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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Could a prestressed-concrete business claim manufacturing exemptions while acting as a lump-sum or separated contractor, and how was cement treated?
No manufacturing exemption applied while it acted as a contractor; only outright sales were treated as manufacturing. Lump-sum cement created no sales-tax liability, while separated-contract concrete-…
Were stationary exercise bicycles and ankle weights exempt from Texas sales tax when prescribed for rehabilitation after an injury?
Yes. The Comptroller treated exercise bicycles and ankle weights sold on a doctor's prescription for post-injury rehabilitation as exempt therapeutic devices.
Was merchandise taxable when customers redeemed ten savings stamps for a free bottle of food supplements, and what amount formed the tax base?
Yes. The Comptroller treated the program as trading-stamp redemption and the merchandise exchange as a taxable retail sale, measured by the product's suggested retail selling price.
How did Texas determine whether an installed pipeline sale involved real property or tangible personal property, and could the sale qualify as an occasional sale?
An installed pipeline generally qualified as real property, subject to a good-faith agreement or the fixture tests. If personal property, its sale could qualify as an identifiable-segment occasional s…
When did electricity qualify for exemption under the predominant-use test, and what rules applied to exemption certificates and refunds of previously collected tax?
More than 50% of metered electricity had to be exempt use, supported by a usage study. Sellers were not required to refund prior tax, and refunds required qualifying historical use, an active meter, a…
Which electricity uses of a private water and sewer utility were exempt, and how did the predominant-use test apply to a mixed-use meter?
Electricity for extracting, pre-processing transport, and water-processing equipment was exempt. Post-processing storage and delivery, incidental operations, and sewer service were taxable; a mixed me…
Did electricity used to clean, grade, sort, pack, refrigerate, and store produce qualify as electricity used directly in processing?
No. Those activities were not treated as processing, so their electricity was not exempt. More than 50% of total electricity had to be used directly in processing produce for sale to qualify.
Was a rental company's charge for damage to rented equipment taxable when the damage required replacing a destroyed part?
Yes. The Comptroller treated replacement of a destroyed part as a taxable repair, separate from later rentals. For lost or stolen items, the letter only said a new item could be a replacement rather t…
Was electricity used for lighting at a manufacturing or processing facility exempt from Texas sales tax?
It depended on location. Lighting directly in the manufacturing or processing production area was exempt use, while lighting in hallways, storage rooms, and other nonproduction areas was taxable use.
Did MTA tax apply when a common carrier bought parts inside an MTA for its own use and transported them on its own freight system to a shop outside the MTA?
Yes. The carrier possessed the goods inside the MTA even while acting as the shipper, so carrying its own purchases to a point outside the MTA did not prevent MTA tax.
Did a bowling center's new ownership end the historical sales-tax exemption for league agreements signed before October 2, 1984?
No. The old agreements remained exempt prior contracts despite the ownership change, but the letter expressly said that exemption expired on September 30, 1987.
Could a taxpayer use modified invoices obtained after completed transactions to satisfy a separate-statement requirement and change the sales-tax result?
No. Executive Counsel rejected after-acquired modified invoices because the completed transaction's form determined taxability and the later documents were obtained only to alter that result.
What happened when a coffee-vending service bought taxable and nontaxable items together for one lump-sum price?
The entire lump-sum charge was taxable. Nontaxable items had to be separately listed to be excluded from the sales-tax base.
Were paint brushes exempt as property necessary and essential to manufacturing?
No. Although the brushes otherwise met the necessary-and-essential manufacturing test, the law specifically excluded hand tools, and Rule 3.300(a)(6) included paint brushes in that definition.
Could an out-of-state bus lessor qualify for Texas's new-resident motor vehicle tax when it first leased used buses in Texas?
Yes. The Comptroller said the out-of-state lessor qualified as a new resident under § 152.023 when its previously out-of-state registered buses entered Texas for new leases. The result was the same fo…
Were hunting-lease operators required to obtain a permit or collect Texas sales tax while the Comptroller reconsidered its policy in July 1986?
Temporarily, no. This letter superseded a May 9, 1986 letter and suspended permit and collection requirements for hunting-lease operations until a final determination was reached.
Was a hospital's charge for providing copies of medical records to third parties subject to Texas sales tax?
No. The Comptroller treated the copies as part of the hospital's professional service and said providing them to third parties was not subject to tax.
Could a direct-payment exemption certificate be reproduced with the controller's signature already on it?
Yes. The controller's signature could be reproduced, but the vendor's name and the certificate's issue date had to be completed when the certificate was actually issued to that vendor.
Was the service of converting an oil well from a bottom-hole pump to a gas-lift operation taxable?
Yes. The Comptroller classified the well-conversion service as taxable remodeling.
Did casing and tubing bought for use in high-pressure New Mexico wells qualify as drilling equipment under Section 151.324(b)?
No. The Comptroller classified casing and tubing as production equipment rather than drilling equipment and said they were exempt only when used offshore outside Texas's territorial limits.
Were radio transceivers sold to individual members of tax-exempt organizations exempt merely because the members belonged to those organizations?
