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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Can a tax-exempt nonprofit organization use its exemption certificate to buy beer, wine, or liquor tax-free?
It depends on which kind of exempt organization you are. Most organizations exempt under Rule 3.322(b) are only exempt on purchases that relate to their specific exempt purpose — so a nonprofit educat…
Is cleaning a vacant apartment after a resident moves out taxable, and is painting that same apartment treated the same way?
Cleaning is taxable in all three scenarios asked about — vacant apartments, the leasing office, and the model apartment — because keeping a building's interior and exterior clean, orderly, and functio…
Which diabetic supplies (test strips, insulin, needles/syringes, lancets, blood testing equipment) are exempt from Texas sales tax, and which ones need a doctor's prescription to qualify?
Blood glucose monitoring strips, insulin, and hypodermic needles/syringes are exempt from Texas sales tax without needing a prescription. Lancets and blood testing equipment (diabetic monitors), by co…
Is a coupon-style discount on amusement tickets treated the same as a sales tax exemption, and does a tax-exempt organization (like a school) owe sales tax on amusement tickets bought for its own members?
A coupon or other discount taken at the time of sale reduces the taxable sales price under Tex. Tax Code § 151.007(c)(1) — but a valid sales tax exemption is a completely different thing from a discou…
When a business is sold to an unrelated buyer, how long can the Comptroller go back to assess unpaid sales tax against the successor, and can the successor dispute a tax bill that was really the predecessor's fault?
The four-year limitations period runs from whichever is later: the date the predecessor was assessed, or the date the buyer (successor) purchased the business, under Tex. Tax Code § 111.020(e). That f…
If a Texas seller delivers equipment to a Texas customer (who then ships it out of state) and later sells maintenance contracts on that equipment, is Texas tax due on the maintenance charges even though the equipment is located elsewhere?
It depends on the timing and shipping pattern of each maintenance purchase. The original maintenance contract sold at the same time as the equipment (delivered to the customer in Texas) is taxable in …
What counts as an acceptable trade-in for sales tax purposes, and what happens if a store accepts an unrelated item (not normally sold in the business) as a trade-in?
An acceptable trade-in is a "like item" — something the business normally sells in the regular course of its business — but "like" doesn't mean it has to be the exact same item. A jewelry store, for e…
Are herbal dietary supplements taken for weight loss or other medicinal purposes treated as exempt "drugs or medicines" for Texas sales tax, independent of how they're classified under federal dietary supplement law?
Yes. Effective April 1, 2000, over-the-counter drugs and medicines, vitamins and minerals, and nutritional supplements — including herbal dietary supplements taken for weight loss or other medicinal p…
Does a wastewater/leachate treatment system built at a former fertilizer manufacturing site — that treats storm water dissolving leftover gypsum waste and produces a sellable ammonium sulfate byproduct — qualify for the pollution control or manufacturing sales tax exemption?
Not as pollution control equipment: since the facility no longer manufactures fertilizer and the wastewater/leachate being treated comes from rain and other sources dissolving old gypsum waste (not fr…
Is dredging dirt, mud, silt, or sand out of a waterway to add boat slips and improve access a taxable real property repair, or nontaxable new construction?
It depends on what the dredging accomplishes. Dredging done to repair or remodel a man-made waterway, or a naturally occurring channel that's previously been widened, deepened, or otherwise reconfigur…
Is an apartment complex's manager's office and lobby treated as residential property (with nontaxable repair labor) or commercial property, for sales tax purposes?
Apartment complexes are residential property, so labor charges for repairs or remodeling there are not taxable (though materials are still taxable). Residential property under Rule 3.357(a)(10) includ…
My distributors told me nutritional supplements are no longer taxable in Texas — is that correct?
