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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How did Texas treat income from in-state and out-of-state municipal bonds under the 1998 franchise tax?
For taxable capital, municipal-bond revenue entered surplus and the gross-receipts factor. For earned surplus, bond income excluded from federal taxable income because it was exempt also stayed out of…
Did a Pennsylvania online retailer create Texas franchise-tax nexus by placing link and icon code on a Texas company's server and paying sales commissions?
No, on the stated facts. The retailer's own website, headquarters, offices, property, payroll, and representatives were outside Texas. A Texas online magazine displayed the retailer's link and buy-now…
Is drilling a rathole or mousehole (holes in the rig floor used to hold drill pipe and hoisting equipment during oil/gas well drilling) subject to Texas sales tax or the separate 2.42% oil well services tax?
No. Drilling a rathole or mousehole in preparation for drilling an oil or gas well is not subject to sales tax or the 2.42% oil well services tax. However, the company performing this nontaxable servi…
Could corporations claim a Texas franchise-tax manufacturing credit for sales taxes paid by a related partnership?
The Tax Policy Director said no. Texas consistently treated a partnership as an entity rather than an aggregate of its partners, and Section 171.0021's tax-credit language controlled even if an aggreg…
Is charging Utah customers for internet access subject to Utah sales tax?
No, not in 1998. The Utah Tax Commission said it was treating internet access charges as nontaxable under the statutes in place at the time, while cautioning that a future legislative change could ove…
Is Texas sales tax due on a separately stated, refundable $10 deposit charged on a returnable pallet — whether the underlying product is sold to the end user or to a retailer for resale?
No. A refundable pallet deposit that is separately stated to the customer and identified as refundable is not subject to sales tax, whether the sale is to the end user (with tax charged on the product…
Were bank drive-up windows, night depositories, pneumatic systems, and security equipment real or personal property for South Carolina property tax?
They were generally real property. Installed drive-up windows, night depositories, pneumatic systems, and security equipment could be treated as personal property only if removal would not be costly, …
Who counted as an immediate family member for South Carolina property-tax purposes under RR 98-1?
An immediate family member was a relative within the third degree by blood or marriage: parents, children (including adopted children), grandparents, grandchildren, siblings, great-grandparents, great…
Are implantable medical devices like filters, stents, and vascular grafts exempt from Kansas sales tax as prosthetic and orthopedic appliances?
Yes. K.S.A. 79-3606(r) exempts sales of prosthetic and orthopedic appliances prescribed in writing by a person licensed in the healing arts, dentistry, or optometry — apparatus, instruments, devices, …
Did buyers have to pay Texas vehicle tax again when a failed dealer collected the tax but did not remit it or transfer title?
No, when evidence showed the purchaser had paid the dealer. If the dealer was no longer in business and failed to transfer title or remit the tax, the buyer's documented payment prevented a second col…
Does a company that delivers and sets up appliances for a retailer collect Kansas sales tax, or does the retailer?
The delivery firm does not collect the tax; the appliance retailer does. The Department found that a company that merely delivers, uncrates, sets up, and test-runs appliances for a retailer is providi…
Did on-site Texas software training create nexus for both the service subcontractor and the software company promising the training?
Yes. Corporation A provided on-site training and consulting in Texas, creating nexus under Rule 3.546(c)(2), whether it used its own staff or subcontractors. Corporation B also had nexus when its cust…
Can a Utah manufacturer sell tax-free to an out-of-state (Colorado) retailer who resells to a Utah customer, when the goods are drop-shipped directly to the Utah jobsite?
Yes. A Utah manufacturer may sell a building tax-free for resale to an out-of-state (Colorado) retailer, using a resale exemption certificate on which the out-of-state retailer's own state sales tax l…
Under the 1998 physical-presence nexus test, did an out-of-state internet retailer create Texas sales tax nexus merely because its website was linked from an unrelated third party's website that happened to be hosted on a server located in Texas — and is that charge for maintaining the link itself taxable?
Under the physical-presence rule this 1998 letter applied, no — a retailer with no physical presence in Texas, taking orders through an out-of-state server, did not have Texas sales tax nexus just bec…
Could a C corporation inherit an LLC's franchise-tax credits or business loss when the LLC merged into it?
No. Franchise-tax credits could not transfer from one corporation or LLC to another through merger for either former tax component, and the survivor could not use the nonsurvivor's business loss in co…
What interest rate did Kansas charge on tax liabilities for 1998, and how is it set?
For 1998, Kansas interest on tax liabilities is 0.833% per month (10% per year). The notice gives the historical rates -- 1.5% per month (18% per year) before January 1, 1995, and 1% per month (12% pe…
Does a pathology-testing company that analyzes patient specimens for physicians qualify for Connecticut's biotechnology sales-and-use-tax exemption on its purchases?
