement did not qualify.
How did Texas sales tax apply to clowning, party decorations, giveaways, rentals, cleanup, and out-of-state decorating work?
Clowning alone was nontaxable, but decorating, decoration sales or rentals, and related cleanup were taxable; bundled charges and where goods were used affected the result.
Who owed Texas state and local use tax when a contractor bought taxable items out of state and had them shipped to Texas for use?
The contractor owed use tax on the purchase price. It paid a permitted supplier or self-reported uncollected state and local tax when the items were first used in Texas.
Was Texas tax due when a Texas watch-repair seller subcontracted the actual repair work to a business in New York?
Yes. The Texas shop remained the seller to the customer and delivered the repaired watch in Texas, although it could buy the subcontracted repair for resale.
Did a seller owe Texas tax when its Missouri customer directed taxable goods to be drop-shipped to a recipient in Texas?
Yes. The seller should charge Texas use tax unless the Missouri customer was reselling the goods and gave a valid resale certificate.
Who owed Texas use tax when an out-of-state buyer directed a seller to drop-ship taxable property to a Texas recipient?
The seller had to collect Texas tax or a valid resale certificate; if the buyer lacked Texas nexus and did not collect, the Texas recipient still owed the use tax.
Could two drilling rigs sold by an out-of-state company and shipped from Louisiana to Texas qualify as occasional sales exempt from Texas use tax?
Yes, under the stated facts. The seller was not engaged in activity requiring a Texas permit and had made no other taxable sale, lease, or rental during the preceding 12 months, so the rig sales appea…
How did a city's Development Corporation tax apply to taxable items bought inside the city or bought elsewhere and then used, stored, or consumed in the city?
A taxable item purchased in the Development Corporation city was subject to its sales tax. An item purchased from a place of business outside the taxing city but used, stored, or consumed inside it wa…
Did Texas limited sales and use tax or motor-vehicle tax apply to off-road vehicles?
Off-road vehicles were subject to limited sales and use tax plus applicable local tax. If an off-road vehicle was titled, the title documents should claim the motor-vehicle-tax exemption as “designed …
Could Louisiana parish tax reduce the Texas state or local use tax due when repaired items were delivered into Texas?
No. Repaired items delivered into Texas for Texas use were subject to state use tax, and seller representation in a Texas local jurisdiction could require local use-tax collection. Louisiana parish ta…
Could an out-of-state printer accept an exemption certificate for direct mail sent into Texas for a customer with no Texas presence, and what if the customer was in Texas?
Yes for the no-presence customer if the certificate stated that fact and that the materials entered interstate commerce through U.S. mail in Mississippi. For a Texas customer, the printer had to colle…
Did Texas's agricultural sales-tax exemption cover equipment used in a commercial crab-fishing operation?
No. Texas treated commercial crabbing as fishing rather than agriculture because the crabs were not animals in captivity, so the operation's equipment did not qualify for the farm-and-ranch equipment …
Did exempt aircraft parts lose their Texas sales-and-use-tax exemption while held in inventory before installation on qualifying carrier aircraft?
No. Parts bought to be permanently attached to qualifying common- or contract-carrier aircraft remained exempt while stored for installation as needed, as long as they were not diverted to another pur…
Was electricity exempt when it powered pumps, crushers, and conveyors at a Texas crushed-stone plant?
Yes. Electricity for the pumps, crushers, and conveyors was exempt. Conveyor power qualified because it transported material extracted from the earth, even though the conveyors themselves were intrapl…
Were amusement-park locomotives and coaches, track materials, operating supplies, and repair or maintenance charges exempt from Texas sales and use tax?
Yes. The trains qualified as exempt rolling stock; essential fuel, track, ties, trestles, and operating supplies were exempt; and repair or maintenance charges were exempt because the serviced propert…
What Texas sales and use tax applied when a cruise-ship retailer sold goods outside U.S. territorial waters and passengers brought them back to Texas?
The retailer owed tax when it withdrew tax-free inventory for resale outside U.S. territory, and passengers still owed Texas use tax when they brought purchases back. The Comptroller encouraged the re…
Were horse-racing forms taxable when sold in Texas or bought out of state for use in Texas, including from October 1985 through July 1989?
