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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Did Texas's 1997 sports-arena car-rental tax exemption apply when a state agency was billed directly, and what if an employee used a personal charge card?
A state agency was exempt when billed directly because the new venue-tax statute incorporated Chapter 152's public-agency rental exemption. The letter found no exemption for an individual state employ…
Can a general contractor holding an owner's direct payment permit pass that permit or exemption certificate on to its subcontractors and vendors?
No. A direct payment certificate is nontransferable — only the permit holder named on it may issue it. The general contractor that receives it from the owner uses its own resale certificate when buyin…
Can New Mexico hold a corporation's officers and directors personally liable for withholding taxes the company deducted from employee paychecks but never paid over, even if a dishonest bookkeeper was actually responsible?
Yes. New Mexico's Withholding Tax Act makes any 'employer' with control over the payment of wages personally liable for payroll taxes the company withheld from paychecks but failed to remit — no willf…
How did a federal Section 338(h)(10) stock acquisition affect the target's former Texas earned-surplus and taxable-capital franchise-tax calculations?
For the former earned-surplus component, the target included the Section 338(h)(10) deemed asset-sale amounts and apportioned receipts according to the assets sold. Texas did not recognize the electio…
When rebuilding fire-damaged spaces in a strip center — where two spaces will have all walls and the roof replaced, leaving only the foundation — is the work taxable nonresidential repair, or untaxed new construction?
It depends on whether the spaces share a common foundation, wall, or roof with the rest of the complex. If they do, replacing the walls and roof is still nonresidential real property repair and remode…
When a customer leasing a new vehicle uses a trade-in and/or a cash down payment to reduce the cost, which one actually reduces the amount subject to Utah sales tax?
Only trade-in equity reduces the sales tax base — a cash down payment does not. On a vehicle lease, sales tax is due on the net cost (capitalized cost) of the vehicle. A trade-in reduces that taxable …
Our bank, as trustee, manages a tax-exempt commingled pension trust fund that pools real estate investments for qualified pension and governmental plans. Some of the fund's real estate investments have matured from 'unstabilized' start-up properties to 'stabilized' performing ones, and we want to split the fund in two -- spinning off the unstabilized properties into a brand-new, identical trust fund -- with every participant getting units in the new fund exactly proportional to what they hold in the original fund. Some of these properties are held through New York corporations and a partnership interest. Does this pro-rata spin-off trigger New York's Real Estate Transfer Tax on the controlling interests being transferred to the new fund?
Exempt -- the pro-rata spin-off doesn't change anyone's beneficial ownership. Morgan Guaranty Trust Company of New York, as trustee of a tax-exempt Commingled Pension Trust Fund pooling real estate in…
Can a wholesale supplier accept a resale certificate from a contractor buying materials for capital improvement or repair jobs?
No -- a wholesale supplier cannot accept a resale certificate (Form ST-120) from a contractor buying materials and supplies to use in performing capital improvement work or repairs on real property, b…
Are the film and processing supplies used in coin-operated photo booths exempt from New York sales tax as production supplies?
Yes -- because the amusement park's photo booths develop the customer's own negatives and print the photographs from raw film and chemicals, the whole process counts as manufacturing tangible personal…
Is a soy-based sports-nutrition supplement sold through a multi-level marketing network exempt from New York sales tax as a dietary food?
Yes -- Reliv's "ProVantage" soy-protein sports-nutrition product is exempt from sales tax as a dietary food and health supplement, because its label describes special dietary properties (boosting ener…
Does a car importer owe sales or use tax on vehicles used in a free, six-month test-drive program before they're sold?
XYZ can import and register the vehicles tax-free for resale, but once it lets outside "evaluators" and its own employees drive them under the test-drive program, the vehicles become taxable "mixed-us…
Is equipment used to make both soft-serve and prepackaged ice cream exempt from New York sales tax as production machinery?
It depends on which product the equipment makes -- machinery used more than half the time to produce prepackaged ice cream for sale (like Petitioner's hardening cabinet) can qualify for the production…
Which of a mail house's printing, sorting, inserting, and mailing services for financial-institution statements are subject to New York sales tax?
It splits by service and by destination -- sorting, inserting, sealing, postage/metering, and mailing charges (and reimbursed postal charges) all escape sales tax if separately stated, but the actual …
Can the distortion requirement for filing a combined report be satisfied by substantial intercorporate transactions among two or more corporations, and does one member's lack of federal income preclude a distortion finding?
Yes. The distortion requirement for a combined report (20 NYCRR 6-2.3) is presumed met when there are substantial intercorporate transactions -- which can exist among two or more corporations, and may…
Is a corporation that holds bare record title to real property as nominee, and was later dissolved by proclamation, subject to Article 9-A -- for the years it was incorporated, after dissolution, or both?
