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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A company plugs holes drilled to record seismic data for an oilfield service company. Is this service taxable, and does it matter whether the bill separates the materials (bentonite) charge from the labor charge?
The hole-plugging service itself is not a listed taxable service, so a lump-sum charge (labor and materials not separately stated) is not subject to Texas sales tax — though the company must pay sales…
Do I need to periodically renew resale and exemption certificates I've collected from customers, and do I need my customers to show me a copy of their Texas sales tax permit?
No to both. There's no requirement to renew resale or exemption certificates once you have them on file, though it's wise to verify the customer's information (address, phone number, etc.) is still cu…
A company answers four separate sales-tax questions: is electricity/gas used to repair aircraft (including in leased-out hangar space) exempt, who collects tax on catered aircraft meals, is electricity for a helicopter-repair shop taxable, and is electricity used to repair equipment held for resale taxable?
Four separate answers in one letter: (1) electricity/gas used for OFF-WING jet turbine engine repair by a licensed, certificated carrier is exempt under Rule 3.297(d)(4) — but a lessor renting out han…
A university owns and operates a parking garage used mostly by its own students, faculty, and staff, with about 10% of the use going to the general public. Are the parking charges to the university's own students, faculty, and staff subject to Texas sales tax?
No — parking permits sold to the university's own faculty, staff, and students are exempt from Texas sales tax. But the university must collect sales tax on parking charges to other tenants of the bui…
A corporation that already holds a Texas sales tax permit forms a single-member LLC (a disregarded entity for federal and Texas income tax purposes) with activity in Texas. Can the LLC report its sales tax activity on the parent corporation's own sales tax permit, or does the LLC need its own separate permit?
The single-member LLC needs its own separate Texas sales and use tax permit — it cannot report its taxable activity on its member's (parent corporation's) sales tax return. Even though the LLC is disr…
A retailer's computerized point-of-sale system calculates a sales tax amount that differs from what's actually collected from customers. Can the Comptroller approve reporting sales tax based on the actual amount collected instead of the statutory calculation?
No — the Comptroller cannot approve a reporting method that departs from Tex. Tax Code § 151.053(a). Tax must be computed on the TOTAL sale of taxable items (not on each individual item), with fractio…
Are admission tickets to view movies in a theater that's listed in the National Register of Historic Places subject to Texas sales tax?
No. Admission tickets to a movie theater are ordinarily taxable amusement services under Tex. Tax Code §§ 151.0028 and 151.0101(a)(1), but § 151.3101(2)(B) specifically exempts admission tickets to vi…
A university holds various events — rock concerts, a student-organization movie showing, and a monster truck rally — sometimes alone, sometimes with a performer's agent, sometimes with a promoter under a profit/loss-sharing contract. In which of these five scenarios are the admission tickets taxable amusement services?
It depends on whether the university is "held out as the provider" of the event and whether it's genuinely sharing both profit AND loss with a for-profit co-provider. Tickets are NOT taxable when the …
A commercial bank asked the Comptroller to run through the sales-tax treatment of a whole list of products and services it purchases: training seminars, delivery charges, armored car/courier services, UCC lien searches, printing, appraisals, pest control, books/subscriptions, audit/loan-review/401(k) administration, software maintenance, and repossession services. Which of these are taxable?
A mixed bag, item by item: training seminars are NOT taxable. Delivery charges billed by the seller of a taxable item ARE taxable. Armored car/courier services requiring a Board of Private Investigato…
A construction company acts as authorized purchasing agent and general contractor for the Federal Home Loan Bank on a construction job, billing equipment rentals to the Bank (paid by Bank check) as a federal exemption claim. Are those equipment rentals exempt from Texas sales tax?
Yes. The equipment rentals are exempt because they are made to the Federal Home Loan Bank, which Tex. Tax Code § 151.309(1)-(3) treats as an exempt purchaser — the statute exempts sales, rentals, and …
Is a Muzak-style 'Marketing on Hold' service — messages and music played to callers while they wait to be connected — a taxable service in Texas?
