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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Does a facilities management company that coordinates cleaning, maintenance, security, and catering subcontractors for commercial building tenants and landlords qualify as an exempt "property management company," and are its coordinated services and markup fee taxable?
Mostly taxable. Texas ruled the company does NOT qualify as an exempt "property management company" because it doesn't secure tenants or collect/apply rental revenue for its clients — it's simply a fa…
How does Texas sales tax apply to a rent-to-own company's agreements — are they taxed as financing leases or operating leases, who's the responsible seller, and what happens when a customer takes the rented item out of state?
Rent-to-own agreements structured like this one are operating leases, not financing leases — so the full rental stream (including any "origination" or "interest"-labeled fees) is taxable, with no excl…
Is the sale of an extended warranty or service contract on a motor vehicle taxable in Texas, and can the warranty provider buy replacement parts tax-free using a resale certificate?
No, the sale of an extended warranty or service contract on a motor vehicle isn't itself subject to Texas sales/use tax or motor vehicle tax, whether the vehicle is sold or leased -- but the used-car …
Is a hospital vendor-credentialing service -- compiling vendor documents and issuing access badges -- a taxable 'data processing service' in Texas, and can the credentialing company buy the access badges tax-free?
Taxable data processing, not a nontaxable security service. The Comptroller ruled that a company's healthcare-facility vendor-credentialing service -- compiling vendor-submitted documents and accredit…
A hotel and its on-site restaurant are commonly owned but separately incorporated. Guests can pay one bundled price for room-plus-meal (with the hotel doing an internal 'book transfer' payment to the restaurant), or a lower room-only price. Is hotel tax or sales tax due, is the internal book transfer itself taxable, and can the hotel give the restaurant a resale certificate for it?
Three related answers for this commonly-owned hotel-and-restaurant American Plan setup: (1) if the guest's invoice does NOT separately state the meal charge, hotel occupancy tax is due on the ENTIRE b…
When a racetrack sells corporate sponsors hospitality-tent passes with closed-circuit race viewing, catered food, and rented tents/furniture, which charges are taxable, and can the racetrack buy the tent equipment tax-free for resale?
All three charges are taxable, and no resale certificate applies to the tent equipment. Admission to a racetrack's hospitality tents (with closed-circuit race viewing) is a taxable amusement service, …
In Texas's deregulated electric market, is a transmission/distribution utility's delivery charge to a retail electric provider taxable, and can a municipal franchise fee passed on to the end customer be taxed too?
CORRECTION of a prior letter. A transmission and distribution utility's (TDU) delivery charge to a Retail Electric Provider (REP) is NOT a taxable service, so no resale certificate is needed or availa…
If I start a business putting on fashion shows and selling calendars/posters of the models, do I owe Texas sales tax on ticket admissions and on the calendars/posters, and do I need a tax permit?
Yes to both. Admission charged for a fashion show held in Texas is taxable, and selling calendars and posters of the models is also taxable (though you can buy the printed calendars/posters tax-free f…
In a two-step resale chain (seller to out-of-state Company A to a Texas Company B), who is responsible for Texas sales/use tax if Company A isn't itself "engaged in business" in Texas?
The original seller's sale is exempt as a sale for resale -- Company A (the out-of-state reseller) can issue a Texas resale certificate, validated with its own state's (South Carolina) retail registra…
When one company charges a lump-sum guide-service fee for an adventure race and a related company separately rents out kayaks and gear, who owes sales tax on what?
Split treatment. A guide service's single charge to a race participant for the guide service itself (orienteering, hiking, trekking, running, team challenges, etc.) is not taxable. The related gear co…
For a sports collectibles/memorabilia show, is general admission taxable, are vendor booth rentals taxable, and is a separate charge for celebrity autographs taxable?
Mixed, by charge type. General admission to a sports collectibles and memorabilia show is taxable, as an amusement service. Booth rental charges to outside vendors exhibiting at the show are NOT taxab…
If a company assembles a septic tank system and sets it into a pre-dug hole on a vacant lot, but someone else later connects it to the home's sewer and electrical lines, is that a tax-exempt real-property-improvement contract or a taxable sale and installation of tangible personal property?
Taxable sale and installation of tangible personal property, not an exempt realty improvement. A subdivision developer's subcontractor assembled septic tank systems and set them into pre-dug holes on …
Is repairing semi trucks, heavy machinery, or overseas shipping containers taxable in Texas, and does having an ICC number change anything?
Having an ICC (interstate carrier) number doesn't change sales tax treatment. Labor to repair motor vehicles, heavy machinery, and commercial trucks is not taxable, but the materials used are taxable …
Is a chemical solvent that an oil and gas operator injects into a marginal well, and which stays in the produced oil/gas, exempt from Texas sales tax?
