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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Our company owns land under a Manhattan building. We're proposing to exchange it for seven other Manhattan properties owned by a related partnership, Eastern Pork Products Co. Both our company and Eastern Pork are ultimately owned (through different family trusts) by the same thirteen family members ('the Second Generation Children'), but the trusts and ownership percentages aren't identical -- our company is 100% owned by them equally through one set of trusts, while Eastern Pork is 99.9% owned by them equally through a different set of trusts, plus a small sliver owned by a corporation that only four of the thirteen family members own. Since the same family effectively owns both sides before and after this exchange, is it exempt from the Real Estate Transfer Tax and Real Property Transfer Gains Tax as a 'mere change of form,' or does the slight difference in cross-ownership percentages make part of it taxable?
Mostly exempt, with a tiny taxable sliver -- New York taxes only the fraction of beneficial ownership that actually changed hands. 1133 Building Corporation, a wholly-owned subsidiary of The Durst Bui…
Is the portion of a Utah employee's gross wages that the employee contributes to an employer's 401(k) plan subject to Utah income tax at the time of contribution, or is it deferred like it is for federal income tax purposes?
Deferred, not taxed at contribution. Because employee contributions to a 401(k) plan are tax-deferred for federal income tax purposes, those same contributions are also deferred for Utah income tax pu…
If a cellular phone retailer sells a phone cheap (or gives it away) to get a customer to sign up for a carrier's service contract, is sales tax owed on the full contract price, and can the retailer buy the phone tax-free for resale?
A retailer can buy cellular phones tax-free for resale, but not if it keeps a phone for its own use (then it owes tax on its cost). If the retailer sells the phone alone, tax applies to whatever price…
Does a mail-order company that has no property or payroll in Texas, but uses an independent contractor in Texas to handle customer calls and sometimes take orders, have nexus for Texas sales and franchise tax?
Yes. The Comptroller ruled the company has nexus for Texas sales tax under Tex. Tax Code § 151.107(a)(1), (2) and (7) because it uses the Texas-based independent contractor to carry out its everyday b…
Does the Texas Comptroller issue sales tax exemption certificates or letters directly to foreign diplomats stationed in Texas?
No. The Comptroller's office does not issue exemption certificates or letters of exemption to foreign diplomats. Instead, diplomats are told to get a Tax Exemption Card from the U.S. Department of Sta…
For the new manufacturing-equipment lease exemption starting October 1, 1995, what makes an operating lease qualify, and can an existing lease be renegotiated to qualify?
To qualify for Texas's manufacturing-equipment lease exemption, a lease must be a single operating lease contract with a term of at least one year (365 days) that starts on or after October 1, 1995, a…
Does a building used to sort, repack and cold-store imported flower bulbs for resale qualify for the Article 9-A investment tax credit as property principally used in the production of goods by processing?
No. The investment tax credit under section 210.12 requires the property to be principally used in the production of goods by manufacturing, processing, assembling, refining, horticulture, etc. K. Van…
Is feed purchased for dogs held for breeding purposes (whose puppies are sold in the regular course of business) exempt from Texas sales tax?
Yes. Feed purchased for dogs held for breeding purposes, when the offspring are held for sale in the regular course of business, may be bought tax free by giving the seller an exemption certificate, u…
Starting October 1, 1995, does Texas sales tax apply to food, meals, soft drinks, and candy sold to inmates confined in a jail, prison, or other correctional facility?
Yes. Effective October 1, 1995, House Bill 462 added subsection (g) to Texas Tax Code Section 151.314, which removes food, meals, soft drinks, and candy sold to a person confined in a correctional fac…
For a new-home landscaping contract that spans the October 1, 1995 law change, is labor taxed based on when the work was actually performed or based on the billing/acceptance date?
Based on when the labor was actually performed, not the billing or acceptance date. Effective October 1, 1995, Senate Bill 640 amended Section 151.0048 so that landscaping purchased by a contractor as…
Do clean rooms and equipment used to manufacture mobile telephones qualify for Texas's semiconductor-fabrication cleanroom exemption?
No. The Comptroller told this mobile-telephone manufacturer that the cleanroom exemption added to Section 151.318, effective October 1, 1995, only covers property used to manufacture, process, or fabr…
Is a credit/debt counseling service, where the provider advises clients on repairing credit, building a budget, and negotiating with creditors, taxable in Texas?
No. The Comptroller's office told this credit counseling provider that the service is not taxable. If tax was already collected and remitted on the service, the provider may amend its sales tax return…
The state audited how I report oil and gas taxes and the report is full of my proprietary contract data — can a co-owner force the Department to hand it over?
Yes — a co-owner with a legal interest in the audited property can obtain the audit report, even though it contains the producer's proprietary contract data. The Department and State Land Office audit…
Are aircraft maintenance manuals that contain the procedures and instructions mechanics must follow exempt from Texas sales and use tax?
