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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Does a tax-free restructuring of a partnership's corporate partners (a section 351 transfer plus section 368(a)(1)(A) mergers) trigger recapture of the investment tax credit?
No. Investment tax credit is recaptured under Tax Law section 210.12(g) only if qualified property is disposed of or ceases to be in qualified use. A tax-free section 351 contribution and tax-free sec…
Do track-mounted or portable moveable partitions qualify as an exempt capital improvement, or are they taxable tangible personal property?
No -- operable, accordion, and portable moveable partitions don't qualify as a capital improvement even though the tracks are bolted into the ceiling structure, because merely mounting panels on rolle…
When is a Metro-North rail employee's pay exempt from New York income tax under the federal rule for employees 'regularly assigned' to duties in more than one state?
It depends on the job description of each specific work assignment, not on how much an employee happens to travel or which roster the employee is eligible for. A Connecticut-based employee sent to fla…
I'm a regulated telecommunications provider that buys basic local exchange network access so jail inmates can make collect outbound calls -- can I buy that access tax-free?
Yes -- this purchase is exempt from sales tax. The Comptroller confirmed that because the firm is a regulated provider of telecommunications services (verified through Public Utility Commission regist…
Did Texas tax short-term tractor and trailer rentals that began outside Texas but were renewed in Texas?
The out-of-state rentals were not subject to Texas motor vehicle rental tax because possession transferred outside Texas. A renewal occurring in Texas was taxable, and an owner renting in Texas needed…
Are a licensed engineering firm's photocopying charges for its final reports, billed as a reimbursable expense, subject to sales tax?
No -- when a licensed professional engineering firm bills a client a fixed photocopy charge (here, 15 cents per page) as a reimbursable expense incidental to its professional engineering services, tha…
Is an insured armored courier's daily bank-delivery service subject to New York sales tax?
Yes -- an insured courier's service of making daily armored-vehicle trips to banks for customers is a taxable protective and detective service under Tax Law § 1105(c)(8) (armored car and bonded courie…
Can the state base my tax bill on a sample of my sales, and who has to prove my exemption certificates covered the items?
McClintock Paper lost on every point. The Department audited this paper-products wholesaler by sampling — reviewing a couple of representative days in selected months and projecting the error rate acr…
The state taxed my equipment lease twice — once to me, once to my customer. Can I get credit for the tax already paid?
Both taxpayers lost. Teco Investments, a Florida company, leased about $7 million of mining equipment to Chino Mines for use at a New Mexico copper mine but never reported or paid New Mexico gross rec…
Is a print-and-mail company's service of printing financial statements, confirmations, and invoices and mailing them to customers subject to New York sales tax?
Printing monthly statements, confirmations, or invoices for financial institutions and businesses is a taxable printing service under Tax Law § 1105(c)(2) when the client furnishes the paper, but only…
Does a Florida training company create New York nexus by sending independent contractors to run free in-state workshops, requiring it to collect use tax on its mail-order home-study program sales to New York students?
Yes -- a Florida-based factoring-training company that hires independent contractors to conduct regular free informational workshops in New York (aimed at enrolling students and promoting its programs…
How did Texas treat S corporations and their subsidiaries before addressing the 1996 Small Business Job Protection Act changes?
Under the existing 1994-Code reference, the S corporation and its C-corporation subsidiaries filed separately and reported earned surplus separately. The S corporation received no Schedule C deduction…
Is a Texas motor vehicle painting/repair shop's charge for painting materials, consumables (masking tape, sandpaper, solvents, etc.), and supplies taxable, and can the shop buy them tax-free for resale?
It depends on how the shop bills. Motor vehicle repair labor itself is not taxable, but tangible personal property furnished in the repair is. If the shop separately states labor and parts/materials o…
Who is responsible for collecting and remitting sales tax on parking garage fees -- the building owner, or the property management company that runs the garage?
The property owner, not the property management company, is responsible for collecting and remitting sales tax on motor vehicle parking services provided in the building's parking garage. Under Rule 3…
How did SC Revenue Ruling 96-11 apply the utility license-tax credit for cash infrastructure contributions?
Under the 1996 ruling, a company subject to the Section 12-20-100 utility license tax could claim a credit for cash paid toward qualifying public-purpose infrastructure. A project needed to be eligibl…
Is chilled or heated water taxable in Texas, and does adding anti-corrosion chemicals to a closed water system change that?