Yes. Micelle mutual solvent — a chemical injected into a marginal well to boost production, which becomes part of the hydrocarbons removed from the well and is sold along with the oil or gas — is exem…
Can someone who buys manufacturing equipment avoid sales tax on the purchase by leasing it out, if the equipment lease is bundled together with a building lease?
No. When an individual buys manufacturing equipment and then leases it together with land and a building to a related company in a single bundled real estate lease — with no separate sales tax charged…
When a city airport board hires a manager and contractors to build and operate a terminal hotel, who can buy supplies, equipment, and construction materials tax-free, and under what conditions?
An airport board is exempt from Texas sales tax as a local government entity under § 151.309(5), so its own purchases (including hotel tangible personal property) aren't taxed; its authorized purchasi…
A new business installs automatic insecticide spray systems in homes. Does it need a Texas sales tax permit and have to collect tax on its charges, and can it buy the spray equipment it installs tax-free?
Yes to collecting tax, yes to buying equipment tax-free. Installing an automatic home insecticide spray system is a structural pest control service — a taxable real property service under Rule 3.356. …
A company operates private phone systems in office buildings and hotels, buying telecom service wholesale and reselling it to tenants/guests -- plus charging separately for wiring, phone jacks, moving/installing phones, and equipment maintenance. Which of these charges are taxable, which can be bought tax-free for resale, and does bundling vs itemizing change anything?
A multi-part breakdown for a private telephone system operator reselling telecom service to tenants/guests. The operator must collect sales tax on its ENTIRE charge to tenants/guests for telecommunica…
When a Texas-permitted seller drop-ships to a Texas customer on behalf of an out-of-state retailer, can it accept the out-of-state retailer's resale certificate instead of collecting sales tax?
Yes. A seller holding a Texas sales tax permit that drop-ships items to a Texas 'ship to' address on behalf of an out-of-state retailer may accept a properly completed resale certificate from that out…
Can a reseller of telephone service buy telecommunications service tax-free using a resale certificate, and who pays the old Telecommunications Infrastructure Fund (TIF) assessment?
PARTIALLY SUPERSEDED (see note below). As of 1999, a reseller of local and long-distance telephone services could issue a resale certificate to its telecommunications provider instead of paying sales …
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…
A company lets customers come to its office to hold video conferences using its own equipment and phone lines, billing them for facility use plus re-billed long-distance charges. Is this equipment rental plus a telecom pass-through, or something else entirely for tax purposes -- and can the company buy its own phone service tax-free?
The company isn't renting equipment and separately re-billing phone charges -- it's providing a single taxable TELECOMMUNICATIONS SERVICE, and the ENTIRE charge to customers (facility/equipment use pl…
Is a gas well foamer product ('soapsticks' or 'acidsticks') purchased by a well operator and injected downhole to stimulate gas flow subject to Texas sales tax?
Taxable. A well operator purchases a gas well foamer product (also called soapsticks or acidsticks) and injects it downhole to turn water blocking a low-pressure gas well into suds/bubbles, lowering w…
Is sales tax due on merchandise (like employee-discounted logo shirts, or safety training videos/workbooks sold to dealers) even when it's sold below the seller's actual cost?
Yes, taxable on the actual price charged, regardless of the seller's cost. A company asked two questions: (1) whether it needs to charge tax when it sells company-logo golf shirts to employees at 15% …
Can a cable/telecom subcontractor buy the cable and hardware it permanently installs inside customers' buildings (schools, apartments, offices) tax-free for resale, when the cable is billed as part of a taxable telecommunications/cable service rather than sold separately?
Depends on whether care, custody, and control of the cable transfers to the actual service customer -- a fact-specific, location-by-location test. A cable/telecom subcontractor installs fiber/coax cab…
Can a multi-level-marketing company let its mall-kiosk distributors buy tax-free with a resale certificate, the way a home-based distributor can't?
Yes -- distributors with a real retail outlet (a store or kiosk) can get their own sales tax permit and use a resale certificate, unlike home-based distributors. A multi-level-marketing company sellin…
Can doctors, dentists, and veterinarians buy prescription pads and other printing tax-free using a resale certificate?
No -- doctors, dentists, and veterinarians perform nontaxable medical services and are not considered to be reselling tangible personal property, so they cannot issue a resale or exemption certificate…
For a Texas aircraft engine repair company, which charges are taxable, and does it matter whether the customer is a commercial airline, a repair shop, or a privately/corporately owned aircraft?
It depends heavily on WHO the customer is and HOW the charge is billed (lump-sum vs. separately stated) -- commercial-airline and licensed-carrier work is largely nontaxable, private/corporate aircraf…
Is a Texas recording studio's charge to musicians taxable as equipment rental, or nontaxable as a manufacturing/production service -- and does it depend on who operates the equipment?