Yes, at least for the manual described in this letter. The Comptroller told the requester that a manual containing the maintenance procedures and instructions an aircraft mechanic must follow qualifie…
Is electricity used in a separately metered manager's office at an apartment complex taxable, or does it count as residential (exempt) use?
Taxable. The Comptroller told the utility and the apartment complex that electricity supplied to a separately metered office not occupied as a residence by an on-site manager is a taxable commercial u…
Does a Texas Youth Commission facility's canteen have to charge sales tax on food, soft drinks, and candy sold to the children living there, and what about sales to staff or fundraiser sales?
No tax on sales to the children in the facility. The Comptroller ruled that a new law taxing food, soft drinks, and candy sold to inmates of 'correctional facilities' (effective October 1, 1995) does …
A seller ships forms into Texas for a customer who will export them to Mexico. The customer's exemption certificate isn't enough to cover the purchase — what are the options for handling the transaction without charging Texas tax?
The certificate the customer sent wasn't sufficient by itself, but the Comptroller described several ways to avoid Texas tax on goods purchased for export to Mexico: the customer can give an exemption…
Does the Texas exemption for services performed on certain exempted tangible personal property (Tex. Tax Code Sec. 151.3111) apply once that property becomes a fixture or improvement to real property, such as a steam boiler installed in an electric generating plant?
No. The Comptroller's office told the taxpayer that the Sec. 151.3111 exemption for services on certain exempted tangible personal property does not extend to property once it becomes a fixture or imp…
Is a company that provides workplace safety and loss control consulting services to insurance-related and non-insurance clients providing a taxable service in Texas?
Yes, generally. The Comptroller's office told this safety and loss control consulting company that its services are taxable 'insurance services' under Rule 3.355 both when paid for by an insurance car…
Is equipment that a company builds and uses to remediate (clean up) contaminated soil at natural gas pipeline metering sites subject to Texas sales/use tax?
The soil remediation service itself is not taxable, but the Comptroller concluded that the equipment purchased or fabricated to perform that service is taxable, because on the facts presented the equi…
New York Advisory Opinion TSB-A-95(37)S: When a captive auto-leasing company buys already-executed vehicle leases from unaffiliated dealerships (via automatic assignment after approval), is the leasing company responsible for collecting the sales tax on those leases?
No, not for the original lease -- the dealer, as the original lessor, bears that responsibility. General Electric Capital Auto Lease, Inc. ("GECAL") buys motor vehicle leases from independent, unaffil…
My law firm bills clients for out-of-pocket costs like copying at cost with no markup — do I owe gross receipts tax on those reimbursements?
Yes — a law firm's reimbursed photocopying charges are taxable gross receipts, because the firm wasn't acting as its client's agent when it bought the copies. Francis & Starzynski, P.A. didn't own a c…
Does a publisher that packages its own books together with purchased videotapes into kits owe sales tax on the wrapping and packaging supplies used?
No. The Comptroller ruled that tax is not due on the packaging supplies used to make the kits, even though the publisher did not produce the videotapes included in the kits, because Rule 3.314(e) lets…
If a construction contract to expand a chemical or petrochemical plant's capacity was signed before October 1, 1995 (when Senate Bill 640 took effect), is the labor taxed under the old law or the new law?
It depends on when the labor was actually performed, not when the contract was signed or when title/acceptance happens. Labor performed before October 1, 1995 is taxable, even if billed later or accep…
Does a paper machine made of interconnected, bolted-down manufacturing equipment count as real property (an improvement to realty), or does it stay tangible personal property for Texas tax purposes?
It stays tangible personal property. The Comptroller's Tax Policy Division toured a paper manufacturing facility and agreed that the 'paper machine' — actually a series of interconnected machines that…
Is a computerized psychological-testing and scoring service for psychological professionals a taxable data processing service in Texas?
No. The Comptroller's office told the taxpayer that scoring and interpreting psychological tests and personality inventories for psychological professionals — even though a computer is used to speed u…
Do utilities used in apartment complex manager's offices, recreation rooms, laundry rooms, outside lighting, and swimming pools qualify for a Texas sales tax exemption, and are utility studies always required when a meter serves both taxable and exempt uses?
It depends on the meter setup. Since 1979, the Comptroller has treated utilities for recreation rooms, laundry rooms, outside lighting, and swimming pools as part of the exempt residential units. A ma…
Must a casualty insurer make the section 1503(b)(11) one-third add-back to Article 33 entire net income for the IRC section 847 deduction, when it already eliminated that deduction from its 1988-1992 New York entire net income?
No. The section 1503(b)(11) one-third add-back exists to uncouple Article 33 from the IRC section 847 special deduction that an insurer claimed federally in tax years 1988 through 1992. These petition…
If a ready-mix concrete company buys a mixer drum and a truck chassis, does it owe motor vehicle tax or sales tax, and does invoicing them separately make the drum exempt?
It depends on the transaction, not the invoice. If the customer buys a complete concrete truck with the mixer drum already attached, the whole thing is treated as the sale of a motor vehicle, even if …
Does the Texas manufacturing exemption cover communication headgear/headsets that machinery operators wear because the plant equipment is too loud to hear over?