The Muzak 'Marketing on Hold' service itself is not a taxable service. But if the same seller also provides 'on hold' tapes containing marketing messages to be played to waiting callers, charges for t…
A manufacturer uses a dedicated holding table to hold molded components in place while glue and carpet pieces are affixed and set, then removed for packaging. The table is used for no other manufacturing process. Does it qualify for the manufacturing equipment exemption?
No. Work tables or holding stations used in a manufacturing process do not qualify for the manufacturing exemption unless they directly cause a chemical or physical change in the product (or its compo…
A homeowners' association contracted for three subdivision entrance signs; the contractor's proposals and invoices bundled labor and materials into one lump-sum price and charged sales tax on top. Are the sign sale/installation charges lump-sum contracts, and is sales tax properly due on the invoices as billed?
The sale and installation of the sign posts qualify as improvements to realty, and the contractor's proposals/invoices here were lump-sum (one combined price for labor and materials). Under a lump-sum…
A retailer's employee embezzled company funds, including sales tax collected from customers. Can the retailer get a refund or waiver of the sales tax that was stolen, since the retailer never actually got to keep that money?
No refund is available. Sales tax is paid by the purchaser and collected by the retailer, who holds it IN TRUST for the state and remains personally liable for remitting it to the Comptroller — even i…
A full-service interactive media company builds websites, domain names, and e-commerce solutions for clients. Which pieces of this work — web page creation, HTML/scanning, graphics/logos, hosting, database access, domain registration, search-engine submission, and software sold online — are taxable data processing, advertising, or other services in Texas?
Web page creation and maintenance is generally a taxable data processing service. Scanning data and creating HTML documents are taxable data processing; creating graphics or logos for a client's page …
A repair business fixes copiers for customers located outside Texas. Is the repair service taxable, and does it matter whether the customer picks up the repaired copier in Texas or has it shipped back out of state?
The repair service is exempt from Texas sales tax if the repairman travels to another state to perform the repair, OR if the repair is performed in Texas but the repaired copier is shipped or delivere…
Is restaurant-style food-preparation equipment purchased when constructing a new nursing home facility exempt from Texas sales and use tax as manufacturing equipment, since it turns raw food into consumable food for residents?
No. The manufacturing exemption applies to equipment used to process tangible personal property that is HELD FOR SALE. A nursing home is in the business of providing nursing care, not in the business …
A debt collection company collects on behalf of a client operating both inside and outside Texas, and has been charging Texas sales tax on ALL debtors regardless of where the debtor is actually located. Is that correct, or should Texas tax only apply to debtors located in Texas?
Texas sales tax should only apply to debt collection charges for debtors located in Texas — no Texas sales tax is due on the charge to collect a debt if the debtor was not located in Texas at the time…
A CPA firm signed a large outsourced-services contract to perform finance, accounting, and information technology functions for a client's upstream/chemical and downstream business units. Should the whole contract be treated as one nontaxable bundle of 'professional' accounting services (since the computer work is just how the firm delivers its professional advice), or does it need to be broken into individually taxable and nontaxable pieces?
The contract must be broken into pieces — it can't all be treated as one nontaxable professional-services bundle just because a CPA firm is providing it. Rule 3.330 defines data processing broadly (da…
A restaurant's game room has coin/token-operated video arcade games and rides, plus a bumper car ride that also requires depositing tokens into a turnstile but is controlled by an employee. Are the receipts from all of these exempt as coin-operated amusement machines?
Not all of them. Receipts from coin-operated video arcade games and rides that require a token/coin to play and display the required $60 annual occupation tax stamp are NOT subject to sales tax (thoug…
A company refurbishes and remanufactures old cryogenic tanks and vessels (used by mostly out-of-state customers to store liquid oxygen, nitrogen, and argon), performing complete restoration and repair. Should it collect Texas sales tax on both in-state and out-of-state customers, and how is tax handled on the parts used in the repair?
Refurbishing, restoring, or repairing tangible personal property belonging to another is a taxable service under Rule 3.292, and tax is due on the ENTIRE charge — materials, parts, labor, consumable s…
A backhoe cut a natural gas pipeline at a construction company's job site. The gas company billed the construction company for the repair, separating out labor, materials, equipment, gas loss, and overhead — without charging sales tax. Should the gas company have charged sales tax on that invoice?