Yes. Effective April 1, 2000, sales of over-the-counter drugs and medicines are exempt from Texas sales tax. To qualify, a product must be a drug or medicine — an article or substance intended for use…
A network marketing company sells a specific list of vitamin/mineral/supplement products with no NDC number, some marketed for athletes, seniors, or even pets. Are all of these exempt as over-the-counter drugs and medicines under the April 1, 2000 exemption?
Yes for the human products — none of them need an NDC number. To qualify, a product must be a "drug or medicine": an article or substance intended for use in the diagnosis, cure, mitigation, treatment…
Who is responsible for collecting and remitting state and local sales tax when a direct sales/multi-level marketing company's independent distributors sell to end consumers, and how should local tax be tracked across Texas's different city/county/district/transit rates?
The direct sales organization itself — not its individual independent distributors — is responsible for collecting and remitting state and local sales/use tax on Texas sales made through its distribut…
Are gun club membership fees taxable, and separately, is labor to repair appliances or real property taxable?
Gun club membership fees are taxable as an amusement service under Rule 3.298. Separately, labor to repair tangible personal property (like appliances) is taxable, but labor to repair real property is…
Is fluoride toothpaste, and denture toothpaste/cleaners, exempt from Texas sales tax under the new over-the-counter drugs and medicines exemption?
Yes. Fluoride toothpaste is a medicated dental product and is exempt from Texas sales tax effective April 1, 2000, under the new over-the-counter drugs and medicines exemption. Denture toothpaste and …
Is an optional warranty contract to repair a leaking roof taxable, and does it matter whether the roof is on a residential or nonresidential building?
It depends on the type of property. A warranty contract to repair nonresidential realty is taxable per Rule 3.357, though the warrantor may purchase items tax-free that will be incorporated into the r…
I personally paid sales tax when I bought a business's inventory in a rush with my own personal funds, then transferred that inventory to a partnership I formed the next day to run the business. Since there was no real change in ownership, can I get that sales tax refunded even though the partnership (not me personally) has the sales tax permit?
No, not without your own permit first. Texas follows the separate legal entity theory — a partner and a partnership, though related, are separate legal entities in fact and in law, and that separatene…
A billing-services firm processes and mails account statements using computers, laser printing, and manual folding/inserting/mailing steps — which of these steps count as taxable data processing (eligible for the 20% exemption), which count as nontaxable printing/mailing, and which are just taxable sales of tangible personal property?
It depends step-by-step on what's actually happening to the data and the physical materials. Manipulating data to produce statements/notices (computing, laser printing driven by data manipulation, cou…
An accountant wants to offer telephone technical support answering bookkeeping 'how to' questions and software questions to clients — does that require charging Texas sales tax?
Technical support answering questions about accounting or bookkeeping procedures is not subject to Texas sales tax. But a charge for software technical support IS taxable specifically if the person pr…
Does the April 1, 2000 over-the-counter drugs and medicines exemption relieve a direct sales organization from collecting sales tax on vitamin, mineral, and dietary supplement sales?
Yes. Effective April 1, 2000, sales of over-the-counter drugs and medicines are exempt — a qualifying product must be a drug or medicine, meaning an article or substance intended for use in the diagno…
Does weighing/scale equipment at a Texas food processing facility qualify for the manufacturing exemption, and does the answer change depending on where in the process the scale is used?
It depends on the scale's specific function. A scale used as part of the manufacturing line to ensure the correct weight of ingredients going into a formula qualifies for exemption. A scale used to ve…
When a company sells vacation packages bundling hotel rooms, meals, amusement services, and incentive certificates, which components does it collect sales tax on, and which does it just pay tax on itself as the purchaser?
The company must collect tax from the customer on any amusement services charge that's separately stated within the travel package (or where surrounding additional costs are inconsequential), per Rule…
A retailer sells its credit-card receivables to a financial institution but is contractually obligated to buy back (with recourse) any accounts that go uncollectible — can the retailer still claim a sales tax bad debt deduction on those charged-back accounts?