No -- water is not taxable in Texas, whether it's sold chilled or heated, and adding chemicals to prevent corrosion in a closed system doesn't change that. The Comptroller reasoned this is the same as…
Is a nonprofit aircraft co-ownership club, formed to make light-plane ownership affordable, a taxable 'social or athletic club' under New York's dues tax?
No -- under its current bylaws, a nonprofit club formed so members can jointly own and use light aircraft affordably is not a 'social or athletic club' within the meaning of Tax Law § 1101(d)(13), bec…
Is a litigation-support videographer's entire fee for producing and delivering accident-reconstruction video/audio media to attorneys subject to sales tax?
Yes -- a planned business that produces, edits, duplicates, and delivers audio/video media (such as accident reconstructions) to attorneys or parties in litigation is making a taxable retail sale of t…
My predominant use utility study was rejected by the Comptroller -- what did it need to include, and why was mine found deficient?
The study was rejected as deficient. Rule 3.295(e)(1) requires a predominant use study to show all exempt and nonexempt uses of the utility, the times of usage, the energy used, twelve consecutive mon…
Is selling grocery-discount 'coupon certificate' books, redeemable by mail for manufacturer coupons, subject to sales tax?
No -- selling 'Coupons on Demand' coupon certificate books, which entitle the book owner to request manufacturer-issued grocery coupons by mail, is not subject to New York sales and compensating use t…
Is selling a discount-coupon directory of health and fitness vendors subject to sales tax?
No -- the 'Healthy Step Directory,' a compilation of coupon-style discount advertisements for health, fitness, and wellness vendors, is not subject to sales and use tax when sold (whether through cons…
Does a free-brochure publisher, whose revenue comes only from selling ads printed in the brochures, owe sales tax on its own printing costs even though it gives the brochures to the State for free?
Yes -- a publisher that produces brochures and maps promoting State campgrounds and parks, gives them to New York State free of charge, and earns its revenue solely from selling advertising space prin…
Is the electricity my golf club charges to recharge members' own golf carts, stored in the club's cart barn, taxable?
Yes, taxable. The electricity used to recharge golf carts that belong to members (not the club) is taxable, because the cart barn storage space is sold as part of a taxable club membership -- an amuse…
I operate a landfill and am reorganizing into a separate management company -- is operating the landfill itself taxable, and does adding a transfer station change that?
Operating and managing the landfill itself -- receiving trash already delivered to the dump site, separating, compacting, and covering it -- is not a taxable service, because it is not the removal or …
Is avionics installation, equipment addition, and interior modification/remodeling work on a privately owned aircraft taxable under Texas sales and use tax, and how is a lump-sum repair/remodeling contract taxed?
No sales or use tax applies to the charge for the repair/remodeling service itself -- the Comptroller ruled this work (avionics installation and interior modification/installation) on a private aircra…
Did Texas change its franchise tax treatment of municipal bond income for 1996 or 1997?
No changes. This December 1996 Comptroller letter confirmed there were no 1996 changes to the Texas franchise tax code and no tax-code changes affecting holders of municipal bonds set to take effect i…
I run an FAA repair station that services aircraft components for airlines -- are the machinery, tools, manuals, wire, chemicals, hardware, and shipping supplies I use exempt from Texas sales tax?
Mostly exempt. Tax Code 151.328(d) exempts machinery, tools, supplies, and equipment used or consumed exclusively in repairing, remodeling, or maintaining aircraft, aircraft engines, or aircraft compo…
I run a computer backup service and also install software and do on-site hard disk maintenance for small businesses -- which of my fees are subject to Texas sales/use tax, and at what local rate?
All of it is taxable. The monthly service fee for data storage/backup, the software installation charges, the on-site maintenance fee, and the file-restoration fee are all subject to Texas sales and u…
I bottle and resell water in returnable bottles that I get back from customers and refill -- can I buy those bottles tax-free as packaging/manufacturing supplies?
No -- the purchase is taxable. The Comptroller ruled that returnable water bottles do not qualify for the packaging-supplies exemption. Rule 3.314(b)(1) exempts items like boxes and pallets, but (b)(3…
I have an operating lease on a printing press that started before 10/1/95 -- can I cancel it and sign a new letter agreement so the equipment qualifies for the manufacturing exemption going forward?