It depends on who operates the equipment: if the studio hands over full operational control to the producer/musician with no studio personnel operating it, that's a taxable equipment rental; if studio…
Can a company leasing purifier/vaporizer/piping/storage-tank equipment to a semiconductor manufacturer buy it tax-free and lease it tax-free too?
Yes on both ends -- the equipment can be purchased tax-free with a resale certificate, and the monthly facility fee charged to the semiconductor manufacturer can also be exempt if the manufacturer pro…
If a subcontractor never gets a resale certificate from the general contractor on a separated construction contract, who owes sales tax on the materials -- even though the ultimate customer holds a direct-pay permit?
The subcontractor (Company B) must bill and collect sales tax on the materials under the separated contract, because it never received a valid resale certificate from the general contractor (Company A…
When a seismic-data library company sells exempt geophysical information but separately bills for copying it onto tapes, the tapes themselves, and shipping, are those add-on charges also covered by the geophysical-services tax exemption?
Yes for the customer's price, but the provider still pays tax on its own supplies. The sale of nontaxable geophysical/seismic data under Rule 3.342(d)(2) includes the tapes in its sales price, so the …
When a homeowner buys a pest/termite warranty from a warranty company, and later pays a trade fee (deductible) directly to the pest control company doing the actual work, who owes sales tax on what -- the initial warranty fee, the deductible, and the warranty company's pass-through payment to the pest control company?
It splits by who pays whom. The pest control company may accept a resale certificate from the warranty company instead of collecting tax on services it bills to the warranty company (since the warrant…
In a janitorial cost-plus contract where the vendor buys and amortizes cleaning equipment over three years but the equipment stays at the customer's site under the customer's access and risk of loss, should the vendor pay tax on the equipment itself, or collect tax on the amortized charge to the customer?
The vendor should collect tax on its total charge (including the separately stated amortized equipment cost) to the customer, rather than paying tax itself when purchasing the equipment -- because und…
A contractor building a new manufacturing plant under a lump-sum contract asked a comprehensive set of questions: who can issue manufacturing exemption certificates, how lump-sum vs. separated contracts are taxed differently, what a direct payment permit is, and what Texas's sales tax rate and permit procedures are -- what's the full picture?
This letter is a comprehensive contractor tax primer. (1) Only the MANUFACTURER itself -- never a contractor or subcontractor -- may issue an exemption certificate for qualifying manufacturing machine…
A GPS vehicle-tracking company runs a test program with an insurance company, paying the cellular carrier directly and then allocating/re-billing the charges to the insurer and individual drivers at cost with no markup -- is this a nontaxable reimbursement, or does it make the tracking company a taxable cellular service reseller subject to security-service tax and the Telecommunications Infrastructure Fund (TIF) assessment?
Neither "reimbursement" nor "resale" was quite the right frame -- the underlying service itself is taxable. The company's core offering (GPS tracking with electronic tracking of a vehicle's location, …
Is cleaning, inspecting, and applying a protective monel coating to oilfield equipment like submersible pumps and tank batteries a taxable repair or remodeling service in Texas?
Yes. Coating and re-coating oilfield equipment such as submersible pumps and tank batteries counts as taxable maintenance, remodeling, or repair of tangible personal property under Rule 3.292, so the …
A supplier sells car wash soap, upholstery shampoo, deodorizers, and other supplies to auto dealers, car washes, body shops, and detailers. Which of these items are taxable, can customers just write 'BLANKET' on a resale certificate, and is the supplier covered if a customer just refuses to pay tax?
No blanket exemption from listing items, and no, a refusal-to-pay form doesn't protect the seller. A resale certificate must describe the general nature of the taxable items — the single word 'Blanket…
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…
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…
I'm a sole proprietor disputing a sales tax audit. If I ask Texas to settle my liability because paying it would make me insolvent, can the Comptroller count my spouse's wages and our community property, not just my business assets?
Yes. In this Comptroller's Decision on Rehearing (Hearing No. 29,794), the Administrative Law Judge held that when a sole proprietor asks the Comptroller to settle a tax assessment under Tex. Tax Code…
Are charges for assembling or erecting an above-ground swimming pool taxable in Texas, and does it matter whether a third-party installer does the work?
It depends on what the work actually is. Charges for a true third-party 'installation' — placing tangible personal property in position without changing its form — are not taxable (though separately s…
If a customer paid tax on parking space rent before getting a Texas sales tax permit, and later gets a permit, can the tax already paid be refunded?
Generally no. A customer cannot issue a resale certificate for purchases made before the effective date of its sales tax permit, so tax collected before that date should not be refunded. The only way …
Can a Texas business scan invoices and resale/exemption certificates and store them electronically instead of keeping paper copies?
