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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Who owed Texas use tax on a vehicle bought outside Texas and leased for use in Texas, and what happened at buyout?
The operator owed Texas use tax when the out-of-state-purchased vehicle was brought into Texas for use. Tax was based on the owner's purchase price, with credit for similar tax legally paid to another…
Is sales tax due on assets transferred into a new corporation or partnership as part of a statutory merger or a tax-free IRC 351 reorganization?
No. Assets transferred as part of a statutory merger, or transferred to a newly formed corporation or partnership for its initial capitalization, are not subject to Texas sales tax, as long as either …
Does a company owe Texas sales or use tax on loose product samples and sample binders or books that it produces or buys to help its sales representatives solicit customers?
Yes. The Comptroller ruled that loose samples and sample binders or books distributed in Texas are taxable, because their only use is to demonstrate the products they represent, not to be sold themsel…
Is a temporary staffing agency's key-entry data-entry work, performed at a client's own facility using the client's own computer system, subject to New York sales tax?
No -- charges from a temporary staffing agency for its temps' key-entry of manual records (time cards, C.O.D. stubs, package pick-up records) into a client's own computer system, at the client's own l…
The rules for exemption certificates changed in 1992 — do the old timing rules still apply to my earlier sales?
McDonnell Douglas lost this round. It had claimed gross receipts tax deductions for services it performed for Martin Marietta (which Martin Marietta resold to a U.S. agency), but it couldn't produce t…
Does a film and video production company owe sales tax on special-effects paint, blank tape stock, and duplicate tapes (dubs) it has made for clients?
It depends on the item. The blue paint used exclusively for blue-screen special effects can be bought tax-free with an exemption certificate (though separately billed painting labor is still taxable),…
Does the manufacturing exemption cover a microwave oven used to cook or heat food for sale?
It depends on who operates the oven. A microwave or convection oven used by a restaurant (or similar business) to cook food that it then sells qualifies for the manufacturing exemption, but a microwav…
Is a 'Maps on Demand' service that delivers maps and proximity information over the internet subject to Texas sales tax?
Yes. The Comptroller ruled that a 'Maps on Demand' service delivering maps and proximity data over a web page is taxable in Texas, and the entire charge -- including the monthly minimum and any per-ac…
Does a university have to charge sales tax on the fee it bills dorm students each semester for network port access to the campus computer system?
Yes. The semester fee a university charges dorm students for network port access to the campus computer system is taxable as a sale of information services, and the university must collect sales tax o…
Is a mandrel used to wind fiberglass filament and resin into pipe and tanks exempt from Texas sales and use tax, and what about the disposable rollers used to apply resin?
Mandrels purchased after January 1, 1995, and used to wind fiberglass filament and resin into pipe and tanks are totally exempt from Texas state and local sales and use tax, and the buyer may give sup…
Why could a Texas vehicle owner face local property tax after already paying motor vehicle sales tax?
The taxes were separate. Motor vehicle sales tax applied to the purchase price. Cities and counties could also impose local property tax, generally on business-use vehicles and sometimes on personal-u…
Did out-of-state salesmen who could bind the company on order terms remove Public Law 86-272 protection and Texas throwback?
Yes. Because the salesmen could bind the company on order quantities, some prices, payment terms, delivery dates, and refusals, the company had nexus in every state where it sent them. It was not prot…
Does a wholesaler that only makes exempt resale of natural gas during pipeline transportation need a Texas sales tax permit, and can it use a resale certificate without a permit number?
No. A wholesaler that only makes exempt sales of natural gas resold during pipeline transportation does not need a Texas sales tax permit solely to report those exempt sales, but must still issue a re…
Where were information-service receipts sourced for the former Texas taxable-capital and earned-surplus components?
They were sourced where the services were performed. The Comptroller classified the client's activity as information services and applied that performance-location rule to both taxable capital and ear…
Is electricity used at a food-processing facility exempt from Texas sales tax as manufacturing use when the facility's own vending machines are what ultimately sell the packaged food?
No, the electricity is taxable. Because the facility is owned by the same entity that owns the vending machines the food is ultimately sold through, the Comptroller treated the electricity as being us…
Does a multi-level marketing or direct sales company have to collect and remit Texas sales and use tax on sales made by its independent distributors?
