State Tax Rulings
Free state tax letter rulings and advisory opinions with plain-English summaries, full citations, and the original source on every page.
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As an independent distributor for a direct-sales company, am I responsible for Texas sales tax if the parent company isn't collecting it?
The direct sales company itself is legally responsible for collecting and remitting the tax -- but if it fails to do so, the distributor may still owe the tax and can pay it directly to the state. An …
Are internet access fees and web hosting charges subject to Kansas sales tax?
No. Charges for internet access fees and web hosting are not currently subject to Kansas sales tax. But the provider is the consumer of what it buys to deliver that nontaxable service — it must pay sa…
How do Kansas county appraisers identify and value non-productive 'waste' land within agriculturally classified property?
Within agriculturally classified land, non-productive 'waste' areas are valued at $10.00 per acre. This 1998 Division of Property Valuation memo helps county appraisers identify waste land — the test …
How do Kansas county appraisers adjust the agricultural use value of farmland whose productivity is reduced by salinity or alkalinity?
Farmland whose productivity is reduced by salinity or alkalinity can have its agricultural use value adjusted, but only for specifically identified areas where the condition is hindering normal croppi…
Is a manufacturer's own aluminum casting mold taxable, and does it matter whether the mold is separately billed or the customer owns it on paper?
As of October 1, 1997, the mold used to make these particular castings no longer qualifies for the manufacturing exemption -- but the answer depends heavily on the time period and on whether there's a…
Can a company that buys bulk gas tanks to lease to customers purchase the tanks exempt from Kansas sales tax?
Yes. Because Kansas sales tax applies only to retail sales — sales to the final user or consumer — a company that buys bulk liquefied gas tanks in order to lease them to its customers is not the final…
When a company installs home theater, security, and automation equipment into a house, does each item stay taxable personal property, or does it become part of the real estate?
It depends on the item, not the whole project. Equipment that can be removed without significant damage to the house (like a bolted-on projector or cabinet-mounted components) stays personal property,…
Is installing a new swimming pool at a residence exempt from Kansas sales tax as residential remodeling?
Yes. Installing a new swimming pool (or tool shed or similar structure) near an existing residence qualifies as exempt residential remodeling when the structure is intended to serve the residence, so …
Under RR 98-14, could a South Carolina taxpayer deduct commissions paid to a foreign sales corporation instead of treating them as dividend-related expenses?
Yes, if the foreign sales corporation had economic substance and was properly formed and operated under IRC Sections 921-927. RR 98-14 treated the commissions as deductible business expenses, not expe…
Can a Texas farmer or rancher buy an advertising sign tax-free using a farm exemption certificate?
Yes -- a farmer or rancher can purchase a sign used to market their products (for example, a 'hay for sale' sign) tax-free by giving the seller an agricultural exemption certificate instead of paying …
Did filing a final federal return and liquidating operations dissolve a Texas corporation for franchise-tax purposes?
No. Although the corporation had liquidated two years earlier and filed a final 1996 federal return, Comptroller records still showed an active Texas charter. It remained responsible for franchise tax…
Was a for-profit corporation exempt from Texas franchise tax because it performed services formerly provided by government agencies?
No. Section 171.001 applied to corporations doing business or authorized in Texas, and the former law contained no exemption for a for-profit company performing services for federal, state, county, or…
The state seized money from my bank account and later admitted the levy it named was invalid. Do I get the money back?
No — the bank was served two levies at the same time, and even though the one the Department pointed to was invalid, a second levy for genuinely delinquent taxes was valid and supported the seizure, s…
Can a direct payment permit holder switch to a new inventory accounting system by depleting old tax-paid parts first (FIFO) before reporting tax on new usage?
No -- the Comptroller rejected the proposed First-In-First-Out (FIFO) transition method for depleting old tax-paid inventory before reporting new tax under a direct payment permit. A brewery with a di…
Did maintaining a company office in Texas create nexus for both former franchise-tax components?