Yes. The Comptroller confirmed that canceling the existing lease and replacing it with a new lease (via a letter agreement attached to the canceled lease, same terms, taking effect on the cancellation…
Did proceeds from selling treasury stock enter taxable-capital gross receipts under the former Texas franchise tax?
No. Texas treated the treasury-stock sale as an issuance of the corporation's capital stock, so none of the proceeds entered Texas or everywhere gross receipts for taxable-capital apportionment. Divid…
When could a Comptroller sales-tax audit sample be used to project the former franchise-tax credit for manufacturing equipment?
Only a sample selected and projected by a Comptroller auditor could be used; taxpayer-created samples were not allowed. Projection was limited to the audited October 1, 1991 through September 30, 1993…
My corporation is merging with a subsidiary of another company: shareholders will automatically have their shares converted into a set ratio of the acquirer's newly issued shares (with cash instead of any leftover fractional share), and separately, the merger subsidiary's own shares will convert into 1,000 shares apiece of the surviving company. Is any of this share conversion activity subject to New York's Stock Transfer Tax?
No. NYNEX Corporation ('Old NYNEX') merged with a wholly-owned merger subsidiary of Bell Atlantic Corporation, with Old NYNEX surviving as 'New NYNEX,' a Bell Atlantic subsidiary. Under the merger agr…
Can a utility company rely on an exemption certificate from an apartment complex owner or property management company to exempt utility service from sales tax, without checking whether the property actually qualifies?
Yes, in most cases -- a utility company may accept and rely on a complete exemption certificate from an apartment complex owner or property management company without demanding proof that the property…
Is the money a customer pays directly to a table/couch dancer at a topless club subject to Texas sales tax as an amusement service?
No. The Comptroller ruled that a table dance or couch dance is an amusement, but the payment a customer makes directly to the dancer is not a taxable sale of an admission to an amusement service under…
When must a Nebraska insurance company include reinsurance premiums in its one-factor apportionment formula?
Reinsurance premiums are normally left out -- unless they exceed one-third of premiums received. Under Revenue Ruling 24-96-1 (corporate income tax), an insurance company or unitary group apportions i…
Could a corporation extend the deadline to amend its former Texas franchise-tax report after an IRS audit?
No. If a finalized IRS Revenue Agent's Report changed amounts used for Texas franchise tax, Rule 3.544(d)(2) required an amended Texas report within 120 days. The RAR became final when IRS administrat…
I bought subsurface pumps for my gas/oil wells to remove water so gas can flow to the surface -- do they qualify for the sales tax manufacturing exemption?
No -- the pumps are taxable. The Comptroller ruled that bringing oil or gas to the surface is "production," not "manufacturing, processing, or fabrication" under Tax Code 151.318. Even though the subs…
Could a lessee's own vehicle reduce the taxable value of the lessor's purchase of a new vehicle?
Yes, but only if the lessee's old vehicle was delivered to the new-car dealer as part of the lessor's purchase. If the vehicle went to the leasing company and was then sold to a neighbor, the lessor r…
Was a qualified settlement fund subject to the former Texas franchise tax?
No, on the Comptroller's stated understanding. The letter said a qualified settlement fund could not be a corporation, LLC, bank, or savings and loan association under state or foreign law. Because it…
Does a New Jersey document-storage company owe New York tax on its various service charges (storage, retrieval, filing, faxing, photocopying) to New York customers?
A New Jersey document-storage company's storage, retrieval, filing, disposal, and similar labor services -- all physically performed in New Jersey -- are not subject to New York sales or use tax even …
How did corporate expenses affect the two former Texas franchise-tax components?
Corporate expenses were generally deductible in computing taxable capital. They also reduced earned surplus to the extent the expenses were allowed as deductions when computing the corporation's feder…
Can I buy a recumbent bicycle tax-free in Texas if my doctor prescribed it for rehabilitation, and what does the prescription need to say?
Yes, but only if the prescription is written correctly. A recumbent bicycle can be purchased tax free with a prescription from a licensed practitioner of the healing arts, but the prescription must st…
Is renovating a specialty hospital taxed as work on nonresidential (commercial) real property, or as work on residential real property?
Taxable. The Comptroller ruled that hospitals are considered nonresidential (commercial) property, so the total charge to renovate an existing building into a specialty hospital is taxable, even thoug…
Did leasing airplanes and train cars that lessees used in Texas create franchise-tax nexus for the lessor?
