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 cumulative preferred securities tied to 49-year debentures qualify as debt under the former Texas surplus rules?
No. Texas concluded that the preferred securities failed at least one of Section 171.109(a)(3)'s three debt criteria. Mandatory redemption when the related 49-year debentures matured or were redeemed …
Is a loss-consulting firm's investigative reports, built from subcontracted private investigators and other experts, subject to sales tax as protective and detective services?
Yes -- a loss-consulting firm's investigative reports built from surveillance and background-investigation work by subcontracted private investigators and other experts are taxable protective and dete…
Is a bioresorbable surgical implant like Seprafilm IM -- an internal adhesion barrier that dissolves in the body over time -- exempt from Texas sales tax as a prosthetic device?
Yes. Texas exempts prosthetic devices from sales tax, and its rule specifically includes devices implanted in the body -- so a bioresorbable membrane like Seprafilm IM, which is surgically implanted t…
Could a surviving corporation inherit former Texas business-loss carryforwards from corporations merged into it?
No. Rule 3.555(g)(3) prohibited conveying, assigning, or transferring a former Texas business loss to another entity, including through a merger. The surviving corporation therefore could not use loss…
Is hiring a trucking company to haul asphalt to a paving job a nontaxable transportation service, or a taxable equipment rental?
Hiring a trucking company to pick up and deliver asphalt to a paving job site -- where the trucking company supplies its own truck and driver, chooses its own routes, pays all operating expenses, and …
My satellite TV provider let me prepay a year of service for $154.95 instead of $354.95 using an 'instant credit certificate,' but then charged me sales tax on the full $354.95, calling the credit a gift certificate -- is that right?
No. Texas sales tax is measured on the actual selling price you actually pay, and an 'instant credit certificate' that immediately reduces your bill at the time of purchase is a discount, not a gift c…
My Texas-based internet business builds websites, broadcasts information online, and resells domain name registrations to customers both in and out of state -- which of these are subject to Texas sales tax, and how do I handle out-of-state customers?
Building and maintaining a website is a taxable data processing service, sourced to wherever the customer actually receives the benefit (not where your server sits) if the customer gives you an exempt…
I sell to a Mexican retailer who wants to buy tax-free for resale in Mexico -- what documentation do I need beyond a standard Texas resale certificate, and does a blanket certificate expire over time?
Beyond a properly completed Texas (or Border States Uniform) resale certificate, Rule 3.285(d)(2) requires you to also keep a copy of the buyer's Mexican Registration Form showing their RFC (Mexican f…
Is a court-created qualified settlement fund that only invests and distributes funds subject to the New York franchise tax or personal income tax?
No. A qualified settlement fund under IRC section 468B that only holds, invests, and distributes funds is not conducting a business, so it is not a corporation subject to the Article 9-A franchise tax…
Did a wooden farm wagon count as a motor vehicle for Texas tax purposes?
No. The wooden farm wagons were not designed to carry people or property over the highway, so Texas treated them as tangible personal property rather than motor vehicles. Changing the business's SIC c…
Did four annual paid Texas product-training seminars defeat P.L. 86-272 protection for a medical-products manufacturer?
Yes. Four recurring one-day seminars teaching customers how to fit the company's medical devices were training services, not protected solicitation. Their regular annual schedule meant they were not t…
Who collects Texas tax when a storage facility auctions vehicles for the U.S. Marshals Service, and how are salvage vehicles treated?
A nondealer auctioneer acting for the U.S. Marshals Service did not collect motor vehicle tax; the buyer paid it at county registration. Salvage vehicles were tangible personal property subject to lim…
Does an out-of-state manufacturer with no Utah offices or employees have Utah sales tax nexus just because it hires an independent contractor to install and service its products in Utah, and how are warranty repairs and installation taxed?
Yes, nexus exists here through the service contractor. Even though the manufacturer had no Utah offices, warehouse, inventory, or sales force, and shipped everything by common carrier, the Commission …
Is Utah sales tax owed on a computer software licensing agreement that also bundles in maintenance, training, and other services?
It depends on whether the software is "canned" (prewritten, sold to a general market) or "custom" (built to a particular customer's specifications). Canned/prewritten software is taxable in Utah wheth…
I design store signage and trim on a computer using 3D drafting software, then fabricate and install it in new stores -- am I taxed as a contractor or as a manufacturer, and does my design equipment qualify for the manufacturing exemption?
You're taxed as a contractor, not a manufacturer, because you affix the signage and trim you fabricate to realty under a new construction contract. Tax is due on your cost of materials (lump-sum contr…
I run a lockbox/remittance service that automates payment posting for doctors' offices -- is that a taxable data processing service in Texas?