Yes. Rule 3.546(c)(15) treated maintaining a Texas place of business as taxable-capital nexus. Rule 3.554(d)(18) treated an office paid for directly or indirectly by the company and formally attribute…
Did converting a Texas corporation to an LLC by filing articles of conversion require final franchise- and sales-tax returns?
No, if the corporation filed articles of conversion. Texas treated the converted LLC as the same legal entity, so no final franchise-tax or sales-tax return was required; the state would update its re…
How is a 501(c)(7) not-for-profit country club's real property classified and assessed for Kansas property tax?
It depends on how each part of the property is used. Following a Board of Tax Appeals decision (Manhattan Country Club, Docket No. 97-1460-PR), this memo tells county appraisers that portions of a 501…
Is a customized medical literature-search service taxable as an information service, even though each report is tailored to one client and can't literally be resold as-is?
Taxable -- customizing the search and binding results into a client-specific report doesn't make the underlying information 'proprietary' to that client, so the service is a taxable information servic…
How are a natural-gas limited partnership and its corporate general and limited partners taxed under sections 186, 186-a, and Article 9-A?
The partnership itself is not subject to Article 9-A or section 186, but as a 'person' selling gas consumed in New York and not PSC-supervised, it is a second-class utility taxable under section 186-a…
Could a first-year New Mexico resident avoid penalty and interest after reporting only New Mexico income instead of all federal adjusted gross income?
No — Jim Dodson had to report all federal adjusted gross income on Form PIT-1 and use Form PIT-B to allocate his California income, so the penalty-and-interest protest was DENIED. Dodson called the De…
Can a 501(c)(3) nonprofit buy remodeling work tax-free for a building it leases out to for-profit tenants?
Yes -- because the rental income from the leased space qualifies as related (tax-exempt) income under IRS guidelines for this organization's exempt purpose, the entire remodeling project can be purcha…
Did a Texas retailer collect limited sales tax on a utility trailer kit, or did the buyer pay motor vehicle tax when registering it?
The retailer did not collect Chapter 151 limited sales tax. The trailer kit was subject to Chapter 152 motor vehicle tax, which the purchaser paid to the county tax assessor-collector when registering…
Did independent agents soliciting Texas orders for publications create nexus for both former franchise-tax components?
They created taxable-capital nexus. Independent agents soliciting Texas orders for tangible publications made the corporation responsible for franchise-tax reports under Rule 3.546(c)(4). The corporat…
Is a television station's doppler weather radar system exempt from Texas sales tax?
Exempt only if used to generate images for broadcast -- if the same system is instead used for weather forecasting or other non-broadcast purposes, that use is taxable. A television station asked abou…
In a pick-and-pack fulfillment arrangement, are the printing costs, picking fees, and packing fees subject to Kansas sales tax?
In this pick-and-pack and printing arrangement, the Department ruled that the printing costs are taxable — Kansas sales tax if the material is printed in Kansas, otherwise Kansas compensating (use) ta…
Did an investor-owned electric utility include transformers in taxable capital when GAAP required capitalization as plant assets?
Yes, if GAAP required capitalization. Section 171.109(b) required the corporation to compute surplus, assets, and debts under generally accepted accounting principles. Transformers classified by GAAP …
Did a federal Section 368(a)(1)(F) reincorporation eliminate Texas final and initial reports when state records showed one entity terminated and another was authorized?
No. Although the taxpayer viewed the state-of-incorporation and name change as a federal F reorganization with uninterrupted tax attributes and no short year, Texas records showed the old corporation …
Could one corporation receive another corporation's Texas business-loss carryover through a merger when state records still showed separate certificates of authority?
No. Comptroller records showed one corporation still had an active Texas certificate of authority, the other had received a separate certificate on December 23, 1996, and the agency had no record of t…
Does Utah tax phone calls and prepaid calling cards, at what rate, on which calls, and when is the tax actually due on a prepaid card?
Yes, Utah taxes intrastate telephone service (calls that both originate and terminate in Utah) at a combined state/local rate generally between 6.00% and 6.35%, which can be passed through as a line i…
Can a motor vehicle be titled and registered in the name of a business trust, and can beneficial interests in that trust be sold or transferred to investors without triggering a re-titling requirement?