Yes. Under Rule 3.286(a)(3) a direct sales/multi-level marketing company is treated as the retailer, its independent distributors are its agents for nexus purposes, and the company -- not the distribu…
What rules of play govern selling and conducting seal card games in Nebraska?
Seal card games are legal, and this ruling is the operator's rulebook for running them. Under Revenue Ruling 35-96-5, LB 1277 (effective July 19, 1996) made seal card games a legal form of lottery by …
Is an optional escrow fee charged so customers can claim a software's source code if the seller goes out of business subject to Texas sales tax?
Yes. The Comptroller ruled that the escrow fee is part of the total sales price of the taxable software, so it is subject to Texas sales/use tax both when first charged and each year it is renewed.
How were separately contracted software modifications, upgrades, and maintenance receipts sourced under former Texas franchise tax?
Separate modifications and maintenance were services sourced where performed, while separately stated upgrades were sourced to the payor. If one upgrade-and-maintenance contract did not reasonably sta…
How were separately contracted software modifications, upgrades, and maintenance receipts sourced under former Texas franchise tax?
Separate modifications and maintenance were services sourced where performed, while separately stated upgrades were sourced to the payor. If one upgrade-and-maintenance contract did not reasonably sta…
Is the labor to install new equipment in a refinery or chemical plant taxable, and does an October 1995 capacity-expansion exclusion change the answer?
It depends on the facts: installation labor on qualifying manufacturing equipment that is not an improvement to realty was exempt in 1995 under Sec. 151.3111, but the same labor was taxable in 1994 be…
Is a consultant's fee for auditing EDP controls, helping a client pick new computer hardware/software, or writing a software vendor's white paper subject to Texas sales tax?
No, none of the three described services is taxable on its own. Reviewing a client's EDP controls and writing a confidential audit report is not taxable, and neither is a needs-assessment/vendor-selec…
Does Texas sales tax apply to charges for staking (surveying) an oil or gas well before it is drilled?
Mostly yes. The boundary surveying and acreage/unit-designation work used to stake an oil or gas well are taxable surveying services, but the narrower charge for determining the actual placement of th…
I had enough investment credit to cover the tax I owed — do I still owe penalty and interest for paying the compensating tax late?
The protest was denied. Jezlaine, a jewelry manufacturer, bought equipment out of state in 1993–1994 but didn't know it owed compensating (use) tax and never reported it. A new CFO later filed for a m…
Which parts of a phone-based information, advertising, and voice-mailbox service are taxable telecommunications services in Texas, and which parts are not?
Charges for playing recorded advertisements or messages to callers who dial in are not subject to Texas sales tax, but charges for computerized telephone polling, call transfer/routing, and electronic…
Is telephone or on-site technical support for software and hardware subject to Texas sales tax, and does it matter whether the same company sold the property?
Yes, if the property being supported is located in Texas. Telephone technical support for tangible personal property (hardware or software) is taxable when the property is in Texas, and exempt under T…
Is cleaning a petroleum storage tank subject to Texas sales tax, and does it matter whether the tank is above ground, below ground, or over 500 barrels in capacity?
It depends on whether the tank counts as an improvement to real property. Cleaning a below-ground tank, or an above-ground tank holding more than 500 barrels, is treated as nontaxable real property re…
Does a wholly owned aircraft-transportation subsidiary that flies employees and customers of related companies for a cost-based fee qualify for New York's commercial aircraft sales tax exemption?
Yes, conditionally -- a wholly owned subsidiary whose sole activity is flying employees, customers, and potential customers of its related companies for a cost-based fee qualifies for New York's comme…
Is a charge for 'on hold' tapes with marketing messages played to callers waiting to be connected, plus related equipment, subject to Texas sales tax?
Yes. Charges for 'on hold' tapes containing marketing messages played to callers while they wait to be connected, and for the related equipment, are subject to Texas sales tax. A single charge coverin…
When a manufacturer drop ships goods to a distributor's customer in Utah and the distributor won't pay sales tax or provide exemption documentation, who is responsible for the tax -- the manufacturer, the distributor, or the end customer?
The manufacturer's sale to its distributor is exempt as a sale for resale, even when the manufacturer drop ships the goods directly to a third-party customer in Utah -- the manufacturer is not liable …
Does electricity used in a vacant apartment unit count as residential use that is exempt from Texas sales tax?
