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 tax a vehicle bought for export and accessories installed before or after the vehicle purchase?
The vehicle qualified for the export exemption only if its use was limited to removal from Texas and the buyer signed an out-of-state use certificate. Accessories added before the vehicle purchase qua…
Does a weekly investment research subscription that mixes stock ratings data with analytical articles qualify as an exempt periodical under New York sales tax?
Yes -- The Value Line Investment Survey, a weekly subscription publication combining stock ratings data with analytical articles by different authors, qualifies as an exempt periodical under Tax Law §…
(1) Can a wholesaler accept a manufacturing exemption certificate from a grocery store buying packaging supplies it knows are used only to repackage, not manufacture, products? (2) When taxable and nontaxable items ship together for one delivery charge, how much of that transportation charge is taxable?
Two separate answers. (1) A wholesaler CANNOT accept a manufacturing exemption certificate in good faith from a grocery-store customer if the wholesaler actually knows the packaging supplies are used …
Does a crane that lifts scrap metal from a metal-cutting shear to a bin for processing -- and can only be used for that one task -- qualify for the manufacturing exemption?
No. A crane (a 1993 Link-Belt Hydraulic Crawler Excavator) that's attached to a metal-cutting shear and uses a magnet to move scrap to a bin for processing does not qualify for the manufacturing exemp…
Is an apartment locating service taxable, where the locator gets paid a referral fee by the apartment complex (not the renter) for each successful referral?
No. Apartment locating services are not taxable in Texas when the locator's fee is paid by the apartment complex for each successful referral.
Does a 5,500-gallon storage tank plumbed directly into a chemical-blending manufacturer's mixing kettles qualify for the Texas manufacturing exemption?
No. A chemical-blending manufacturer's newly acquired 5,500-gallon storage tank -- plumbed directly into its mixing kettles so material can be fed into a batch-in-process by opening a valve -- does no…
Does Utah sales tax apply to construction materials a non-Indian contractor buys to build a tribal health facility on reservation trust land, funded through a federal Indian-health grant?
It can be tax-free, but only if the contract was entered under the Indian Self-Determination Act or similarly comprehensive federal regulations governing the financing and construction of Indian healt…
When shareware software is downloaded for free but the user later pays a registration fee to unlock it, is that a taxable sale in Texas, and does it matter which server the customer downloaded the software from?
Downloading shareware for free is not a taxable sale, because there's no consideration exchanged at that point. Tax Code § 151.005 defines a "sale" as a transfer of title or possession of tangible pro…
Can a textile manufacturer buy the artwork and design mechanicals it uses to silkscreen or weave patterns into its products tax-free under the production exemption?
Yes -- artwork and design mechanicals a textile manufacturer buys and uses directly to silkscreen or weave patterns into products it manufactures for sale qualify for the production machinery and equi…
Did a licensed wholesale auto auction have to collect Texas motor vehicle tax when selling a government vehicle to an unlicensed public buyer?
Yes. When the licensed wholesale auto auction sold a government-owned vehicle to an unlicensed public buyer, it had to collect the tax, remit it to the tax assessor-collector, and file the documents n…
Must a Kansas licensed vehicle dealer collect sales tax on a vehicle sold to a Native American who lives on a reservation?
Yes, in almost all cases. This 1997 memo to Kansas vehicle dealers and county treasurers states that a Kansas licensed dealer must collect sales tax at the time of sale on a vehicle sold to a Native A…
Did a foreign corporation owe the former Texas franchise tax even without a certificate of authority?
Yes. The corporation lacked authority to transact business in Texas, but it appeared to have begun doing business there in 1988 and was therefore subject to the former franchise tax. The letter treate…
Is developing original design specifications for a client's custom home project taxable, even though the designer isn't a licensed architect or engineer -- and how does that compare to drafting services or selling stock house plans?
Developing original specifications and producing an original design for a client -- creating, conceiving, originating, and relating the planning and specifications of a project such as a custom home -…
Did a Dodge pickup with an attachment in its bed qualify for Texas's farm-machine motor vehicle tax exemption?
No. The pickup only had an attachment in its bed; the vehicle itself was not specially adapted or modified. An electrical hookup was not enough, and a qualifying vehicle also had to be used primarily …
Could a parent reduce its former Texas taxable-capital basis after liquidating a subsidiary whose charter remained active?
No for taxable capital. Because the subsidiary's charter remained active, Texas did not recognize the liquidation or adjust the parent's cost-method investment basis on its 1997 report. Earned-surplus…
Is the labor charge for a contractor splicing a new section of fiber optic cable into an existing cable TV network taxable?