Yes. The lessor was subject because it held a Texas certificate of authority. It also had nexus independently because it leased airplanes and train cars that lessees used in Texas, even though the les…
Did changing fiscal year-end require an extra former Texas franchise-tax filing, and which earned-surplus periods applied?
No additional report was required solely because the fiscal year-end changed. The 1997 annual report used August 1, 1995 through April 11, 1996 for earned surplus. The 1998 report used April 12, 1996 …
I'm leasing land, a car wash building, and the car wash equipment together to my own S corporation -- is that lease subject to Texas sales tax?
No. The Comptroller ruled that leasing the land, building, and equipment together to the S corporation is treated as a lease of real property, so no sales tax applies to the lease payments -- the same…
Did an out-of-state alarm-monitoring company have Texas franchise-tax nexus without Texas plant, equipment, or employees?
Yes. The alarm-monitoring company was subject because it held a Texas certificate of authority. Texas also found independent service nexus because it processed monitoring signals for Texas customers, …
We had to completely rebuild an ice skating rink that never worked because of construction defects, before it ever opened to the public -- does the rebuild count as new construction or taxable repair?
New construction. The Comptroller ruled that rebuilding the ice rink qualifies as new construction (rather than a taxable repair to existing real property) because the original rink was never used for…
How is local sales tax (like the Regional Transportation Authority tax) sourced on cellular telephone and cellular roaming charges?
Local sales tax (such as the Regional Transportation Authority tax) on cellular telephone service is sourced to the location of the cell site that receives and re-transmits the call. If the cellular c…
Are charges for telemarketing sales calls, list-based calling, and related services (compiling lists, mail fulfillment, final reports) subject to Texas sales tax?
Charges for making sales calls (soliciting sales and taking orders) are not subject to Texas sales tax. But charges tied to gathering or selling customer/prospect information -- such as calls made usi…
Are natural gas and electricity used at a personal care home taxed as residential or commercial utility service?
Residential -- provided the predominant use of the natural gas and electricity is by persons who initially contracted to live at the personal care home for periods exceeding 29 days. The Comptroller a…
Does a bank subsidiary's section 1452(d) election to be taxed under Article 9-A survive the merger of another bank subsidiary into it, with the electing company as the survivor?
Yes. Barclays Business Credit made the one-time section 1452(d) election to keep being taxed under Article 9-A rather than the Article 32 bank tax. Merging another bank subsidiary (BZWSI) into it, wit…
I'm a cotton ginner and I use gas and electricity to keep my warehouse or storage area cool and dry so cotton seed doesn't sprout, including during the off-season -- is that electricity exempt from Texas sales/use tax?
Mixed answer, split by predominant use. The electricity used to actively lower the temperature or humidity of stored cotton seed to a target level counts as exempt processing. But electricity used jus…
Did Canadian sales representatives soliciting Texas dealers create former franchise-tax liability, and did P.L. 86-272 protect the company?
Texas representatives soliciting dealer purchases of office furniture subjected the Canadian corporation to the former taxable-capital component. If their Texas activity was limited to soliciting orde…
How were intercompany receivable sales, collection gains, and servicing fees sourced under the former Texas franchise tax?
The parent's sale of receivables to its subsidiary created no gross receipts for either corporation. Any subsidiary gain collected above its purchase price was sourced to the customer-debtor's legal d…
Is a fee for gathering medical records from doctors and hospitals on behalf of an insurance company's underwriting department subject to Texas sales tax?
Yes, it's taxable. The Comptroller ruled that a firm's fee for contacting doctors, hospitals, and other medical service providers to obtain medical information for an insurance company's underwriting …
Could an S corporation deduct IRS payroll-tax penalties when computing former Texas earned surplus?
No. Texas treated shareholder-allocated S-corporation items as if the corporation were taxed as a C corporation. Because the Comptroller understood Section 162 to disallow deductions for U.S. governme…
I wrongly accepted exemption certificates but I'd asked the state about it several times — can the penalty be abated even though I owe the tax?
The protest was granted in part and denied in part. Roadrunner Industrial Works, a small family equipment-rental and services company, accepted non-taxable transaction certificates (NTTCs) on equipmen…
Is the wastewater treatment system my manufacturing company must install to meet TNRCC environmental requirements exempt from Texas sales and use tax?
Partially exempt. The pollution control equipment itself qualifies for the Texas manufacturing exemption because it's necessary and essential to the manufacturer's production process, and the company …
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