No. Section 151.310(a)(2) applied to qualifying purchases by the exempt organization itself, not purchases by its members or stockholders, so the seller had to collect tax.
Did an insurance company's gross-premiums-tax exemption also exempt its purchases from Texas sales and use tax?
No. The internal legal memo treated the insurance-language exemption as covering annual occupation, privilege, or franchise taxes—not transaction-based sales and use tax.
Did bond financing under the Regional Waste Disposal Act create the same sales-tax exemption for pollution-control equipment as the Clean Air Financing Act?
No. The Clean Air Financing Act contained an equipment tax exemption, but the Regional Waste Disposal Act did not. The corrective letter limited any exemption to qualifying purchases by the river auth…
Were prepackaged mixed drinks and wine coolers subject to Texas sales tax or alcoholic-beverage gross-receipts tax?
A prepackaged mixed drink sold only under a mixed-beverage permit was subject to gross-receipts tax, not sales tax. Wine-cooler treatment depended on the seller's permit and location.
When did Texas make damage-waiver fees taxable after postponing the effective date announced in the June 1986 Sales Tax Review?
September 1, 1986. The Comptroller postponed the announced July 1 effective date by two months so lessors had time to reprogram their computers.
Was the rental of cable-signal decoders taxable, and could the lessor buy the decoders tax-free for resale?
Yes. The lessor had to collect tax on decoder rental charges and obtain a sales-tax permit. Decoders actually rented to customers could be bought for resale, but equipment kept for the lessor's own us…
Did F.O.B. terms or purchaser-paid shipping insurance determine title passage for goods delivered by UPS?
No. The June 30 correction said UPS did not issue the bills of lading underlying Rule 3.303(b)(2), so F.O.B. terms were irrelevant; purchaser-paid insurance also did not make title pass at the seller'…
Could a restaurant calculate its clearly stated 15% gratuity on food plus sales tax, or did it have to calculate the gratuity only on food sales?
Either method was acceptable on the stated facts. The entire gratuity went directly to the waiter and was clearly identified on the guest's check.
Was a minimum utility bill taxable when an apartment was vacant and the bill showed zero consumption?
Yes. A zero-consumption minimum bill was a taxable sale whether charged to the individual utility customer or to the apartment owner or managing company.
Did communication and storage buildings qualify for the exemption for tangible property used in offshore mineral exploration or production?
No. Property had to be used directly and exclusively in the exploration or production activity itself, and communication and storage buildings did not meet that test.
Did an equipment seller include a manufacturer rebate assigned by the purchaser when computing the amount subject to sales tax?
Yes. The taxable amount included everything the seller received for the equipment, including a manufacturer rebate that the purchaser assigned to the seller.
Was MLO Instant Milk and Egg Protein subject to Texas sales tax?
No. The Comptroller classified MLO as a food supplement and said it was exempt from tax.
Could a software-maintenance provider buy computer dial-up line service tax-free for resale when it used the lines to diagnose and adjust customer systems?
No. The line was a taxable tool consumed in providing taxable maintenance, not a resold telecommunications service. The provider owed tax on the line and charged tax on its total maintenance fee.
What certificates, meter-by-meter studies, records, refund proof, and ongoing monitoring were required for customers claiming a utility sales-tax exemption?
Each meter had to qualify separately, with account-specific certificates and a valid study showing over 50% exempt use where uses were mixed. Claimants kept proof, updated changes, and withdrew certif…
Were custom poems taxable when recited as entertainment, sold in written form, or given away as gifts?
A delivered and recited poem was a nontaxable service; a written poem was taxable tangible property. Gifts were not taxed to the recipient, but the poet owed tax on materials used for services and gif…
Could a private snack-bar operator at a state school make tax-free sales to students or inmates while also selling to staff and visitors?
Yes, if the operation primarily benefited students or inmates and kept records separating those sales. Sales to staff, guests, and visitors were taxable; failure to distinguish them made all sales tax…
Did the value paid under the submitted contract's price, billing, and tax provisions include tax reimbursement?
No. After reviewing the submitted contract sections, the Comptroller concluded that the value being paid did not include tax reimbursement.
Could a retailer use store-level sales ratios to estimate the sales tax embedded in uncollectible hot checks covering cash, gasoline, taxable goods, and exempt goods?
Yes. The Comptroller accepted the proposed ratio method: subtract estimated cash, allocate the balance between gasoline and merchandise, apply the taxable-merchandise ratio, and back out the tax.
How did Texas sales tax apply to replacing a vinyl roof that was a manufactured component of a motor vehicle?
A separately billed repair was taxed on parts only. For a lump-sum parts-and-labor charge, the repairer paid tax on the parts and did not charge the customer tax on the repair.
Could farriers buy horseshoes, supplies, and equipment tax-free under the agricultural exemption?
No. The Comptroller said farriers, who normally charged one lump-sum fee for materials and labor, did not qualify for the agricultural exemption and had to pay tax on those purchases.
Could a chiropractor prescribe vitamins tax-free for Texas sales-tax purposes?