Yes. When an outside contractor splices a newly constructed cable line into an existing cable TV network at a pedestal splice point -- detaching the old cable pairs and attaching a new group of cable …
Was a parent's transfer of motor vehicles to a newly formed wholly owned subsidiary subject to Texas motor vehicle tax?
Not if the transfer occurred when the wholly owned subsidiary was formed, no consideration other than stock was given, and the parent had already paid the proper Texas tax on the vehicles. If the pare…
What former Texas franchise-tax filing rules applied to a foreign S corporation and its nonresident shareholders?
The foreign S corporation itself had to file an initial franchise-tax report and annual reports and was taxed like a C corporation under the former system. The initial report was due 89 days after the…
Does a tax-free restructuring of the corporate partners of a partnership that owns investment-tax-credit property trigger recapture of the credit?
No. Investment tax credit is recaptured under Tax Law section 210.12(g) only if the qualified property is disposed of or ceases to be in qualified use. A tax-free section 351 contribution and tax-free…
Our public authorities are financing a rail-yard sale-leaseback and sublease transaction with private lenders, using a leasehold mortgage, a fee mortgage, a collateral assignment, and an eventual assignment of everything to a private trustee. Which of these mortgage recordings, assignments, subleases, and options trigger New York's mortgage recording tax or real estate transfer tax?
Almost none of it is taxable. Every mortgage recording in this multi-party rail-yard financing is exempt from New York's mortgage recording tax because a state public authority (the MTA or the TBTA) i…
I was set to close on the sale of my mother's residence, but the buyer refused to close, claiming we needed a full gains-tax pre-transfer audit and tentative assessment instead of the simple exemption affidavit we offered. Was the affidavit actually enough?
Yes -- the affidavit would have been enough, given the facts presented. Bonnie Lee Smith had lived in her New Rochelle residence for decades (with a brief period living elsewhere after the town wrongf…
When a membership warehouse club sells to a nonprofit or government member, what exemption paperwork does it need, and is it responsible for policing whether the member stays a valid exempt organization?
A membership warehouse club can make tax-exempt sales to its Business members that are exempt organizations if it accepts a properly completed exemption certification in good faith and the purchase is…
Does a Canadian mail-order company have to collect New York sales tax when it uses a New York mailing address for orders and drives its own trucks across the border to mail products to New York customers?
Yes -- a Canadian mail-order company that advertises a New York mailing address for customer orders and payments, and uses its own trucks to bring products across the border into New York for mailing …
Does a manufacturer's backhauling -- using its delivery trucks to pick up products and unrelated goods in New York for return to its home state -- exceed Public Law 86-272 and create franchise-tax nexus?
Yes. Delivering products into New York by the company's own trucks is protected solicitation, but using those trucks to pick up nonconforming products, trim, and scrap (post-delivery backhauling) exce…
Is a state-certified inspector's fee for testing medical and dental x-ray equipment for mandatory safety-code compliance subject to New York sales tax?
No -- a certified radiation equipment safety officer's fees for inspecting medical and dental x-ray equipment are not subject to sales tax when the inspections are performed solely to demonstrate comp…
Are stair lifts, patient lifts, home elevators and dumbwaiters sold to help disabled people exempt from New York sales tax as medical equipment or prosthetic aids?
Portable stair lifts, evacuation devices, and patient lifts sold to help disabled people are exempt from New York sales tax as medical equipment or prosthetic aids; residential elevators installed for…
Which of a multi-level marketer's nutritional powders, bars and drink mixes are exempt food or health supplements versus taxable beverages under New York sales tax?
Eight of a multi-level marketer's nine dietary and nutritional products (weight-management supplements, protein/vitamin powders, fruit bars, and joint-support and antioxidant powders) are exempt from …
Is a background-check company's resume-verification service, which digs into a job applicant's education, employment, credit and government records, a taxable detective service under New York sales tax?
Yes -- a company's resume verification service, which investigates a job applicant's educational records, employment history, government records, credit history, and personal references (including int…
Can I take a resale deduction from New Mexico gross receipts tax if I don't have the NTTCs, and how far back can the state assess if I understated the tax?
The protest was denied. Margaret's Upholstery was assessed gross receipts tax on 1988 magnet sales that the owner's late husband had handled as a distributor. The Department agreed to drop the out-of-…
Does a manufacturer otherwise protected by Public Law 86-272 lose its exemption by conducting three small one-day product-fitting training seminars a year in New York?
No. A manufacturer whose New York sales reps stay within solicitation is protected by Public Law 86-272. Conducting three one-day seminars a year to train retailers on fitting its products is technica…
Is Rogaine exempt from New York sales tax now that it's sold over-the-counter without a prescription?