No. A company that performs pathology testing on patient specimens to help physicians diagnose, prognose, or monitor disease does not qualify for Connecticut's biotechnology exemption in Conn. Gen. St…
Does a pathology-testing company qualify as a 'biotechnology company' entitled to the 15-year carryforward of Connecticut's research-and-experimental-expenditure corporation business tax credit?
No. A pathology-testing company does not qualify as a 'biotechnology company' under Conn. Gen. Stat. § 12-217j, so it cannot use the special 15-year carryforward of the corporation business tax resear…
If a New Mexico store wrongly claimed the out-of-state (interstate commerce) sales deduction and later concedes the tax, can it still get the negligence penalty removed?
No. The negligence penalty was upheld. A New Mexico assessment — including the penalty — is presumed correct, and the Taos art store that had wrongly deducted in-store cash and check sales as out-of-s…
Is a restaurant's fryer filter machine — which cleans and recirculates shortening/oil so it can keep frying food — exempt from Texas sales tax as manufacturing equipment?
It depends on the date. Before October 1, 1997, the filter machine, its parts/accessories, and repair labor were exempt because the shortening it processed became part of the fried product. Effective …
Are a professional recruiting firm's placement fees, and its separate contract-labor billings for secretarial/consulting help, subject to Texas sales tax?
Placement fees for recruiting are not taxable. Contract labor billings may be taxable, though, depending on whether the arrangement qualifies as an exempt 'employee' or 'temporary help service' under …
Are a Web-development company's charges for domain registration, host site maintenance, Web page design, and interactive games -- and its own purchases from programmers -- subject to New York sales and use tax?
No -- none of the Web-development company's charges to its clients (domain and InterNIC registration, passed-through host site maintenance, Web page design, or custom interactive games) are subject to…
Is the per-transaction fee an ATM network operator charges member banks for processing electronic banking transactions subject to New York's tax on telephone service?
No -- the roughly 10-cent per-transaction fee an ATM network operator charges its member banks is not subject to New York's tax on telephony and telegraph service, because the network operator is prov…
Is a waste-management consulting company's fee for auditing, designing, and monitoring a client's waste program -- without ever hauling or disposing of waste itself -- subject to New York sales tax?
No -- receipts from the waste-management consulting company's services are not subject to New York sales tax, because auditing a customer's waste stream, designing a waste-management program, soliciti…
Can a cellular reseller buy phones it later gives away 'free' or at a discount with a service contract tax-free as a purchase for resale, rather than paying tax on the phones upfront?
Yes -- the cellular reseller can buy the phones tax-free as a purchase for resale, using a resale certificate, even though some customers receive the phone for "free" or at a discount as part of a bun…
Is a commercial tenant's 'additional rent' charge for lawn, common-area, and complex maintenance subject to New York sales tax, and can the landlord charge tax only on its mark-up?
The lessor's additional-rent charges for maintaining the areas directly tied to the tenant's own leased premises (adjacent lawn, shrubbery, driveways, parking) are not subject to sales tax, because th…
Are architectural and interior design drawings, specifications, and rental-space plans taxable interior decorating and design services, or are they exempt when performed by a licensed architect or engineer?
It depends on who performs the work and what the drawings are for. Drawings that require a licensed architect's or engineer's certification under the Education Law -- whether drawn personally by the l…
If an out-of-state mother rents or buys a New York City apartment for the roughly four years her minor son attends a religious high school there, and as a result they spend more than 183 days a year in New York City, does either of them become a New York statutory resident for income tax purposes?
No. Because the apartment is maintained only for the fixed, ascertainable period needed for her son to finish high school (a 'particular purpose'), it is not a 'permanent place of abode' under 20 NYCR…
Under RR 97-23, was buying a prepaid telephone calling card taxable, and when did tax apply to calls made with it?
The card purchase was not taxable because it represented an intangible future right to telephone service. Under the ruling's 1997 rules, tax arose when the card was used: local South Carolina calls we…
Did RR 97-22 impose South Carolina accommodations tax on membership and timeshare exchanges even when no cash rent changed hands?
Yes. RR 97-22 treated the reciprocal promise to furnish accommodations as taxable consideration and based the tax on reasonable rental value plus reservation, upgrade, or similar fees. RR 98-5 later e…
Could airplanes, trucks, boats, cars, or other mobile property qualify for South Carolina fee-in-lieu-of-property-tax treatment under RR 97-21?
Only if the property stayed at the qualifying project site. Mobile property used both on and away from the site was not considered located in the required county, multicounty park, or contiguous tract…
Could counties share only the revenue from new property in a joint industrial park while excluding revenue from pre-existing property added to the park?