Two periods, two answers. A corporation that was incorporated and held record title to New York real property in a corporate capacity is subject to the Article 9-A franchise tax under section 209.1 fo…
Is a federal S corporation that is a corporate member of an LLC doing business in New York subject to the Article 9-A franchise tax, and is it taxed as a C corporation?
Yes, with the tax computed as a C corporation. An LLC treated as a partnership for federal income tax is a partnership for New York; its corporate members are corporate partners. If the S corporation'…
Can a New Mexico contractor that builds dairy-farm barns and structures claim the 50% agricultural-implement gross receipts tax deduction on the materials it builds into those facilities?
No. Construction materials that a contractor builds into dairy barns and structures become part of a taxable construction service, not deductible 'agricultural implements,' so the 50% deduction under …
Can a property management company buy materials and services tax-free on behalf of an exempt entity it manages property for, and from what date does that entity's tax exemption take effect?
A property management company acting as the exempt entity's designated agent under a written management agreement may issue exemption certificates on the entity's behalf, and the entity's exemption ap…
Could a dealer buy new medium-duty Chevrolet trucks tax-free for resale when its law and franchise agreement did not authorize it to sell them as new?
No. Under the recent legislative change described in the letter, only a dealer authorized by both law and franchise agreement to offer the particular vehicle as new could acquire it tax-free for resal…
Is a county's fee for letting the public access county documents and records through a computer link a taxable information service in Texas?
No. Rule 3.342(d)(3) excludes information that must be furnished under the Texas Public Information (Open Records) Act, Government Code § 552, from the definition of a taxable information service — so…
Were an S corporation and its wholly owned qualified subchapter S subsidiary treated as one taxpayer or as separate corporations for former Texas franchise tax?
They were separate Texas franchise-tax entities even though federal income-tax law treated the QSSS as a division of its S-corporation parent. Section 171.001 imposed tax on each corporation, and Rule…
Is a country club's optional 'buyer's club' membership fee (which gives members a discount on Pro Shop purchases) subject to Texas amusement services sales tax?
Yes. The buyer's club membership fee is taxable as an amusement service because Rule 3.298(b) taxes fees charged for a special privilege, status, or membership classification in a private club — and t…
Are country club membership dues taxable as an admission/user fee, and does it matter whether the membership carries voting rights over how dues are set?
It depends on whether the membership is 'equity' or 'nonequity,' not narrowly on voting rights over dues. The Commission held that its own administrative rule (R865-19S-33, which exempted only dues th…
Did Texas impose more tax when a tax-paid vehicle was re-leased, and what happened when an out-of-state leased vehicle was brought into Texas?
Re-leasing a vehicle whose lessor had already paid Texas tax caused no additional motor vehicle tax because the lessor's purchase, not the lease, was taxable. An out-of-state vehicle brought into Texa…
When a company places its own computer-skilled staff at a customer's site to run a defined IT project, is it selling taxable personnel services or taxable computer and data processing services?
It's computer and data processing, not personnel services. A company that places its own computer-skilled staff at a customer's site to complete a prearranged, predetermined IT project is providing ta…
Is an extended warranty/service contract on residential real property taxable in Texas?
Generally no — an extended warranty on existing residential real property is not taxable in Texas. But there are exceptions: an extended warranty tied to a pest control service, or to repair/remodelin…
For a company that prewires new homes for audio/video and security systems, sells stereo equipment after the builder sells the house, and installs and monitors security systems: what's taxable, and does prewiring alone count as a security service or as ordinary contractor work?
It depends what's bundled together. Prewiring ALONE (before any keypad/alarm equipment goes in) is treated under the ordinary contractor rule (Rule 3.291) — materials taxable, labor not, depending on …
Did a bank create former Texas franchise-tax nexus by leasing automobiles used in Texas, despite having no Texas real property, payroll, or active solicitation?
Yes. Leasing tangible personal property used in Texas created nexus for the lessor. The bank was subject to Texas franchise tax even though it had no Texas real property or payroll and did not activel…
Can an Industrial Development Agency's leasing subsidiary buy and lease equipment and resell services tax-free through resale certificates on the agency's behalf?
Yes -- Donaldson, Lufkin & Jenrette's Leasing Corp. subsidiary can purchase IDA-Equipment directly as the IDA's agent, lease other equipment and buy installation/maintenance services from third partie…
What did Texas say about dealer tax collection, title-transfer duties, and documentary fees in 1997?
Section 152.0411 required dealers to collect motor vehicle sales tax. The letter understood the Transportation Code to require dealer handling of title transfer and registration and to permit a docume…
Is a manufacturer's purchase of reusable wood/metal shipping containers, plus the rings and fixtures used to secure product inside them, tax-exempt if the containers are returned and reused to move product between the manufacturer's own facilities? Is repair work on those containers exempt too?