Yes, effective October 1, 1995, when Section 151.317 of the Tax Code was amended, the Comptroller began treating electricity used in vacant apartments as residential use exempt from sales tax -- excep…
Is electricity used to power the pumps at a saltwater disposal well exempt from Texas sales tax as electricity used to transport a material extracted from the earth?
Electricity used to power the pumps at a saltwater disposal well is exempt from Texas sales tax only if the saltwater being transported is naturally occurring produced saltwater. Once that saltwater i…
Is a separately stated charge for inspecting and testing a commercial building's fire alarm system subject to Texas sales tax?
No. A fire alarm system in a commercial building is considered an improvement to realty, so separately stated charges for inspecting and testing that system are not subject to Texas sales tax, even th…
If I buy molds from a California company and a California company also modifies those molds, do I owe Utah sales/use tax on the modification (labor) charges, or only California tax?
No Utah sales tax applies. The Commission ruled that because a California company performed the mold-modification labor in California, the transaction was a California sale, not a Utah sale, so Utah's…
On a combined bank franchise tax return, how are a banking group's allocation factors and loan receipts sourced, and does an intercorporate transfer of a loan change its location?
On a combined Article 32 return the banking group is treated as one corporation. The combined activities of all members are used to compute the entire-net-income, alternative-entire-net-income, and as…
When a vehicle leasing company restructures using a titling trust to hold legal title to leased vehicles, are the vehicle transfers into and within that structure subject to Utah sales tax?
No, not the vehicle/lease transfers themselves. A leasing company can acquire a vehicle tax-free under Utah's resale exemption (§ 59-12-104(26)), and transferring that vehicle and lease into a titling…
Does a contractor owe Texas sales tax on the profit and overhead portion of a cost-plus construction contract, with or without a guaranteed maximum price?
Cost-plus contracts (with or without a guaranteed maximum price) are treated as separated contracts under Tax Code § 151.056, so the contractor collects sales tax on materials charged to the job owner…
Is a single-member New York LLC subject to New York tax, and does owning it make a foreign corporate sole member taxable in New York?
New York follows the LLC's federal classification. A single-member LLC that is disregarded for federal income tax (the default under the check-the-box rules) is treated as a branch or division of its …
Are industrial development agency bonds investment capital, is their interest investment income, and are they governmental securities for the investment allocation percentage?
Yes. Bonds issued by the New York City Industrial Development Agency -- a governmental instrumentality (public benefit corporation) under Article 18-A of the General Municipal Law -- are investment ca…
Does a foreign corporation that enters New York only to meet with a prospective accountant, banker, lawyer, or underwriter become subject to the Article 9-A franchise tax?
No. A foreign corporation (XYZ) that enters New York for the limited purpose of meeting with an accountant, banker, lawyer, or securities underwriter it might engage -- and does nothing else in the St…
Is a cane-like device designed to help Parkinson's disease patients overcome motion block exempt from Texas sales tax?
Yes. The STEPP-ALERT, a cane-like device with a multi-colored flap that helps Parkinson's disease patients experiencing motion block phenomenon, qualifies as a therapeutic device and may be purchased …
When an exempt organization owns part of a joint venture that buys taxable items for a joint venture facility, how much of the purchase price can be bought tax-free with an exemption certificate?
An exemption certificate can only cover the percentage of a taxable item's purchase price equal to the exempt organization's percentage ownership interest in the joint venture that owns the facility w…
Does a multi-level marketing/direct sales company have to collect and remit Texas sales and use tax on sales made through its independent distributors?
Yes. Because a company's independent distributors act as its agents under Texas Tax Code § 151.024 and Rule 3.286(a)(3), the company (not the individual distributors) must collect and remit Texas sale…
Is a matchmaking service that arranges social lunch meetings between clients subject to New York sales tax?
No -- a service that interviews clients, matches them with other clients by phone, and arranges a luncheon meeting between them is not subject to New York sales tax, because the primary function of en…
Does an aircraft leased to a commuter air-charter operator qualify as an exempt "commercial aircraft" under New York sales tax law, even though the lessor also uses it for its own company business?
Yes -- an aircraft the owner leases to a commuter air-charter operator qualifies as an exempt "commercial aircraft" under Tax Law § 1115(a)(21), exempting the lease payments and related maintenance/re…
Does a Texas mobile home dealer owe sales tax on the tools, equipment, and materials it uses to repair or refurbish manufactured homes held for resale?