Yes -- receipts from the sale of Rogaine remain exempt from New York sales tax as a product for the preservation of health, even after the FDA's 1996 approval of its over-the-counter sale, because New…
If a retired couple buys a seasonal home in Utah and spends about five and a half months a year there, but keeps their permanent domicile, driver's licenses, and voter registration in another state, are they Utah residents subject to Utah income tax?
Owning Utah real property by itself does not make you a Utah resident for income tax purposes. Under § 59-10-103(1)(j), you're a Utah resident only if (1) you are domiciled in Utah -- meaning you've v…
When a seller inside the City of Austin ships taxable items to a delivery address in Travis County that's outside the Austin MTA boundary, what local tax rate applies?
A seller located inside the City of Austin that ships or delivers taxable items to a Travis County address OUTSIDE the Austin Metropolitan Transit Authority (MTA) boundary collects 7.25% total sales t…
Is a disposable, one-time-use bone-marrow stem-cell concentration kit -- sold to hospitals/physicians, not directly to patients, and used to filter out cancer cells and debris before an autologous bone marrow transplant -- exempt from Texas sales tax as a prescription medicine or therapeutic device?
No. A disposable, one-time-use biological kit that processes a cancer patient's own bone marrow (reducing 3 liters down to 4.5 milliliters of vital cells, removing cancer cells and debris) as part of …
Does a foreign corporation that only displays goods at two five-day trade shows a year in New York, without taking orders or selling, become subject to the Article 9-A franchise tax?
No. Coming into New York only to display goods at two five-day trade shows a year (10 days total), without taking orders or making sales and without otherwise doing business, owning property, or maint…
A firm whose main business is insurance adjusting is paid per-claim to re-inspect plumbing work as part of a class-action settlement over faulty pipe -- is that re-inspection service a taxable insurance service?
No. Re-inspecting plumbing work done as part of a class-action lawsuit settlement over faulty pipe -- charged per claim to a Texas company -- is not a taxable insurance service, even though the firm's…
Is a Nebraska warranty or service and maintenance agreement taxable when it covers fixtures, and are the repair parts taxable?
It depends on whether the agreement covers fixtures, other personal property, or both. Under Revenue Ruling 1-97-1 (sales and use tax), a warranty, guarantee, or service and maintenance agreement that…
Could an S corporation with up to 75 shareholders qualify for the 1998 former Texas earned-surplus report?
Not under the statute as it stood on March 21, 1997, because Texas still calculated earned surplus using the 1994 Internal Revenue Code. If pending legislation changed the reference to the 1996 Code, …
How did Texas treat a Qualified Subchapter S Subsidiary under the former franchise tax in March 1997?
Texas treated a state-law QSSS as a separate corporation required to file its own franchise-tax report, because the tax applied to each corporation and consolidated reporting was prohibited. For earne…
When is a country club's mandatory gratuity charge on meals and food exempt from Texas sales tax, rather than taxed as part of the sales price?
A mandatory gratuity charge that a country club adds for serving meals and food (including soft drinks and candy) for immediate consumption is exempt from Texas sales tax if ALL four conditions in Rul…
When I sell a portable, relocatable building that just gets set on blocks and leveled, am I selling tangible personal property (which can be sold tax-free to a government or nonprofit) or a construction service?
The protests were granted in part and denied in part. Morgan sells portable, relocatable buildings that are made 100% complete at a plant, then delivered and simply set on blocks and leveled. The Hear…
Is cloud seeding a taxable service in Texas, and does the company doing the cloud seeding owe tax on the materials and aircraft it uses?
Cloud seeding itself is not a taxable service -- no tax is due on the charge for cloud seeding whether performed for an exempt or a non-exempt entity. However, the firm performing the cloud seeding ow…
How did the former Texas franchise tax apply to a new S corporation's expenses, apportionment, and filing duty?
Texas generally taxed the S corporation like other corporations. Earned surplus allowed expenses to the extent deductible under federal law, while taxable capital reflected wages and expenses through …
Did a Texas-based employee investigating aircraft accidents create franchise-tax nexus for an out-of-state corporation?
Yes. Even though the corporation had no Texas facilities or sales activity, its employee lived and worked from home in Texas and investigated aircraft accidents in Texas and nearby states. Performing …
Is a torque turning and computerized torque measurement service (joining/tightening drill pipe and measuring joint torque) for oil and gas wells taxable in Texas, and does it matter whether it's a new well or a producing/workover well?
Torque turning and computerized torque measurement service -- joining and tightening pipe on wells being drilled or serviced, and measuring the torque applied to each joint -- is not, by itself, a def…
Which occasional Texas activities created earned-surplus nexus, and when did Public Law 86-272 protect a seller?