Yes. A retailer that assigns or factors its receivables to a third party (like a financial institution financing its credit card) may claim a bad debt deduction on accounts that get written off due to…
Does microwave equipment that relays a TV news truck's signal back to the television station qualify for the manufacturing exemption?
No. Microwave equipment used to relay a signal from a television news truck to the station does not qualify for exemption under either Tex. Tax Code § 151.318 or § 151.3185, whether the signal is ulti…
After the Governor declared Tarrant County a disaster area, is labor to repair damaged property in the area exempt from Texas sales tax?
Yes. Once the Governor declares an area a disaster area, labor to restore real or tangible personal property damaged within that area by the condition that caused the disaster declaration is exempt fr…
The new OTC drugs and medicines exemption covers diabetic test strips — does it also cover the lancets used in diabetic monitoring machines?
No, not automatically. Lancets are not exempt as over-the-counter drugs or medicines on their own. They do qualify for exemption, however, if sold under a doctor's prescription.
A company sold half its employees to a new, commonly-owned company and now leases those employees back at cost plus a markup — is that lease of employees exempt from sales tax as staff leasing?
This arrangement appears to qualify as exempt staff leasing under Rule 3.364, but only if the leasing company meets the legitimate staff-leasing-company requirements in Rule 3.364(a)(5), and the clien…
A contractor doing improvement-to-realty work for a tax-exempt entity (an airport) rents equipment for the job — is that equipment rental taxable, even though the airport's own purchases would be exempt?
Yes, equipment rented or leased by the contractor for use in performing the contract is taxable — the exempt-purchaser status of the airport doesn't flow through to the contractor's own equipment rent…
A Laredo communications center lets customers make collect long-distance calls and also buys items online on customers' behalf for in-store pickup — how is each service taxed, and do local taxes apply the same way to intrastate versus interstate/international calls?
Charges to customers for using a phone to make collect long-distance calls are taxable telecommunications services either way, but the tax rate depends on the call type. Intrastate collect calls (with…
Some insurance companies (especially out-of-state ones) refuse to pay Texas sales tax on medical case management services performed for a Texas resident — is that tax actually owed, and who's on the hook if it isn't collected?
Case management services are taxable as insurance claims adjusting/claims processing services under Tex. Tax Code §§ 151.0039 and 151.0101(a)(9) and 34 Tex. Admin. Code Rule 3.355(a)(5) and (b). Rule …
Is sales tax due on a mail-in rebate a retailer pays through a third-party clearinghouse, even though the rebate coupon says 'sales tax is not refundable'? And does a manufacturer's rebate tied to a specific retailer's receipt work the same way?
For the retailer-funded rebate: no additional tax analysis needed to exclude it — a cash discount rebated to the customer after the sale by the retailer is excludable from the tax base, even when a th…
Is a regional education service center exempt from Texas sales and use tax the same way a school district is, and does that exemption extend to the center's employees?
Yes for the center itself, no for its employees. Regional education service centers — and all other regional education service centers statewide — are exempt from paying Texas sales and use taxes, bec…
Was an over-the-counter drug or medicine exempt from Texas sales tax in 2000 just because it had an NDC (National Drug Code) number, even if the number didn't appear on the label?
As of this March 2000 email response, yes — an OTC drug or medicine with an NDC number was exempt from Texas sales tax even if the number wasn't printed on the label. STAR has since attached a currenc…
When a company charges donors a separate fee to notify a recipient (by letter or by e-mail) that a charitable gift was made in their name, is that notification fee taxable in Texas?
It depends on how the notification is sent. A separately stated charge to notify the recipient by e-mail is a taxable telecommunications service under Rule 3.344. A separately stated charge to send th…
Is a golf course's 'trail fee' — charged to a member who brings and uses his own golf cart on the club's cart paths — subject to Texas sales tax?
Yes. A country club's trail fee, charged to a golfer for using his own privately owned cart on the club's cart paths, is taxable as a sale of an amusement service under Rule 3.298(b).