Yes -- taxable. The Comptroller ruled that the ABC charges for this automated accounts-receivable payment-posting service fall within the definition of a taxable data processing service under Rule 3.3…
Our nonprofit 501(c)(3) garden club association prints instructional brochures and sells them at no profit to local garden clubs in Texas -- do we owe sales tax on those sales?
No -- the sale is exempt from Texas sales tax. The Comptroller ruled that brochures published or distributed by a nonprofit 501(c)(3) organization are exempt from sales tax under Texas Tax Code Sec. 1…
My school teaches in New Mexico but develops its curriculum and runs job placement out of state — can I apportion my tuition so New Mexico only taxes the in-state part?
The protest was denied. ITT Educational Services runs a vocational school (ITT Tech) in Albuquerque and paid gross receipts tax on its bookstore sales but never on tuition. After an audit, the Departm…
Does sales tax apply to a commercial greenhouse and laboratory used to grow, propagate, and sell orchids from seed?
No sales tax is due. The Comptroller confirmed that machinery and equipment -- including a qualifying building or structure -- used exclusively to process, pack, or market agricultural products by the…
How did a Texas or foreign corporation receive its Comptroller taxpayer identification number?
Secretary of State filings automatically registered a Texas corporation with the Comptroller and generated a temporary taxpayer number. Texas assigned a permanent number after receiving the corporatio…
Is replacing a temporary fire sprinkler system with a new one during finish-out of a never-occupied strip-center lease space taxed as new construction or as nonresidential remodeling?
It's new construction, not remodeling -- because the lease space had only been roughed-in and was never finished out or occupied, installing the new fire sprinkler system counts as new construction ev…
My local sales tax rate changed partway through a multi-year equipment lease -- do I owe the old rate or the new rate for the rest of the lease, and what happens when the lease is renewed?
For a fixed-term operating lease (like a 5-year lease), the sales tax rate is locked in at the rate in effect when the lease was signed (consummated) -- it does not change even if the local tax rate g…
Did corporations with more than 35 shareholders add back officer and director compensation under the former earned-surplus tax?
Yes. Section 171.110(a)(1) required the officer-and-director compensation add-back, while subsection (a)(2) excused corporations with no more than 35 shareholders. Presuming each claimant had more tha…
Did a voting trust holding shares for 19 people count as one shareholder for the former officer-compensation add-back exception?
Yes, if the shares were registered in the trust's name and the trust was not organized to avoid the add-back. Rule 3.558(b)(7) counted a trust, association, or other registered legal entity as one sha…
I'm a Texas private investigation/security firm with clients and jobs both inside and outside Texas -- which of my investigation and security services are subject to Texas sales tax?
It depends on where the investigation is performed and where its object/benefit is located, not on where the client is based: investigations of people, places, or facilities located outside Texas are …
We're restructuring ownership of a Manhattan office building through five coordinated steps happening the same day, maybe within minutes of each other: a bank's new entities will buy out a 74% interest in two upper-tier partnerships; simultaneously, the remaining lower-tier partnership entity will buy out the other partner's 74% stake in the property-owning partnership, which then dissolves and distributes its real estate to the surviving entity; the bank's new entities will then redeem their upper-tier partnership interests for a direct 74% stake in the entity that now holds the real estate; and finally, the original upper-tier partners will form a new joint entity holding the remaining 26%. Which of these steps trigger New York's Real Estate Transfer Tax, and which are exempt restructuring steps?
Split outcome -- the core 74% acquisition is taxable (viewed as one integrated transaction), while the remaining restructuring steps are exempt. The property at 40 West 53rd Street was owned by 40 Wes…
Is installing an awning or canopy taxable as new construction, or as a sale of tangible personal property, under Texas sales tax rules?
It depends on whether the canopy becomes an improvement to the realty. If it does, the installation labor counts as new construction and is not taxable, but the materials are taxable (per the lump-sum…
Did a stock sale and inclusion in a new federal consolidated return end a corporation's former Texas franchise-tax obligation?
No. The stock sale and shortened federal consolidated-return period did not end the corporation's Texas status while its certificate of authority remained active. Its filed 1996 report produced no tax…
What Utah corporate taxes does an out-of-state mortgage lender owe if it's qualified to do business in Utah but has no offices, property, or employees here?
It owes Utah corporate franchise tax, because holding a Certificate of Authority to do business in Utah as a foreign corporation creates nexus by itself -- Public Law 86-272 doesn't help here since th…
I overpaid a state fuel fee for years because the state's own form never told me to subtract the exempt gallons — can I still get all my money back?
The protest was denied. Smith Oil, a Clovis fuel distributor, paid New Mexico's petroleum products loading fee on all the diesel it received from 1990 to 1995 — including diesel sold for non-motor-veh…
I'm a carpet company recarpeting an apartment complex, and the job includes the manager's office and lobby along with the apartments themselves -- is the labor to recarpet the office/lobby taxable, or does it count as part of the tax-exempt residential job?