Yes, mostly. The charge for repairing the pipeline is taxable as a nonresidential real property repair service under Rule 3.357, and the total charges for the repair — labor, materials, equipment, and…
A non-Texas food broker with no Texas offices, employees, or agents obtains bids to supply food products (not ready-to-eat meals) to tax-exempt entities like school districts, using common carriers for delivery and sometimes a short-term rented storage facility in Texas. Does this company need a Texas sales tax permit?
The company's short-term rental of a Texas storage facility does make it "engaged in business" in Texas under Tex. Tax Code § 151.107(a)(1). However, as long as the company sells only food products no…
A store advertises a computer at $649, but gives an instant $400 rebate at the time of purchase if the customer signs a 3-year internet provider contract — so the customer only pays $249, and the $400 never appears on the customer's bill or account. Is Texas sales tax due on the $649 advertised price or the $249 actual price paid?
Sales tax is due on the $249 discounted price actually paid, not the $649 advertised price. This follows the standing rule (from an earlier 1988 letter, 8810L0904F12) that cash discounts taken at the …
A city owns and operates an auditorium-coliseum and has begun charging patrons to park for events. Is the parking fee taxable if the city is the sole entity charging for parking, and is it taxable if the city instead shares the net parking profit with the event promoter leasing the facility?
Yes — the parking fee is taxable either way, whether the city is the sole entity charging for parking or the city and the event share the parking profits. Rule 3.315(a) makes sales tax due on parking …
Is selling and installing a modular semiconductor cleanroom exempt from Texas sales tax, and what about repairing or remodeling the building around it?
It depends on who the customer is. Selling and installing a modular cleanroom (including installation labor) is exempt only when the customer is a semiconductor manufacturer who gives a properly compl…
Is sales tax due on drilling rigs docked in Texas, and on repairs/maintenance performed on them, while they wait for offshore oil-and-gas contracts?
It depends on how the rigs are used and built. Renting a rig with an operating crew for a single charge is a nontaxable service, not a taxable rental. Separately, purchasing the rigs and repairing/mai…
Is an above-ground swimming pool exempt from Texas sales tax if a doctor prescribes water exercise in it as physical therapy?
No. Even with a doctor's prescription for water exercise as therapy, an above-ground swimming pool does not qualify as an exempt therapeutic device under Tex. Tax Code § 151.313(a)(5) and Rule 3.284(c…
Can a seller take a sales tax credit for cash rebates it pays back to customers after the sale, based on volume of business?
Yes, if properly documented. Cash rebates paid back to customers after the sale are excludable from the sales tax base as long as the tax is refunded to the customer in proportion to the rebated sales…
Is an on-site-built glass-melting furnace ('Tank') tangible personal property that qualifies for the manufacturing exemption, or a taxable improvement to realty?
It's tangible personal property, not realty, because the facts showed no intent to permanently affix it (semi-temporary, no mortar, demolished after 3-5 years). As TPP used directly to cause a physica…
Can a wedding/portrait photographer buy cameras, flashes, batteries, and similar equipment tax-free using an exemption certificate, or only film and processing supplies?
Yes, more than just film. Photographers are treated as manufacturers under Sec. 151.318, and the 1999 addition of Sec. 151.318(t) lets them give an exemption certificate for cameras (conventional and …
Is labor to repair or remodel a building listed on the National Register of Historic Places exempt from Texas sales tax?
Yes, but only the labor. A contractor may accept an exemption certificate in lieu of collecting Texas sales tax on charges for labor to repair or remodel a building that is listed on the National Regi…
Is a service that inspects vehicle body-shop repairs and reports on their quality subject to Texas sales tax?
No, unless the service is performed for an insurance company. Post-repair inspection and reporting is not taxable in general, but the same service becomes a taxable insurance service (requiring collec…
Can a city tax or regulate passengers boarding a 'nowhere' gambling cruise ship, and is a cruise lasting longer than 24 hours a taxable amusement service?
A cruise lasting longer than 24 hours is not a taxable amusement service under the Sales and Use Tax law. Separately, the Comptroller found no statutory provision letting a municipality regulate or ta…
If a business took a sales tax credit believing items were exempt under the manufacturing exemption, and an audit later finds they weren't exempt, does the business owe penalty and interest?