No. Once pre-existing property was incorporated into a joint industrial or business park, its revenue became park revenue and had to be included in the percentage allocation between participating coun…
Is a remanufactured drilling rig, built exclusively for use by a foreign customer, exempt from Texas sales tax if it's stored in Texas for up to six months after completion while the customer decides on its foreign destination?
No. Sales tax is due when title transfers at completion. Because the customer plans to store the rig until needed rather than remove it forthwith, the rig can't be treated as for exclusive use outside…
If a company designs its products, buys the raw materials and packaging, and controls production, but has a third-party subcontractor actually assemble the goods, can the company still buy its packaging materials tax-free as a manufacturer?
Yes. Because the company designs the product, supplies the raw materials and packaging, and controls the production process — even though a subcontractor's employees do the physical assembly — the Com…
What did a September 1, 1997 Texas law change do to dealer tax collection on motor vehicles over 11,000 pounds?
The letter said dealers were no longer required to collect motor vehicle sales tax on units with gross weight over 11,000 pounds, effective September 1, 1997. It believed the separate Transportation C…
When a hotel — building, land, and all its furnishings (artwork, silverware, linens) — is sold for one lump-sum price and then immediately leased back out as a hotel for a single lease amount, is any of that subject to Texas sales tax? What about tangible property a partner trades with the partnership before the sale closes?
The lump-sum sale and the lump-sum leaseback are both treated as real property transactions and are not subject to Texas sales or use tax — the furnishings are incidental to the realty (and the sale m…
How did Texas's child-care licensing agency describe an emergency shelter for purposes of the Comptroller's residential child-care vehicle exemption analysis?
The licensing agency explained that a Chapter 42 emergency shelter was a residential child-care facility licensed for 24-hour care and could serve children with no special needs, emotional disturbance…
Our public utility is restructuring into a holding company structure, as regulators are requiring utilities to separate their generation, delivery, and marketing functions. We'll form a new, wholly-owned holding company, then do a binding share exchange under New York Business Corporation Law Section 913 (structured as a tax-free reorganization under IRC Section 351): our existing shareholders will automatically become shareholders of the new holding company on a one-for-one basis, and we'll become the holding company's subsidiary -- with no physical stock certificate exchange required. We own real property in New York State. Does this share exchange trigger New York's Real Estate Transfer Tax (as a transfer of a controlling interest in a real-property-owning company) or the Stock Transfer Tax?
Both taxes are avoided, though for different reasons. Consolidated Edison Company of New York, Inc. ('Petitioner'), a regulated utility supplying electricity, gas, and steam across New York City and W…
Did a qualified Subchapter S subsidiary file separately from its parent, and how did it compute taxable earned surplus?
The QSSS and its parent S corporation had to file separate franchise-tax reports because Section 171.001 taxed each corporation and Rule 3.544(c) barred consolidated reporting. But the Comptroller did…
Are membership dues, an initiation fee, and an annual assessment charged by a private yacht club subject to New York's club dues tax?
Yes -- the yacht club's $600 initiation fee, $300 annual dues, and $200 capital-improvement assessment are all subject to sales tax, because the club is formally organized and controlled by its member…
Are membership dues and an initiation fee paid to a recreational boating club subject to New York's club dues tax?
No -- the boating club's $350 initiation fee and $300 annual dues are not subject to sales tax, because the club's material purpose is purely recreational boating and fishing (with no tournaments, con…
Is the sale of software source code exempt from Texas sales tax when the buyer will fold it into another software program and resell the combined product?
Yes. Because the source code becomes a component part of another software program that will be sold at retail, the seller may accept an exemption certificate under Rule 3.300(d)(2) instead of collecti…
Is a DEXA (dual energy x-ray absorptiometer) machine, used by a doctor to diagnose osteoporosis and measure bone mineral density, exempt from Texas sales tax as an orthopedic appliance?
No. A doctor must pay sales tax on a DEXA machine and cannot issue an exemption certificate for it under Rule 3.284(a)(9), because the orthopedic appliance exemption covers devices used to correct or …
When did RR 97-20 treat a local fee or tax as part of gross proceeds subject to South Carolina state sales tax?
A local hospitality tax or qualifying local accommodations fee was included in gross proceeds when imposed on the retailer and passed through as the retailer's receipt. It was excluded when imposed on…
Was a vehicle transfer to an investor lessor followed by a required end-of-term repurchase a nontaxable sale-leaseback financing arrangement?