Yes. Racing forms were taxable tangible personal property, not newspapers or magazines. Texas sales tax applied to in-state sales, and use tax applied when forms were bought elsewhere for use in Texas…
Did depreciating offshore equipment make later Texas storage a taxable use, and how did the appended letter classify surveying in and outside Texas waters?
Yes. Depreciated equipment returned to Texas for storage was used in Texas, creating state and applicable local use tax based on the storage location. The appended letter also taxed boundary, right-of…
Would a multistate retailer owe Texas use tax on out-of-state printed materials mailed directly to Texas recipients?
Under the proposed Rule 3.346 revision described in the letter, yes. A corporation doing business through five Texas stores would report use tax on the portion of its out-of-state printed-material cos…
Who owed Texas use tax when an out-of-state seller without Texas nexus shipped customer-branded note pads into Texas?
The seller did not have to collect Texas use tax if it truly lacked Texas nexus. Customers that did have Texas nexus were responsible for paying use tax directly to the Comptroller on note pads delive…
Did a Texas parachute broker collect tax on parachute sales and periodic airing, inspection, and repacking?
The broker did not collect use tax on out-of-state manufacturers' parachute sales, although Texas purchasers still owed the tax. The broker did collect sales tax on its full parachute-packing charge b…
How much Texas use tax applied to out-of-state catalogs and a mailing list used for Texas and non-Texas recipients?
Texas taxed the share of catalog cost delivered into Texas and the share of the mailing-list service representing Texas names.
When did Texas use tax accrue on imported machinery held in a foreign-trade zone before delivery to a plant?
Tax accrued only when the machinery was used inside the zone or removed from it; local tax at the outside plant site then applied.
Did a free advertising publication owe tax on its in-house work and purchased production services?
Its own employees' work created no sales-tax liability, but purchased printing and other production services were taxable.
When did Texas's temporary-storage exclusion protect equipment held or assembled in Texas for out-of-state use?
Out-of-state purchases could qualify if temporarily stored and used solely outside Texas; in-state purchases and Texas manufacturing use were taxable.
Could the Comptroller waive a nonprofit mail-order seller's prior Texas tax liability when it volunteered to register and collect tax prospectively?
No. The Comptroller said it had no authority to waive the tax itself, although it would waive penalties and interest; the organization should obtain a use-tax permit and collect tax if doing business …
If customers bid no-value promotional 'bonus dollars' for merchandise at an auction, are those transactions taxable Texas sales?
The auction bids are not taxable. Because the promotional 'bonus dollars' have no monetary value, exchanging them for merchandise, meals, or services is not a 'sale' under Texas Tax Code § 151.005, so…
Was an out-of-state computer service that processed Texas-prepared tax-return data subject to Texas use tax?
Yes. Texas classified the host-computer work as data processing and said the per-return service fee was subject to Texas use tax.
Were independent contract programmers taxable when creating a program from scratch or modifying software sold by someone else?
No under this 1988 letter. Texas distinguished nontaxable contract programming from sales of completed software, which were taxable.
When was Texas use tax due on foreign equipment stored in a Texas bonded warehouse before delivery to a job site?
Tax was deferred while the equipment remained in the bonded warehouse and became due when it was removed for use. A direct-pay permit offered a separate inventory rule.
How did Texas tax a provider's hotel calling-card service, purchased transmission time, customer billing, and installed equipment?
The provider could buy transmission for resale, while billing phone companies remitted customer tax. Provider-owned hotel equipment and other Texas property were taxable to the provider.
Does Texas use tax apply to equipment brought in from out of state, and what is the one-year exception?
Equipment brought into Texas from out of state is subject to Texas use tax on its purchase price. You get credit against the Texas tax for sales or use tax legally due and paid to another state on non…
Are freight charges billed directly by a third-party carrier to the buyer part of the taxable sales price in Texas?
No. The Comptroller agreed that transportation charges a third-party carrier bills directly to the purchaser are not included in the taxable 'sales price' — so no sales or use tax is due on them — whe…
Does Texas tax an event ticket based on where the ticket is sold or where the amusement event occurs?
Texas treated the event's location as decisive. A Texas sale for a Texas event was subject to sales tax on the ticket's face value and convenience charge; a Texas sale for an out-of-state event was no…
Were newspaper advertising inserts shipped into Texas subject to sales or use tax?