Yes, tax is still owed, but a taxpayer authorized to conduct a managed audit under new Tax Code Sec. 151.0231 (effective October 1, 1999, added by SB 1319) may not be assessed a penalty, and the Compt…
Is an environmental services company's cleanup of an oil spill in a Texas waterway, and its disposal of the spilled oil, subject to Texas sales tax?
No. Cleaning up an oil spill in a waterway is not a taxable service, and disposing of the spilled oil is also not taxable because oil is excluded from the definition of taxable waste removal under Rul…
Does an FAA airworthiness certificate or a pilot's license prove an aircraft qualifies for Texas's certificated-carrier sales tax exemption, and is repairing autopilot systems installed in aircraft taxable?
No, an airworthiness certificate or pilot's license does not prove certificated-or-licensed-carrier status — that status requires specific authorization to operate as a common or contract carrier for …
Can a photographer who sells images online buy a computer and scanner tax-free, and does it matter whether the scanner scans a negative or a finished photo?
It depends on the equipment's actual use. A computer used only to enhance/edit unfinished photographs held for sale can be bought tax-free (with tax owed on the fair rental value for any divergent non…
Is a company that arranges and coordinates real property surveys for its clients, using independent licensed surveyors, purchasing survey services for resale and required to collect tax from its own customers?
Yes. Based on the contracts submitted, the coordinator is purchasing surveying services for resale and reselling them to its customers — it may give the surveyor a resale certificate instead of paying…
If a contractor is building out a state agency's exempt facility (like the Texas State Preservation Board's history museum theater), which of the contractor's own purchases are tax-exempt, and which stay taxable?
Materials/supplies incorporated into realty for an entity exempt under Sec. 151.309 (government) or 151.310 (religious/charitable/educational/501(c)(3),(4),(8),(10),(19) organizations) are exempt, in …
A CPA asked about three new clients: a coin-operated apartment laundry business, an advertising/marketing firm, and an internet-based construction-tracking software company — what's taxable for each?
Coin-operated laundry revenue itself isn't taxed, but the business owes Texas use tax on the washers/dryers it buys (and must collect sales tax on any vending-machine soap sales). An advertising scrip…
Which bulk-mail fulfillment charges (sorting, folding, collating, stuffing, shipping) are subject to Texas sales tax?
Fulfillment mailing services — sorting, stuffing, metering, folding, labeling, and collating printed matter supplied by the customer, plus set-up fees, storage, packaging, and shipping/freight charges…
Can an architecture firm use its tax-exempt school client's exemption certificate to buy blueprint copies tax-free from a copy shop, even though the copies are for the school's project?
No, not just because the client is exempt. An architect's or engineer's professional services are themselves nontaxable, so the firm — as the provider of a nontaxable service — must pay sales tax on t…
Does a company that promotes and sells bleacher-seat tickets to a public outdoor festival need to collect Texas sales tax on admission charges?
Yes. An outdoor festival qualifies as an amusement service, and sales tax is due on the admission charge. The seller of the amusement service (here, the ticket promoter/handler) must collect and remit…
Is asbestos abatement (collection, encapsulation, removal, disposal) taxable in Texas, and what about the repair work done to restore the building afterward?
The asbestos abatement service itself (collection, encapsulation, removal, disposal) is not taxable. But replacing insulation, siding, ceiling tiles, paint, and other realty improvements done in conne…
If a sports facility operator rents its facility long-term to instructors who use it only to teach students (no tournaments, leagues, or open play), is the facility rental taxable even though the instructors' own teaching services are tax-exempt?
Yes, the facility rental to the instructors is still a separately taxable amusement-service transaction, even though the instructors' downstream charge to their students for sports instruction is a di…
At a gas processing plant, is repairing equipment incorporated into realty taxable, are H2S monitors exempt as pollution-control equipment, and is new underground gas-line construction taxable?
It depends on the specific item. Repair labor on gas-plant equipment that's been incorporated into realty (which most is) is taxable real property repair, though separately stated repair parts are exe…
Can a retailer keep filing Texas sales tax returns on a 4-5-4 fiscal accounting schedule instead of strict calendar months for the year 2000?