Yes. Because the initial lessor was required to repurchase the vehicles at the end of the lease, the contract qualified as a conditional sale or lease-purchase agreement and the overall transfer was a…
Did six single-member Texas LLCs treated as divisions of a Colorado corporation file separately, and did ownership alone tax the parent?
Each Texas-organized LLC had to file its own franchise-tax report even though federal law treated all six as divisions of their sole corporate member; consolidated or combined reporting was not allowe…
Which Texas agency handled used auto dealer licensing in 1997, and did a seller-financing dealer also need a Comptroller tax permit?
The Texas Department of Transportation's Motor Vehicle Division handled used auto dealer licensing. A dealer that financed the motor vehicles it sold also needed a tax permit from the Comptroller and …
How does a Nebraska estate or trust recompute the 1997 federal credit for prior year minimum tax to claim the Nebraska credit?
Recompute the federal credit on Nebraska terms, then take 29.6% of it. Under Revenue Ruling 23-97-2, Neb. Rev. Stat. §77-2717 requires an estate or trust to recompute the 1997 federal credit for prior…
How does a Nebraska estate or trust recompute the 1997 federal alternative minimum tax to figure the Nebraska minimum tax?
Recompute the federal AMT on Nebraska terms. Under Revenue Ruling 23-97-1, Neb. Rev. Stat. §77-2717 requires estates and trusts to recalculate the 1997 federal alternative minimum tax (Federal Form 10…
How does a Nebraska individual recompute the 1997 federal alternative minimum tax to figure the Nebraska minimum tax?
Recompute the federal AMT on Nebraska terms. Under Revenue Ruling 22-97-1, Neb. Rev. Stat. §77-2715 requires an individual to recalculate the 1997 federal alternative minimum tax (Federal Form 6251, o…
Does an out-of-state direct-sales company owe Utah corporate franchise tax just because independent-contractor 'Members' solicit and make sales in Utah?
No, not under these facts. An out-of-state direct-sales/network-marketing company whose independent-contractor 'Members' only solicit and make sales of tangible personal property in Utah, with no Utah…
Are fees paid to a third-party adjusting company that inspects plumbing damage claims and coordinates repairs under a national class action settlement taxable 'insurance services' in Texas?
No. Because the adjusting company's services are performed under a court-supervised class action Settlement Agreement rather than under an insurance policy, they don't count as taxable insurance servi…
How were zero Texas receipts, an apportionment ratio over 100%, and weekend due dates handled on 1997 Texas franchise-tax reports?
On Form 05-147, zero Texas gross receipts meant entering zero in Item 23 and leaving lines 17-22 blank. Texas receipts could not exceed receipts everywhere, so the apportionment factor could not excee…
Is a charge for training customers on how to use software subject to Texas sales tax?
It depends on whether the training is bundled with the sale of the software or billed separately. Training provided in connection with the sale of the product is part of the taxable sales price under …
How did a same-day multi-entity restructuring affect OldSub's final report, business-loss carryforward, merger credit, and transitory subsidiaries?
OldSub had to file a final report and could use its existing business-loss carryforward against its own final taxable earned surplus. Any remaining loss disappeared and did not transfer to NewSub2. Ne…
Are the dies a printer uses for diecutting, foil stamping, embossing, and engraving exempt from Texas sales tax as manufacturing equipment, regardless of how long the dies last?
Yes. Diecutting, foil stamping, embossing, and engraving are processing activities, so dies used in them are exempt as accessories to exempt processing equipment under Rule 3.300 — with no requirement…
Could an S corporation using the federal-income-tax method value a management contract at zero for taxable-capital surplus when its balance sheet showed $2 million?
Only with documentation. The balance sheet's $2 million value appeared to be the asset's cost unless the corporation proved that the management contract had zero federal-income-tax value when recogniz…
How does a Nebraska individual recompute the 1997 federal credit for prior year minimum tax to claim the Nebraska credit?
Recompute the federal credit on Nebraska terms, then take 29.6% of it. Under Revenue Ruling 22-97-2, Neb. Rev. Stat. §77-2715(2) requires an individual to recompute the 1997 federal credit for prior y…
Does a company that transports disabled people and developmentally-delayed preschoolers qualify as an omnibus carrier 'in local transit service' eligible for New York's motor fuel, petroleum business, and sales tax refunds?
Partly. The company is an 'omnibus carrier' for the Article 12-A motor fuel tax, Article 13-A petroleum business tax, and Article 28 sales tax, but only some of its fleet is 'in local transit service.…
Are a company's natural gas meter chart calculation, chart audit, consulting, and training services taxable as data processing, given that a computer is used to help calculate the final figures?
No. After an on-site audit review, the Comptroller reversed its earlier position: chart calculations, chart audits, consulting, and training are not taxable data processing services because they depen…
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