It depends on how the office/lobby is billed and how big it is relative to the whole job. If the office/lobby recarpeting labor is separately stated from the apartment recarpeting labor, it is always …
Are checks that a bank or credit union sells to its customers subject to Texas sales tax, and who has to collect it?
Yes -- checks are taxable tangible personal property under Sec. 151.010, so the sale of checks delivered to a purchaser in Texas is taxable. Who must collect and report the tax depends on how the bank…
If I perform scheduled, periodic maintenance on real property and incorporate materials into it, am I a contractor for tax purposes -- and does it matter whether the property is residential or nonresidential?
Yes, you're a contractor either way. Under Rule 3.291(a)(3), a person who repairs, restores, or remodels residential real property and incorporates tangible personal property into it is a contractor, …
Is an out-of-state corporation that owns a limited partnership interest in a partnership doing business in New York subject to New York franchise tax?
Yes. Under 20 NYCRR 1-3.2(a)(6) a foreign corporation is treated as doing business in New York if it is a limited partner in a partnership (other than a portfolio investment partnership) that does bus…
Are reinsurance premiums counted as 'premiums' when testing whether more than 95% of an insurer's premiums are for annuity contracts under section 1505(b)?
Yes. For the section 1505(b) test of whether more than 95% of an insurance company's premiums are received as consideration for annuity contracts (or section 1510(c)(2) policies), 'premiums' has the m…
Can property bought after a taxpayer applies for a subsequent Nebraska incentive agreement still get the property tax exemption under the first agreement?
No -- filing the second application draws the line. Under Revenue Ruling 29-96-2, property acquired after the date a taxpayer applies for a subsequent agreement covering the same project cannot qualif…
Do league fees paid to a nonprofit that organizes recreational softball, volleyball, and table tennis leagues count as taxable 'club dues'?
No -- league fees paid by teams to a nonprofit that runs open, non-exclusive softball, volleyball, and table tennis leagues aren't subject to the club dues sales tax, because the members have no propr…
Is a utility's fee for operating a building's heating, air conditioning, and electric generating equipment on the owner's behalf subject to sales tax?
Yes -- when a company operates and monitors a building's boilers, air conditioning units, and electric generators on the building owner's behalf (turning them on and off, adjusting them, and logging t…
Does a New York social/athletic club have to collect sales tax on dues paid by members who live outside New York?
Yes -- a social or athletic club based in New York must collect sales tax on membership dues from every member over $10/year, regardless of whether the member lives in New York or another state, becau…
Once a homeowners association acquires a swimming pool and tennis courts for its members, does any part of its monthly association fee become subject to the club dues sales tax?
No -- because this is a homeowners association whose membership is limited to owners and residents of homes in a defined development, its monthly association fee stays entirely outside the club dues s…
Does a Professional Employer Organization (PEO) that becomes the employer of record for its clients' workers, handles payroll/withholding/workers' comp, and leases those employees back to the clients, owe Utah sales or use tax on the payroll-cost reimbursements or its service fee charged to clients?
No. Neither the payroll/employment-tax/benefit reimbursement amounts nor the separate service fee that a Professional Employer Organization (PEO) charges its clients are subject to Utah sales tax — th…
I leased out my restaurant and liquor license but collected no cash rent — do I still owe gross receipts tax on it?
The protest was denied. A Santa Fe motel operating as a Quality Inn leased its on-site restaurant and state liquor license to a tenant. When the tenant fell behind, they modified the lease to waive th…
Which asset basis controlled gross receipts when federal and former Texas franchise-tax depreciation methods differed?
Taxable-capital basis followed the method used to compute surplus: GAAP depreciation under the GAAP method or federal basis under the federal-income-tax method. Earned surplus used the actual Section …
Does a graphics design firm have to collect sales tax on the brochures, logos, and marketing materials it designs and delivers to clients on a computer disk?
It depends on what's actually being sold: if the invoice and agreement clearly state the client is buying only reproduction rights (not ownership) and the computer disk is transferred solely so the cl…
Does a videographer have to charge sales tax on video tape copies sold to a town board, a church, or a wedding couple?
A videographer who tapes town board meetings, church services, and weddings, then sells a copy to the purchaser, doesn't owe sales tax on copies sold to a town or other government entity (with a purch…
When a commercial landlord charges tenants for 'condenser water' used to run their air conditioning, is that a taxable utility sale or an untaxed part of the rental?
No -- a commercial building owner's charge to tenants for 'condenser water' (the water circulated through a building's central air conditioning system) is not a taxable sale of water or a refrigeratio…
I didn't know about New Mexico's gross receipts tax and my tax preparer never mentioned it — do I still owe the penalty and interest, or just the tax?