No. Sales tax is due on the shipping containers, shipping rings, and shipping fixtures used to move product between the taxpayer's own facilities, and sales tax is also due on repair charges for those…
Can a mechanical contractor buy or rent temporary boilers tax-free for resale when installing them at a customer's building during a boiler replacement job?
Yes -- because Dierks' temporary boilers are installed and operated solely to provide heat and hot water for a building's tenants (not to serve Dierks' own construction work), and Dierks itself never …
Are installation-services payments and computer software acquisitions made through an Industrial Development Agency's disclosed agents exempt from New York sales tax?
Yes, with conditions -- payments by Travelers' disclosed agents for installing IDA-owned equipment, and for acquiring or maintaining computer software (including software delivered electronically or u…
Are a disaster-recovery service's monthly subscription fees and usage fees subject to New York sales tax?
It's split -- Petitioner's monthly subscription fee, which merely grants customers a contingent right to access backup computer equipment if a disaster ever strikes, is a nontaxable sale of an intangi…
Is a consulting firm's service of physically inspecting a company's buildings, updating its CAD floor-plan/systems database, and maintaining cost-allocation codes for floor space subject to Texas sales tax?
No. All three parts of this consulting arrangement — (1) inspecting buildings and updating the floor-plan CAD database, (2) updating other building-systems layers (electrical, plumbing, etc.) in the s…
Is diesel fuel sold for use in locomotives exempt from Utah tax, and can the Commission exempt railroad fuel from sales tax to match neighboring states' prices?
Dyed diesel fuel sold and used in locomotives (an off-highway use) isn't subject to Utah's special fuel tax, but fuel exempt from special fuel tax is still subject to sales tax -- so locomotive fuel i…
Is selling software via a free preview CD plus a paid 'electronic key' a taxable Utah sale, and are web design, web hosting, and internet-access charges taxable too?
Mixed answers on three questions. Selling a password/'electronic key' that unlocks full software already sitting on a free preview CD is a taxable Utah sale if the buyer is in Utah. Web page design, h…
Does the industrial-use fuel exemption apply to a real property contractor (plumbing/HVAC installer) that also claims to run a separate manufacturing operation making the parts it installs?
The Commission declined to resolve the specific question for lack of adequate facts, but gave general guidance that undercuts the taxpayer's theory. Sales tax applies to fuel sold for commercial use, …
Is renting a race track to a professional driving school (to instruct drivers) or to race teams for practice sessions taxable as an amusement service?
No. The Comptroller reversed an earlier (October 29, 1997) letter that had said these track rentals were taxable. Renting the track to a driving school or to race teams for practice is not the provisi…
Is a $15 fee a business charges customers for a check returned due to insufficient funds subject to Texas sales tax as a debt/claim collection service?
No. There is no sales tax owed on charges by a bank, or by a business, for a returned/insufficient-funds check — the charge is an overdraft-type charge, not payment for a service performed for the cus…
An insurance agent also charges a separate hourly or flat fee to review a client's existing retirement and health plans and propose new plans. Is that consulting fee subject to Texas sales tax as a taxable insurance service?
No. Reviewing existing retirement/health plans and proposing new plans doesn't fall within the definition of taxable insurance services in Rule 3.355(a)(1) through (6) — the Comptroller found these ac…
Is the charge/fee to dispose of produced salt water (brine) from oil/gas exploration in a saltwater disposal well subject to Texas sales tax as a waste removal service?
No. Rule 3.356(a)(3)(B) excludes waste materials resulting from the exploration, development, or production of oil, gas, geothermal resources, or any other substance regulated by the Railroad Commissi…
Could a borrower claim a trade-in deduction after selling the old vehicle to the lender for the balloon-payment amount?
No. When the borrower sold the old vehicle to the lender for the balloon amount, that vehicle was not delivered to the new-car seller as consideration for the replacement purchase. A later purchase of…
Did a corporation need to file another public information report with its 1997 final franchise-tax report after filing one with its 1997 annual report?
No. Section 171.203(b) required the public information report once a year. Because the client had already filed a PIR with its 1997 annual franchise-tax report, it did not need another PIR with its 19…
For a contractor working on an exempt entity's job site: is a portable toilet rental tax-exempt because the contract requires it, and is the transportation/delivery charge for hauling dirt, sand, caliche, or rock to the site taxable?
Portable toilet rentals are NOT exempt, even when the contract with an exempt entity requires them — Sec. 151.311 only exempts tangible personal property incorporated into the realty or completely con…
An engineering/CAD services company asked about eight separate activities: (A) revising client drawings, (B) creating new designs, (C) scanning documents, (D) plotting, (E) computer consulting/installation/troubleshooting, (F) software training, (G) furnishing employees to clients, and (H) accepting direct pay permit numbers. Which of these are subject to Texas sales tax?