It depended on the shipment. Texas said inserts shipped into the state by the advertiser were taxable regardless of transportation method, without requiring constructive possession. But inserts sent d…
Did Texas's $25 sales-tax permit fee or state and local sales and use taxes apply to the National Railroad Passenger Corporation?
No. The letter said the permit fee did not apply and that the National Railroad Passenger Corporation was exempt from state and local sales and use tax under the cited federal provision.
Did an out-of-state credit-reporting vendor have to collect Texas tax on reports mailed into Texas?
Not if the vendor was not doing business in Texas. The Texas purchaser was responsible for any use tax due. The report was taxable when both the credit applicant and the requesting person's Texas conn…
Could a direct-payment permit holder claim credit for tax-paid inventory later removed for exclusive offshore mineral exploration or production?
Yes, if the items had no prior use and were used exclusively offshore outside Texas's territorial limits. Credit used the same rate originally accrued and paid, required purchase, removal, and tax rec…
Were Oklahoma data-processing services supplied to Texas financial institutions subject to Texas use tax beginning January 1, 1988?
Yes. After reviewing the servicing agreement and marketing brochure, Texas said the financial-institution data-processing services became taxable January 1, 1988. Because performance occurred in Oklah…
How did Texas distinguish taxable software sales and modifications from nontaxable programming, training, and computer consulting?
The letter taxed completed-program sales and seller-performed modifications, installation, and maintenance, while separately stated training and consultation were generally nontaxable. Modifying softw…
When did Texas treat an accountant's computer work as taxable data processing rather than nontaxable professional accounting?
Computer word processing, accounts-receivable billing, and payroll-check printing were taxable data processing. Financial reports, printed tax returns, and other work requiring accounting or tax exper…
Did repossessing improved equipment create a taxable sale, and how would Texas measure use tax on the improvements?
Repossession itself was not a sale. The seller owed use tax on the improvements based on the consideration it gave, but the letter lacked enough facts to determine that amount.
Did a Texas taxpayer owe tax on the full invoice for Ohio work adding a truck body and accessories to a cab and chassis?
Yes. The work was remodeling or the final stage of manufacturing, a taxable service, so tax accrued on the total invoice price.
Did Texas use tax apply when a Texas resident bought repair services outside the state and realized the repair in Texas?
Yes. The letter said Texas residents owed use tax on goods and services bought from out-of-state sellers when the repair was realized in Texas, even if the seller did not have to collect it.
Was an armored-car provider's entire charge taxable when it arranged New York pickup, commercial air transport, and final Texas delivery?
Yes. The full charge was subject to use tax based on delivery location; direct customer contracting with the airline removed only the air portion.
Did an out-of-state lessor with equipment in Texas have to collect tax despite having no Texas office or representative?
Not initially, but beginning October 1, 1987 Texas-situated leased property made the lessor a Texas retailer required to collect and remit tax.
Were purchases by the U.S. Economic Development Administration exempt from Texas sales and use tax?
Yes. Texas treated the agency as an instrumentality of the U.S. Government and exempted its purchases from sales and use tax.
Could an aircraft dealer buy used aircraft for resale, display and test-fly them in Texas, refurbish them, and sell to a qualifying foreign buyer without Texas sales or use tax?
Yes, on the stated facts. The purchase and refurbishing qualified for resale treatment, display and test flights were incidental to resale, and an immediate qualifying nonresident sale was exempt unde…
Could a company use Texas's aggregate use-tax reporting method retroactively from September 1, 1985, and how were existing assets and a capitalized repair treated?
No retroactive start was allowed; the method began November 1, 1986. Undepreciated balances and a separately capitalized $24,000 repair were reportable over four years.
Could buyers issue Texas resale certificates for magazine inserts, statement enclosures, catalogue inserts, scratch-and-sniff labels, or fragrance slurry?
Advertising inserts, enclosures, and labels were not bought for resale and were taxable based on Texas delivery or control. A printer could issue a resale certificate for slurry incorporated into prin…
Was advertising space in a free periodical taxable, and who owed sales or use tax on the periodical's materials, printing, and publisher charges?
Advertising-space sales were not taxable, but the periodical operator owed tax on production inputs and the full publisher charge, through seller collection or direct use-tax remittance.
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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.