Yes to both, with a key condition. A motor vehicle can be titled and registered in the name of a business trust, because Utah treats the LESSOR of a leased vehicle as its owner for titling/registratio…
When a city owns an airport but a private airline finances/contracts the construction, is that construction exempt from Texas sales tax -- and does it matter whether the space is public or restricted?
Yes for public-access areas -- construction of a people mover, bus stations, terminal relocation, and baggage system is exempt under Sec. 151.311 because it's owned by the City, benefits the public, a…
For the Article 9-A receipts factor, is part of a company's commission income allocable outside New York when the income-generating telemarketing is performed by an out-of-state subcontractor?
Yes. The taxpayer earns commissions when an out-of-state independent telemarketing company it hires gets a telephone company's customers to subscribe to a new service. For the receipts factor, receipt…
Is a flat monthly fee for an assigned parking space behind my office building a taxable parking service or a nontaxable real property rental in Texas?
Taxable -- a flat monthly fee for an assigned parking lot space is a taxable motor vehicle parking service, not a nontaxable real property rental. A business paid a flat monthly fee for an assigned pa…
An immigrant couple's accountant wrongly told them cleaning income wasn't subject to gross receipts tax, and paying the back interest would be a hardship. Can the interest be waived?
No — interest on late-paid gross receipts tax is mandatory and cannot be abated for bad advice or financial hardship, so the protest was DENIED. Luis Tamayo and Amanda Llerena came from Ecuador and cl…
What sales tax exemptions and changes took effect in Kansas on July 1, 1998?
This notice summarizes the sales tax legislation that took effect in Kansas on July 1, 1998. Key changes: the aircraft exemption for licensed air carriers was extended to sales made through the carrie…
Did delivering products to Texas in vehicles borrowed or assigned from a parent corporation create earned-surplus nexus for both companies?
Yes. Solicitation already created taxable-capital nexus for both foreign corporations. For earned surplus, Corporation A controlled the borrowed, assigned, or leased vehicles and used them to deliver …
Is leasing hard-drive space on a computer system to store voice and fax messages subject to Kansas sales tax?
No. A business that leases space on its computer system's hard drive — used by customers to store voice or fax messages that callers can access — is providing a non-taxable service. The Department rul…
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…
Can a 50/50 joint venture between a 501(c)(3) nonprofit and a for-profit company use a direct payment permit to claim a partial (50%) sales tax exemption?
Yes -- the joint venture may issue direct payment blanket exemption certificates to its vendors, and may then claim a 50% (pro rata) exemption on taxable purchases in keeping with the exempt partner's…
Are pallet rental fees and related delivery/transfer charges taxable for a food manufacturer, given the packaging-supplies exemption for pallets?
Taxable -- the packaging-supplies exemption for pallets doesn't apply here because the pallets are leased on a short-term (daily) basis, not for a period of one year or more. A food manufacturer packe…
How did Texas tax a total-loss vehicle sale, its later resale after repair, and an insurer's receipt of the vehicle after paying a claim?
A vehicle declared a total loss lost its motor-vehicle identity for sales tax purposes, so its sale was taxed under Chapter 151. After repair, later sales returned to Chapter 152 motor vehicle tax. An…
Is sushi sold from a supermarket's in-store sushi bar subject to New York sales tax?
Yes. Sushi packs and platters sold from a sushi counter inside a grocery store are taxable, because they're prepared, ready-to-eat meals arranged for individual or multiple servings -- not the kind of…
Could a licensed South Carolina bingo operation sell a bingo card for more or less than its printed face value under RR 98-13?
No. RR 98-13 said a licensed bingo operation could neither mark a card up nor discount it: every bingo card had to be sold to the player at its printed face value.
Can an out-of-state contractor use a resale exemption certificate to buy materials tax-free in Kansas?
No, in general. An out-of-state contractor cannot use a resale exemption certificate to buy materials (such as carpet) tax-free in Kansas — under K.S.A. 79-3603(l), contractors are the final users of …
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…
Could a Texas state agency grant a license to a corporation that was not in good standing for franchise-tax purposes?