Yes. A 4-5-4 fiscal accounting schedule is an acceptable basis for filing Sales and Use Tax Returns, with due dates set by where the accounting period falls in the month: if the period ends on the 1st…
A contractor's earlier ruling exempted consumable supplies (sandpaper, saw blades, rags, tape, cleaning products) used in remodeling work for tax-exempt entities — does the same exemption apply when the contractor does identical remodeling work for a commercial business like a retail store or restaurant instead?
No. The § 151.311 exemption for consumable supplies used in remodeling only applies when the work improves realty belonging to a tax-exempt entity. The same supplies used in an otherwise-identical tax…
Is a referral fee paid by a nursing home or retirement community to a locator service (that helps senior citizens find a home, at no charge to the senior) subject to Texas sales tax?
No. The referral fee paid by the nursing home or retirement community for the locator service is not subject to Texas sales tax, when the senior citizen being referred is not charged.
Is installing a new sign on top of an existing pole-mounted sign, under a lump-sum contract, considered new construction (potentially nontaxable) or remodeling (taxable)?
It's remodeling of real property, not new construction, so the lump-sum charge for adding the new sign is subject to sales tax. *Note: the scraped subject heading references "painting," but the letter…
At an iron-casting foundry, is the hoist/trolley system moving castings into a blast-cleaning machine taxable, and are hoists used to manipulate castings during grinding exempt?
The hoist/trolley system moving castings into the blast machine is taxable intraplant transportation equipment under Sec. 151.318(c)(1), which specifically excludes such equipment (including piping an…
Is pre-press equipment (mag etching, rubber plates, film master, velox print, photopolymer-to-engraving conversion) that a manufacturer buys to print its own packaging artwork exempt from Texas sales tax?
Yes. Under the newly added Sec. 151.318(t) (House Bill 3211, 1999), pre-press machinery, equipment, and supplies necessary/essential to the printing process — including the items listed (etching plate…
Is equipment a contractor rents (not buys) for use on a tax-exempt entity's job covered by the same exemption that applies to purchases of a taxable service for that job?
No. A contractor's rental of equipment/machinery for a job on exempt realty is legally a "sale"/"purchase" of tangible personal property under Sec. 151.005 (which defines rental the same as a sale), n…
Starting October 1, 1999, are information services and data processing services in Texas only taxed on 80% of their value, and how should that be reported on the sales tax return?
Yes. Effective October 1, 1999, new Tax Code Section 151.351 (added by Senate Bill 441) exempts 20% of the value of information services and data processing services, so only 80% is taxable. On a $1,0…
Is Texas sales tax due on drill team uniform items (leotards, tights, boots, hats) purchased through group orders for students at a public school?
It depends on who buys them. If the school purchases and pays for the uniforms itself for its own use (like band or sports team uniforms it owns), the purchase is tax-exempt. If individual drill team …
How does Texas sales tax apply to network installation services — evaluating a client's computer setup, installing or configuring hardware/software you didn't sell, initial computer setup, employee training, modifying existing software, and hardware repair?
It varies by service. Evaluating a client's computer configuration and writing a report is not taxable, unless the advice is really information on where to get the best price, which IS taxable as an i…
A new business will offer computer-aided drafting (CAD) production, CAD training, computer consulting, customization/deployment recommendations, and custom programming, all billed hourly and without selling any hardware or software. Which of these services are subject to Texas sales tax?
Mixed. Computer-aided drafting production is taxable. General consulting not tied to a taxable-item sale is not taxable. CAD training is not taxable if separately stated. Customization, deployment, an…
Is Texas sales tax due on labor to build or repair fences, gates, cattle guards, and roads on a farm or ranch?
It depends on new construction versus repair. Labor to newly construct fences, gates, cattle guards, or roads as an improvement to realty is NOT taxable, whether billed lump-sum or separately from mat…
How does a direct sales/multi-level marketing organization collect Texas sales tax on its independent distributors' sales, and are sales the distributor makes to customers in Mexico exempt?
The direct sales organization -- not the distributor -- is responsible for collecting and remitting tax on distributor sales, since distributors of direct sales organizations aren't issued their own s…
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.