Yes, in most cases. A Texas mobile home/manufactured housing dealer that repairs or refurbishes homes held for resale owes sales tax on the vehicles, jacks, nail guns, hand tools, and most other equip…
Does a tax-exempt religious organization owe Texas sales tax on books it publishes and sells, mostly at religious services and meetings?
No. The Comptroller ruled that a nonprofit religious organization exempt under IRC 501(c)(3) does not owe Texas sales tax on the sale or distribution of books it publishes, where the books were writte…
Did RR 97-8 require a taxpayer to qualify as an 'economic impact zone business' before claiming the zone investment tax credit?
No. RR 97-8 said the separate 'economic impact zone business' definition did not limit the investment credit. Eligibility turned on qualifying property being placed in service in an economic impact zo…
Does a grower who hybridizes and sells lily bulbs grown from seed on their own land qualify for Utah's agricultural sales tax exemptions?
Yes, with conditions. A grower who produces lily bulbs from seed on their own land as a seasonal crop qualifies as an agricultural producer, and can sell the bulbs tax-free during harvest season under…
My tax return and check probably got lost in the mail years ago — do I still owe the penalty and interest on the missing payment?
The protest was granted in part and denied in part. Zia Printing, a one-person Albuquerque print shop, had a good filing record but the Department had no record of its November 1989 return or payment.…
Does a county owe sales tax on debt-collection legal services performed by a law firm, and is the law firm's reimbursed expenses treated as taxable debt collection or sales tax?
No. Legal services performed by an attorney to recover debts for a client are not taxable as debt collection services, and a county, as an exempt governmental entity, does not owe sales tax on those l…
Can the Utah Tax Commission give a product-by-product ruling on whether a manufacturer's line of electrotherapy medical devices (TENS-type pain units, muscle stimulators, biofeedback systems, and similar equipment) qualifies for the home medical equipment sales tax exemption?
The Commission declined to give a yes/no answer for each product. It explained that eligibility for Utah's home medical equipment exemption isn't determined by what kind of item it is, but by three ca…
Are batteries for a blood pressure monitoring device exempt from Texas sales tax?
Batteries for a blood pressure monitoring device can be purchased tax exempt in Texas, but only if the device itself was purchased exempt under a doctor's prescription, and the batteries are bought fr…
Does electricity used in a vacant apartment unit count as residential use that is exempt from Texas sales tax?
Yes. The Comptroller determined that Section 151.317 of the Tax Code, as amended, defines residential use of electricity to include electricity used in vacant apartments -- except electricity used by …
When a manufacturer outsources its entire computer division, are the outsourced services and the equipment the provider buys exempt -- and what about equipment the provider buys as the manufacturer's agent?
Mostly exempt, with one taxable piece. When a manufacturer outsources its whole computer division to an unrelated provider, the outsourced computer and data processing services are exempt under Conn. …
Does Utah sales tax apply to charges for leasing space on remote Internet servers to customers?
Not taxable under 1996 Utah law. Charges for access to online services like the Internet, including reselling leased space on remote Internet servers, were not subject to Utah sales tax at the time of…
Was a guaranteed vehicle buyback-price agreement subject to Texas motor vehicle sales tax?
It depended on the seller. A guaranteed buyback agreement purchased directly from the vehicle dealer was included in taxable value and subject to motor vehicle sales tax. An agreement purchased from a…
Is steam exempt from Texas sales tax the same way ice is exempt?
No. The Comptroller ruled that steam does not qualify for a sales tax exemption. Although steam, like ice, is water in an altered state, the Tax Code only grants specific exemptions to ice (Tax Code 1…
If a fuel distributor blends cheap marine diesel or off-spec No. 2 heating oil with enhanced diesel motor fuel to make standard No. 2 heating oil, is the result taxable 'enhanced' diesel motor fuel?
No — the resulting product is unenhanced diesel motor fuel, so previously-untaxed inter-distributor sales of it stay free of the Article 12-A excise tax, the Article 13-A petroleum business tax, and t…
How did Texas tax a trust's acquisition of long-term operating leases, related vehicles, and beneficial interests?
The dealer owed tax when it first leased the vehicles. Assigning the lease contracts to the trust was an untaxed intangible transfer. The trust could take vehicle title for resale without tax only if …
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