No. The Comptroller confirmed that a state agency could not grant a license to a corporation that was not in good standing with respect to franchise tax. The letter attributed that requirement to Arti…
Does hosting a web page on a server located in Texas create Texas sales tax nexus, and is server space itself a taxable service?
Yes -- an individual or company that owns, leases, or rents a server located in Texas has nexus in the state because of that substantial tangible property, and must collect Texas tax on taxable sales …
Is Texas sales tax due on teleconferencing/bridging fees when the conference is arranged by an out-of-state company but participants call in from Texas?
It depends entirely on how participants connect: standard dial-in (callers pay their own long distance) has no Texas tax on the bridging fee, toll-free dial-in IS taxable to the extent calls originate…
If a Texas printer stores finished brochures/catalogs in its own warehouse before shipping them to the client's out-of-state customers, is the printing taxable?
Yes, taxable -- storing the printed materials in Texas after printing, even before they're ultimately shipped out of state, counts as a taxable use in Texas by the printer's customer. A printing compa…
Could a corporation eliminate transactions between partnerships by applying consolidated-reporting principles under the former Texas franchise tax?
No. The Tax Policy Director said eliminating transactions between the partnerships would effectively allow consolidation contrary to the statute and agency rulings. Partnership receipts were includabl…
When a utility buys its publicly traded parent's stock from a third party and keeps it, is that a constructive dividend to the parent subject to the section 186 excess dividends tax?
No. When Consolidated Edison directly purchases the publicly traded common stock of its parent (CEI) on the open market and continues to hold it, there is no distribution of property to shareholders. …
Is residential and commercial telephone service — both intrastate and interstate — subject to Kansas retailers' sales tax?
Yes. The Department ruled that gross receipts from intrastate residential and commercial telephone service, and from interstate residential and commercial telephone service, are subject to Kansas reta…
Is installing audio/video (home theater/surround sound) wiring and equipment taxable in Texas, and does it matter if it's new construction, residential, or commercial remodeling?
It depends on the type of job: cabling/wiring LABOR is not taxable for new construction (residential or commercial) or for residential repair/remodeling, but IS taxable for nonresidential (commercial)…
Which cardiovascular surgical products (mesh, grafts, blood bags, chest drains, catheters, software) are exempt from Texas sales tax as implanted medical devices?
Only the items actually implanted in the patient's body are exempt -- the mesh and vascular graft qualify, but blood bags, chest drainage units, thoracic catheters, and patient database software are a…
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…
Was holder-redeemable preferred stock debt when the certificate of incorporation allowed the corporation to refuse redemption under legal, charter, or lender restrictions?
No. Although holders could request redemption at $1,000 per share, the certificate of incorporation allowed the corporation to refuse a request when redemption was prevented by law, the certificate, o…
Were a residential contractor's sales of three houses he built, briefly lived in, and sold exempt as isolated or occasional transactions?
No — the three home sales were part of M. L. Roush Construction's taxable business, not isolated or occasional transactions, so the protest was DENIED. Mark Roush was a licensed residential contractor…
When did RR 98-12 treat a resident's or nonresident's boat as subject to South Carolina property tax?
Tax depended on domicile, the boat's December 31 location, whether an absence was temporary, and whether the boat had a more permanent tax situs elsewhere. Business and interstate-commerce boats requi…
Did a New Mexico commodities broker owe gross receipts tax on commissions when the futures trades were executed on out-of-state exchanges?
Yes — Charles Forkner's commissions were taxable receipts from brokerage services he performed at his Albuquerque office, so the protest was DENIED. Forkner advised clients, placed their orders by tel…
Did a federal waiver of estimated-tax penalties excuse Centex's late New Mexico corporate estimated payments, and could the state offset a refund before issuing an assessment?
No — the federal waiver did not change New Mexico penalty or interest, and the Department could offset Centex's refund against an accrued but unassessed liability, so the protest was DENIED. A 1993 fe…
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