The protest was denied. Steven Bone ran a one-person home-remodeling business and didn't know New Mexico's gross receipts tax existed. He used H&R Block for his income taxes every year — they even pre…
How are an out-of-state natural-gas marketer's sales to New York end-users taxed under the Article 9 utility taxes, Article 9-A, and the sales tax, when title passes outside New York and the marketer arranges transportation as the customer's agent?
A natural-gas marketer deriving more than 50% of its receipts from gas sales is classified under Article 9: it is subject to the section 186 gross-earnings tax (so not Article 9-A, per section 209.4) …
Which parts of a 'turn-key' trade-show company's design, fabrication, rental, shipping, storage, and project-management charges are subject to New York sales tax?
A New York-based 'turn-key' trade show company's rentals and occasional sales of exhibits and displays (bundled with design, fabrication, and shipping charges) are taxable when delivered in New York a…
Does an out-of-state manufacturer have to register and collect New York sales tax if its only New York contact is an occasional trade show demo and orders shipped by mail or common carrier?
No -- a Rhode Island manufacturer with no New York place of business or property, no New York sales staff or agents, only an occasional (once-every-other-year) New York trade show appearance where pro…
Is a wedge-shaped foam bed pillow marketed to control acid reflux exempt from sales tax as medical equipment?
A specialized wedge-shaped foam 'Bed Pillow' recommended by physicians to control acid reflux, if not generally useful absent illness or injury, qualifies as exempt medical equipment when sold directl…
Which of a cargo airline's ground support equipment items -- forklifts, tugs, jacks, carts, and dozens more -- qualify for New York's commercial aircraft exemption from sales tax?
Federal Express's ground support equipment is exempt from New York sales tax under Section 1115(a)(21) only when it's installed on the aircraft or genuinely used for aircraft maintenance and repair (l…
Can a Connecticut resident who works for Citicorp in New York City allocate to Connecticut, and exclude from New York income, the four days per week he works from a home office that Citicorp itself set up as part of a corporate office-space-cutting telecommuting program?
No. Because reviewing environmental reports is ordinary desk work that could be performed at Citicorp's New York City office, and Citicorp's telecommuting program existed to cut office-rental costs ra…
When a New York decedent's estate distributes her mixed retirement benefits - a pension-linked IRA rollover, a Voluntary Employee Contribution Account, and a Flexible Premium Annuity - to nonresident beneficiaries, is that income subject to New York personal income tax under Article 22?
Yes, but only in part. Each nonresident beneficiary has New York-source income, though the taxable amount depends on three separate pieces: the Flexible Premium Annuity is fully taxable because the de…
If someone sells stock short and then moves out of New York State while the short sale is still open, must they accrue the potential gain and pay New York personal income tax on it on their final resident-period return?
No. Under Treas. Reg. § 1.1233-1(a), a short sale isn't consummated until the seller delivers stock to close it out, so the amount of gain, if any, cannot be determined with reasonable accuracy until …
Are multi-year installment payments from a nonqualified deferred compensation plan, paid to a former New York employee who has become a nonresident or nondomiciliary, exempt from New York personal income tax under the federal source-tax law at 4 U.S.C. § 114?
Yes, if the installments are paid annually over a period of 10 or more years using a 'declining balance of years' formula - each year's payment equals the remaining account balance divided by the numb…
If a former New York State employee moves to Florida and later takes a lump-sum withdrawal from the NYS Deferred Compensation Plan (a section 457 plan), can New York still tax that payment as a nonresident's income?
No. Because federal law (4 U.S.C. § 114, added by Public Law 104-95) defines income from an IRC § 457 eligible deferred compensation plan as 'retirement income,' and bars any state from taxing the ret…
Did an out-of-state mortgage broker create Texas franchise-tax nexus by soliciting loans through mail and telephone?
No, if mail and telephone solicitation of mortgage loans was the corporation's only Texas activity and it lacked a Texas certificate of authority. Texas surveys, inspections, or other activities relat…
We sell a color Doppler weather radar system (antenna, computer, and enhanced software) to TV stations for live severe-weather coverage -- is it exempt from Texas sales/use tax?
Yes, exempt. The Comptroller ruled that a color weather radar system -- sold as a package consisting of an antenna, a computer, and enhanced software, with the computer used for no other purpose -- qu…
My direct payment permit is being canceled because the Comptroller says I didn't buy $800,000 of taxable items this year, even though I did — I just didn't accrue that much use tax on it. Will my permit be canceled?
No, the permit will not be canceled. The Comptroller had initially notified the company that its direct payment permit would be canceled because it appeared not to meet the $800,000 annual taxable-pur…
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