Did a Texas pharmacy need a doctor's prescription on file to sell diabetic test strips and lancets tax-free, and did that change in 2000?
As of this March 2000 letter, yes — diabetic test strips and lancets were exempt therapeutic devices only when sold to an individual with a licensed practitioner's prescription on file; without one, t…
When a Texas-permitted seller (Company A) drop-ships an item to a Texas customer (Company C) on behalf of a reseller (Company B), who is responsible for collecting the Texas use tax?
Texas use tax is owed on the sale, but the drop-shipping seller (Company A) doesn't have to collect it as long as it gets a properly completed Texas resale certificate from the reseller (Company B). W…
Is a security guard service — hiring a guard from a security company to walk a business's premises at night — subject to Texas sales tax?
Yes. Charges for providing security services to property or persons located in Texas are subject to Texas sales tax, so the security company was correct to charge sales tax on its hourly guard-service…
Is a tenant's late rent fee subject to Texas sales tax as a taxable 'debt collection service,' and does it matter that a property management firm collects the fee on behalf of the property owner?
A tenant's late fee for paying rent late (a straightforward contractual sanction, not yet a delinquent-account collection effort) is not a taxable debt collection service under Rule 3.354, so the tena…
When a retailer sells its credit-card receivables to a financial institution, can the retailer claim a sales tax bad debt deduction for accounts the institution later writes off — and does it matter whether the sale to the institution is a true recourse arrangement or a discounted factoring sale?
It depends on which one the arrangement actually is: a retailer that factors receivables with a genuine recourse provision can claim a bad debt deduction on accounts written off as a result of that re…
Does the Texas exemption for labor and materials to repair large commercial vessels (Rule 3.297(b)(2)) cover charges for renting equipment like scaffolds used during the repair?
No. Rule 3.297(b)(2)'s exemption covers labor and consumed materials (like sand for sandblasting or solvents) used to repair a commercial vessel over eight tons, but it does not cover equipment — incl…
A 501(c)(3) organization planned to sell taxable items at a Texas convention spanning two days. Does that use up both of its allowed one-day tax-free sales for the year, or does it still count as just one?
It uses up both. A Texas-exempt 501(c)(3) organization gets two one-day, tax-free sale days per calendar year (and the same allowance applies to each bona fide chapter), but selling over a two-day per…
When a business that provides a taxable service separately bills a client for its own travel expenses (airfare, meals, hotel), are those reimbursed expenses part of the taxable sales price?
Yes. Travel expenses billed by a provider of a taxable service are part of the taxable sales price and are subject to Texas sales tax — Tex. Tax Code § 151.007(a) does not allow the sales price of a t…
Are membership dues paid to a professional/trade association subject to Texas sales and use tax?
No. Membership dues paid to a professional association are not subject to Texas sales and use tax.
If a Texas seller ships or personally delivers a taxable item to a customer outside Texas, is Texas sales tax due — and what proof should the seller keep?
No Texas sales tax is due when a Texas seller ships or delivers a taxable item to a location outside Texas. The seller should keep documentation proving the out-of-state delivery — a shipping invoice …
When a country club bills its golf members a monthly assessment to pay for a capital improvement (like a new cart path), is that assessment subject to Texas sales tax — for both equity members (who've vested capital in the club) and non-equity members?
Yes for both. A capital improvement assessment billed to a private club's golf members is taxable regardless of whether the member is an equity member (who has vested capital and voting rights) or a n…
A meat packaging plant uses a hot-water pasteurization cabinet, acetic acid sprays, dust-removal acid wash, sanitizing chemicals, conveyors, and a cooler as part of USDA-mandated processing. Which of these qualify for Texas's manufacturing/pollution-control sales tax exemption?
It's item-by-item, not all-or-nothing. The hot water pasteurization cabinet and acetic acid used to kill bacteria qualify for the exemption, and sanitizing/cleansing chemicals used on the processing a…
Can a Texas local taxing jurisdiction impose local sales tax on direct-to-home satellite television programming?