A one-time buyer visit to a supplier did not create earned-surplus nexus on the assumed facts. A customer seminar, recurring Texas bank reviews, and acquisition due diligence did. P.L. 86-272 did not …
Does a business that recycles and resells used air filters for large trucks owe sales tax on those sales -- and how does that differ from a motor vehicle repairman who cleans a filter and puts it back in the same truck?
Yes, sales tax is due on the sale of recycled air filters, and the seller must collect it unless it receives a valid resale or exemption certificate. This is different from a 1984 letter (document 841…
Does using a third-party answering service that routes paged messages to a mobile locksmith count as having a "place of business" at that answering service's location for local sales tax purposes?
No. A third-party answering service that simply routes paged messages to a locksmith is not considered a "place of business" of that locksmith for local sales and use tax purposes. A "place of busines…
Is a large multi-task garage waterproofing and restoration project a nontaxable capital improvement, or a taxable repair, when some individual tasks look like ordinary maintenance?
A large garage waterproofing and restoration project -- covering roof deck waterproofing, structural steel and concrete work, asphalt paving, walkway replacement, railings and other tasks across nine …
When a club requires patrons to buy a "dance token" before an independent-contractor dancer will perform a table/couch dance, is the sale of that token a taxable admission to an amusement service -- even though the dancers are independent contractors and the club already collects tax on a separate cover charge?
Yes. A club that requires patrons to purchase a "dance token" -- then exchange it with an independent-contractor dancer for a table dance or couch dance -- is selling a taxable admission to an amuseme…
When a manufacturing plant's waste haul-off is 95% or more industrial solid waste (nontaxable) mixed with a small amount of taxable garbage like office trash, does the Comptroller's "five percent rule" exempt the whole haul-off charge from sales tax?
No. The five percent rule does NOT exempt the whole charge just because 95% or more of a manufacturing plant's hauled-off waste is industrial solid waste. Rule 3.356(a)(3)(E) excludes industrial solid…
Was an extended warranty or service contract taxable when sold for a motorcycle, dirt bike, or ATV?
It depended on the vehicle. A service contract for a highway motorcycle was not taxable because motor vehicle repair labor was not taxed. A contract for a dirt bike, ATV, or other non-highway vehicle …
Is an employer's reimbursement of my moving expenses taxable New Mexico income, and can the state charge interest even though it missed my error for years?
The protest was denied. When David Hawkinson moved from Tennessee to New Mexico for a job, his employer reimbursed $23,628 of moving expenses and reported it as compensation on his W-2. He left it off…
Was a separately stated scheduled-maintenance contract included in the Texas motor vehicle tax base?
No. The separately stated scheduled-maintenance contract was not part of the vehicle's taxable sale price and was not subject to motor vehicle tax. Repair and replacement parts used under the contract…
Is a third-party service that uses Interactive Voice Recognition (IVR) technology to independently verify a consumer's phone-service-switch instructions -- billed to the telemarketing company, not the consumer -- a taxable data processing service?
Yes. A company's independent, IVR-based verification service -- confirming a consumer's instruction to switch long-distance telephone carriers after a telemarketing call, matching the phone number and…
If a company performs auto damage appraisal (insurance) services for a self-insured client, are those services taxable, and does the client need to provide anything to document the exemption?
The client (referred to as CORPORATION X) was correct: auto damage appraisal services performed on behalf of a self-insured entity are NOT taxable. Rule 3.355(b) taxes insurance services performed for…
Was Sallie Mae exempt from Texas motor vehicle sales and use tax on a vehicle purchase in 1997?
Yes. The Comptroller said the federal exemption in 20 U.S.C.A. § 1087-2 exempted the Student Loan Marketing Association from Texas motor vehicle sales and use tax, so its Texas vehicle purchase was ex…
Under the superseded RR 97-3, how were hotel room charges, mandatory fees, optional guest services, and tourist packages taxed?
Room charges and mandatory customary services generally used the ruling's 7% accommodations rate. Optional services often used a 5% guest-charge rate or another tax rule. RR 98-21 expressly superseded…
Did using independent contractors for computer programming in Texas create franchise-tax nexus for an out-of-state corporation?
Yes. The corporation employed its own programmers outside Texas but used independent contractors to perform programming services in Texas. Those in-state services subjected it to both former franchise…
How did the former Texas franchise tax define taxable capital and surplus?
Taxable capital was the corporation's stated capital plus surplus. Section 171.109(a)(1) defined surplus as net assets minus stated capital and said it included unrealized, estimated, or contingent lo…
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