Mixed answers across all eight: (A)/(B) drafting FROM client-supplied specifications is taxable (a "draftsman" sale of tangible personal property), but genuine professional engineering — developing th…
Is a risk management consulting firm's fee-based work — exposure analysis, insurance program design/negotiation, policy review, claims reporting/management, due diligence, and statistical reporting — subject to Texas sales tax, even though the firm doesn't sell insurance or earn commissions?
Yes. Even though the firm is paid strictly in fees (no insurance sales, no commissions), its risk-management activities fall within taxable insurance inspection services (Rule 3.355(a)(2)) and insuran…
Who owed Texas use tax on an Oklahoma-leased vehicle operated in Texas, and what happened if the lessee later exercised the purchase option?
The Texas operator owed use tax calculated on the out-of-state lessor's purchase price; the lease contract itself was not taxed, and returning the vehicle produced no refund. Exercising the operating-…
If New Mexico assesses gross receipts tax because a store reported far higher receipts to the IRS than it did to the state, can the taxpayer beat the assessment without records to explain the gap?
No. The protest was denied. Because a New Mexico assessment is presumed correct, the store had to produce evidence that its actual 1993 gross receipts were lower, and with no business records to expla…
Is a standard reclining chair exempt from Texas sales tax when purchased with a doctor's prescription for back support?
No. A reclining chair does not meet the definition of a therapeutic appliance or device (an item designed to alleviate pain or for use in treating/curing sickness, disease, suffering, or deformity) — …
Is replacing a race track's surface taxable real property repair/remodeling (labor and materials both taxable to the customer), or is it new construction (only materials taxed, to the contractor, under a lump-sum contract)?
It depends on the scope of work. Merely RESURFACING the existing track or a portion of it is real property repair or remodeling under Rule 3.357(a)(8) — the ENTIRE charge is taxable to the customer, a…
A building manager remodels office space (moving/removing walls, adding doors/locks, electrical work, carpet/paint) for a taxable tenant that subleases the space to a Texas state agency (TDH). Who pays sales tax on the remodeling — the building manager, the taxable tenant, or the exempt state agency — and does it matter that the state agency requested the work and is the primary beneficiary?
The remodeling charge is taxable in general, but WHO owes it depends on who is billed and who is the ultimate consumer. The building manager may issue the general contractor a resale certificate (sinc…
Are balloon angioplasty catheters and stents taxable when sold to doctors or hospitals, including when used in clinical studies, and what happens if they're sold together as a package?
Balloon angioplasty catheters are taxable when sold to doctors or hospitals, even for use in clinical studies. Stents are exempt as a prosthetic device under Rule 3.284(a)(10)(C). If the two are sold …
A survey company did construction staking for road contractors and deducted the receipts using the contractors' exemption certificates. Was the deduction valid even though the tax department first said no?
Yes — construction staking is a construction service, so the deduction was valid and the protest was GRANTED. Dawson Surveys did construction staking (locating sites, setting elevations and grades) fo…
Can New Mexico deny an income-tax refund and tax your wages when you report zero federal adjusted gross income, without waiting for the IRS to act?
The protest was denied. A New Mexico couple reported zero federal adjusted gross income on their state return and claimed a full refund of the $1,516 withheld — but the husband's W-2s showed nearly $4…
Were motorhomes and other qualifying recreational vehicles subject to the Harris County-Houston Sports Authority's short-term rental tax?
Yes. The Authority said motorhomes and other recreational vehicles fitting the quoted definition were self-propelled vehicles designed principally to transport people or property on public roads. Beca…
Were mandatory dues paid to a private recreational club exempt from Florida admissions tax as homeowners-association dues?
Only conditionally. The club had not established that it was a homeowners association. If it was one, and the dues were mandatory as a condition of owning or occupying real property with the facilitie…
Which hearing-aid-related products (ear wax removal system, Eargene, dry aid kits/dehydrators, telephone foam pads, hearing aid batteries) are exempt from Texas sales tax, and does a prescription matter?
An ear wax removal system, Eargene (for itching), dry aid kits (dehydrators), and foam pads for the telephone are all exempt from Texas sales tax ONLY when sold to an individual WITH a doctor's prescr…
If an out-of-state mother rents or buys a New York City apartment so her minor son can attend a NYC high school, and both spend more than 183 days a year in the city, does she become a New York statutory resident?
No. Because the apartment was maintained only for the fixed, four-year period until the son's high school graduation and only for the particular purpose of his religious high school education (and, fo…
Is a law firm's floor-by-floor office reconstruction (including asbestos removal and re-fireproofing) an exempt capital improvement or a taxable repair service?
Mostly exempt -- the wall, HVAC, plumbing, millwork, and fireproofing work on Petitioner's headquarters build-out (including redoing failed fireproofing) qualifies as an exempt capital improvement bec…
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