Yes, with two conditions: the business must keep back-up hard copies of resale/exemption certificates specifically, and it must provide the Comptroller's auditors with sufficient equipment to examine …
If a customer gives a seller a resale certificate on a rental, but never actually re-rents the item, is the seller liable for the uncollected tax?
Not necessarily. In this December 1992 letter, the Comptroller's Tax Administration Director tells a trade association that on audit, the agency will review a seller's documentation on a case-by-case …
Texas Letter Ruling 9211L1199G12: Hotel — Trunk Lines Purchased For Own Use And For Resale To Guests — Resale Certificate Guidelines
No. A hotel that buys a trunk line for telecommunication service and resells part of that service to guests cannot give its telecom provider a resale certificate for the basic local exchange service. …
Texas Letter Ruling 9209467L: Chamber Of Commerce — Contract From 10/1/91 — 10/1/93 To Build Building To Be Donated To City
A Chamber of Commerce that qualifies as a tax-exempt organization can issue an exemption certificate to its prime contractors, who can in turn issue resale certificates to subcontractors and suppliers…
A general contractor has a separated contract (materials and labor billed separately) to build a new commercial building, and subcontracts landscaping (grass, bushes, trees) and a hardwired burglar alarm system to other companies who install those materials into the realty. How does sales tax apply between the subcontractors, the general contractor, and the customer — and does it matter if the job is residential instead of commercial?
The subcontractors' full charges (materials and labor) to the general contractor are taxable. The general contractor can either pay tax to the subcontractors and pass that cost through as part of its …
A hotel or motel buys telecommunications trunk line service partly to resell to guests and partly for its own business calls. Can it issue a resale certificate for that service, and if it already paid sales tax on services it resold, can it get a credit?
A hotel cannot in good faith issue a resale certificate for trunk line service that it also uses for its own business calls — resale certificates may only be issued for lines dedicated to reselling te…
Is pressure/power washing a residence or other building before painting (or to remove graffiti) subject to Texas sales tax?
Yes, pressure washing a building is a taxable real property service, but the tax treatment depends on who is buying it. If the washing company also does the painting itself, its own pressure washing i…
Could a nonexempt club use the Knights of Columbus sales-tax exemption to buy equipment for facilities used by the Knights, and could it avoid tax on items bought for resale?
The club could not claim an exemption for its own purchases because it was not exempt. But the Knights of Columbus could buy qualifying equipment tax-free with its own funds, and the club could act as…
Was a corporation's transfer of equipment to a new limited partnership for a 99% interest exempt as a joint-ownership transfer?
Only if the corporation retained a joint or undivided interest in the equipment after transfer and had paid tax when it acquired the property. If limited-partnership law prevented that ownership, the …
Did a third-party installer have to charge Texas sales tax for mounting neon channel-letter signs on a building?
For an existing nonresidential building, the installer could accept a valid resale certificate from the manufacturer. New-construction installation labor was not taxable.
When was directional drilling a nontaxable service rather than a taxable equipment rental in Texas?
It was a nontaxable service when the drilling company planned the well, supplied equipment and personnel, and controlled and monitored the work. Supplying tools with only an advisory supervisor was a …
How could a Texas contractor structure a separated contract for work on an exempt organization's real property?
The binding contract—not the bid or draw format—had to separately state labor and materials under Rule 3.291. Incorporated materials could be bought for resale, then covered by the exempt customer's d…
Could a Texas seller accept a California permit number on an out-of-state distributor's resale certificate for Texas drop shipments?
Yes, in good faith, if the buyer was a bona fide out-of-state retailer buying for resale and had no Texas permit. If it was engaged in business in Texas, it instead needed a Texas permit and had to co…
Could a buyer purchasing goods only for export outside the United States obtain a Texas permit and use resale certificates?
No. The letter said export-only purchases were outside the resale definition. The buyer instead had to document export with carrier, customs, destination-country, or freight-forwarder records.
Could an exempt oil-and-gas operator buy taxable goods and services for jointly owned properties without paying suppliers Texas tax?
Yes, using a resale certificate, but it had to allocate the purchases and collect tax from nonexempt joint owners on their billed shares. Its own share stayed exempt, subject to records and certificat…
How did resale certificates and sales-tax permits work through general contractors and subcontractors on separated Texas construction contracts?
Each separated new-construction contractor needed its own permit and resale certificates. Subcontractors accepted certificates from generals, and the general collected from the owner; nonresidential r…
Was a telephone company's purchase of local-exchange access exempt when it resold the telecommunications service to final customers?
Yes, if the purchasing telephone company resold the service and gave a valid resale certificate. The final consumer owed tax on the total service charge, including access; mixed-use purchasers could n…
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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.