No. The federal Telecommunications Act of 1996 preempts local taxing jurisdictions from imposing sales tax on direct-to-home satellite programming, so no local sales tax is due on satellite programmin…
When a restaurant building is subleased to a franchisee together with a separately billed charge for the restaurant equipment, is sales tax due on the equipment rental charge?
No. Under Rule 3.294(k)(1), if a real property lease/rental contract also includes the lease or rental of tangible personal property (like restaurant furniture or equipment) as part of the same agreem…
Is filter fabric used under railroad ballast an exempt railroad supply, and is the labor to install it in an existing track repair taxable?
The filter fabric itself is exempt, the same as the ballast, rails, cross ties, plates, and spikes it's installed alongside — it qualifies as a supply essential to the operation of locomotives and tra…
Are pool tables and shuffleboard tables in a bar subject to Texas sales tax, and does it matter whether they're coin-operated?
It depends on how customers pay. Amusement services like pinball games, pool tables, and shuffleboard provided through coin-operated machines that the consumer operates directly are exempt from sales …
A radiator repair shop wants to charge customers an environmental disposal fee. Is that fee taxable, and does it matter whether the radiator being repaired belongs to a motor vehicle or to other equipment?
The environmental disposal fee is taxable only if the underlying radiator repair itself is taxable — it's treated as just another cost of the repair, folded into the taxable sales price under Sec. 151…
What local sales tax rate does a lump-sum contractor pay on materials for a new construction project, when the contractor buys those materials from a Houston vendor?
A lump-sum contractor performing new construction is the consumer of the materials incorporated into the building and pays sales tax based on the VENDOR'S location and delivery point — not the job sit…
Is 'fishing' (retrieving lost tools or equipment from a wellbore) a taxable service under Texas's oil and gas well service rules?
It depends on when the fishing happens. Rule 3.324(d)(1)(C) generally makes fishing for rods or tubing a taxable activity, but Rule 3.324(d)(4) carves out an exception: fishing services are NOT taxabl…
How is scaffolding erection and dismantling labor taxed for a Texas contractor across five different scenarios: periodic maintenance, a taxable service, new construction, re-renting scaffolding as the rental company, and erecting/dismantling a customer's own scaffolding?
There is no single answer — it depends entirely on what's actually being sold. As a general rule, contractors performing real property services are the 'consumer' of scaffolding they use and must pay …
A company plans to hold a Texas seminar training pharmacists on preparing compounded pharmaceutical products, and will provide notebooks and workbooks as part of the training. Is the training taxable, and who pays sales tax on the materials?
The training itself is not subject to Texas sales tax. If the seminar provider gives materials like notebooks or workbooks to attendees as part of the seminar (bundled into the price), the PROVIDER mu…
In a four-party chain — a telecom provider (Company A) selling to a reseller (Company B), which sells a bundled WAN service to a service company (Company C), which in turn charges a property owner (Company D) — where in the chain is Texas sales tax actually due?
Wide-area network (WAN) charges are taxable as telecommunications services, but the tax only attaches at certain points in this four-party chain. Company A's charge to Company B is taxable. Company B'…
A contractor performs actual repairs (not maintenance) to nonresidential real property and buys parts/materials at a hardware store to incorporate into the job. Can the contractor use a resale certificate to buy those materials tax-free, and does it matter whether the bill to the customer separates labor from materials?
Yes — because nonresidential real property repair is itself a taxable service, the contractor may give the hardware store a resale certificate and buy the materials tax-free, since the materials will …
I inspect homes and buildings, sometimes for insurance purposes and sometimes just because someone is buying or selling the property. Which of these inspections are taxable, and do I need a sales tax permit?
Inspections performed for insurance purposes (evaluating property risk for insurance coverage) are taxable insurance services under Rule 3.355. But an inspection done for the purpose of selling or buy…
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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.