Yes. The Comptroller said chiropractors were treated like doctors for sales-tax purposes and could prescribe vitamins tax-free.
How did the Comptroller's internal timeline assign annual franchise-tax report due dates, penalties, and interest when an extension was late, adequately paid, or only partially paid?
The guidance used March 15 when no timely qualifying extension existed and June 15 for additional tax after a timely, adequately paid extension. It also included a split calculation for a partial-paym…
How did Texas sales tax apply to tanning-bed leases and sales, tanning-clinic membership or session fees, and true customer rentals?
Bed leases and sales to clinics for their own use were taxable. Clinic memberships and on-premises sessions were not taxable, but a true rental giving the customer control and possession of equipment …
Could a supplier accept an exemption certificate on products sold to chiropractors, and could chiropractors dispense vitamins, minerals, and food supplements without collecting sales tax?
Yes. The supplier could accept the certificate; food supplements were exempt as food, and chiropractors could dispense vitamins and minerals tax-free as drugs and medicines.
When were artists' sketches, layouts, consulting design, creative time, and supplies taxable as finished art rather than nontaxable preliminary work?
Work not delivered as the final product could be nontaxable preliminary art, but completed layouts and consulting designs were taxable finished art. Separately stated thinking time unrelated to the fi…
Who paid and collected sales tax when prime contractors or subcontractors used separated versus lump-sum real-property contracts?
Separated contractors acted as retailers, bought incorporated materials for resale, and taxed the material sales price. Lump-sum contractors were final consumers and paid tax to their suppliers.
Which bras, breast forms, covers, and adaptive garments qualified as exempt prosthetic devices after mastectomy?
Specially made prosthesis bras, temporary or partial-removal breast forms, and replacement covers were exempt. Ordinary bras merely adaptable to a form were taxable; nightgowns and swimwear were left …
Were stock-trailer repair parts and labor exempt when a rancher used the trailer between tracts of land or to haul livestock to market?
They were exempt when the trailer was used only to move livestock between tracts, but the exemption was lost when it hauled livestock to or from market. STAR flags a later registration-number requirem…
Was a separately stated fee for reserving a photographer on a specific day taxable?
It depended on the outcome. The retainer was taxable when a photograph was sold and nontaxable when no photograph was sold.
Were prescribed therapeutic devices exempt when sold to individuals but paid for by insurance, and could doctors or hospitals buy the devices tax-free?
The individual sale was exempt with a licensed practitioner's prescription, even when insurance paid, and the seller kept the prescription. Doctors, hospitals, nursing homes, and other providers could…
Was electricity used by beer distributors to cool and preserve beer exempt as electricity used in processing?
No. The distributors bought a finished product from the brewery and used electricity only to preserve it, so they were not processors and the electricity was taxable.
How did title passage, export documentation, and storing goods in Texas affect resale certificates and sales-tax refunds for exported property?
A resale certificate depended on title passing in the United States. Texas storage was a taxable use, and no refund was allowed when property remained in Texas more than one month after purchase.
How did Texas tax a 501(c)(4) flying club's hourly aircraft rentals, membership dues, aircraft supplies, and aircraft purchased for rental?
Hourly aircraft rentals were taxable, but monthly membership dues were not. Rental aircraft and their parts could be bought for resale; other use had to relate to the exempt function or trigger tax on…
Did a TR 200 Fat Cat two-wheel motorcycle qualify for the agricultural machinery and equipment exemption?
No. The Comptroller said transportation was not agricultural use and no exemption was available for a two-wheel vehicle, even under the claimed farm-or-ranch use.
Were metallurgical testing services performed on customer-consumed and customer-manufactured parts subject to Texas sales tax?
No. The testing service was nontaxable, so the provider did not collect tax from customers but owed sales or use tax on taxable items consumed in providing the service.
How was tire-casing repair taxed when performed by the retreader itself versus a separate repair provider?
The retreader's own casing repair was part of the retread process. A separate provider's repair was a taxable service, but the retreader could issue a resale certificate for services on tires it would…
Were royalty receipts taxable when a developer licensed toy and game concepts for others to mass-produce, market, and sell?
No. After reviewing the contracts, the Comptroller treated the business as licensing concepts or ideas rather than selling tangible property. Royalties were not taxed, but the developer paid tax on co…
Was egg-production and processing equipment exempt when used exclusively on a farm or ranch by the original producer?
Yes. The 1986 letter exempted equipment used exclusively on a farm or ranch by the original producer to produce and process agricultural products. STAR flags a later registration-number requirement.
Which 1986 cellular-service charges were taxable, and when did local or MTA tax apply to telecommunications and rented equipment?
Most service, access, feature, intrastate-call, directory, and standalone-equipment charges were taxable. Interstate and international calls and installation were not; equipment bundled with telecom e…
Which admissions, catered-food, volunteer food-and-drink, merchandise, alcohol, parking, and vendor sales were taxable at a nonprofit fundraising event?
Provider admissions were nontaxable and one qualifying annual volunteer food event could be exempt. Catered food, alcohol, merchandise, parking, and unpermitted vendor sales remained taxable.
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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.