No. The Comptroller's office told this taxpayer that communication headgear worn by machinery operators, even though it's necessary because the machinery is too loud to allow normal communication and …
When a combined report is filed, is the 'principally engaged in the business of lending funds' test (for whether a corporate debt instrument is investment capital) applied to the individual lending member or to the combined group?
Per individual member. The exclusion that keeps a debt instrument out of investment capital (when the holder is principally engaged in lending funds and the obligor received those funds) turns on the …
Are culverts or drain pipes used on a farm or ranch exempt from Texas sales tax, and does it matter whether they're part of an irrigation system, a drainage system, or a road?
It depends on what the culverts or drain pipes become part of. Culverts or drain pipes (metal, clay, or other material) are exempt when they're installed as components of an underground irrigation sys…
Which out-of-state gross receipts, business and occupation, and city/county business taxes have to be added back to income when computing Utah corporate franchise tax?
Of seven different out-of-state and local taxes a multistate company asked about, only one had to be added back to income for Utah corporate franchise tax purposes. Utah Code § 59-7-105(2)(b) requires…
An insurance company sold a shopping mall it held in a separate investment account for 190 pension plan clients -- some private (covered by ERISA) and some government pension plans (not covered by ERISA). Is New York's Real Property Transfer Gains Tax on the sale preempted by federal ERISA law for any of these clients' shares of the gain?
Split by investor type. Prudential Insurance Company of America sold the Smith Haven Mall through PRISA, a separate investment account holding real estate on behalf of 190 pension-plan contract holder…
The rule that my on-reservation federal contract work is taxable came out after I did the work — can it really be applied to those earlier years?
Yes — the court decision applies retroactively, so the earlier work is taxable. Compliance Technology, an asbestos-abatement consultant, was assessed gross receipts tax on $17,290.27 it received as a …
Is a video photographer's videotaping of depositions, testimony, and court proceedings exempt from Texas sales tax?
Starting October 1, 1995, yes — when the video (or audio) taping of depositions, testimony, or other court records is sold to a party participating in the lawsuit (such as a plaintiff, defendant, or a…
When a New York resident becomes a nonresident partway through the year and later receives a year-end bonus based on her whole year's performance, is any part of that bonus taxed as resident-period income, and how much of it counts as New York-source income?
None of the bonus accrues to the resident period (January 1 through February 28, 1990), because its existence and amount weren't fixed with reasonable accuracy until the company determined it at year-…
Are direct-to-home (DTH) satellite television subscription services subject to Utah sales tax as a taxable 'telephone service'?
No -- direct-to-home satellite television service is NOT subject to Utah sales tax. Utah taxes intrastate 'telephone service' under § 59-12-103(1)(b)(ii), and the administrative rule defining that ter…
Is VasoSeal, a medical device used to stop bleeding from arterial punctures after procedures like coronary angiography and angioplasty, exempt from Texas sales tax?
No. The Texas Comptroller's office ruled that VasoSeal does not qualify for a sales tax exemption because it doesn't meet the definition of an exempt item such as a drug/medicine or a prosthetic devic…
Is all electricity used in an apartment or housing complex exempt from Texas sales tax as 'residential use,' or does it depend on how each part of the complex is actually used?
No, not all of it. The Comptroller's office reaffirmed that the predominant use test applies area-by-area within an apartment or housing complex: electricity used for genuinely residential purposes (u…
Did South Carolina follow federal nonrecognition treatment for the bank holding-company reorganization described in PLR 95-10?
Yes. For the addressed merger, South Carolina followed federal tax treatment for the bank, interim corporation, holding company, and shareholders under the specifically listed reorganization provision…
Is a city's purchase of generator sets, transmission lines, and natural gas pipeline equipment for a new municipal power plant exempt from Utah sales tax as government-purchased personal property, or taxable as construction materials?
Mostly exempt, but with an important catch on installation. The generator sets (mounted on removable skids), overhead transmission lines and poles, and the underground natural gas pipeline all retain …
Does a Texas healthcare provider owe sales tax on polysomnographic sleep units (equipment used to diagnose and treat sleep disorders and sleep apnea)?
Yes. The Comptroller confirmed the company correctly paid sales tax on its polysomnographic sleep units. Healthcare providers owe sales tax on equipment they buy to provide their services unless a spe…
When a contractor buys materials, supplies, or equipment for a construction or design contract where title passes to an exempt customer, when does the contractor owe Texas sales or use tax instead of claiming a resale exemption?
It depends on timing. Under Day & Zimmerman v. Calvert, a contractor's purchases can be exempt as sales for resale only if title to the property passes to the customer before the contractor makes any …
Are charges for installing, servicing, and monitoring a burglar alarm/security system taxable in Texas, including when the system is installed during new construction of a building or house?
Yes. The Comptroller's office confirmed that charges for installing, servicing, and monitoring burglar alarm/security systems are taxable as 'security services' under Tax Code Section 151.0075, even w…
Does a rental company owe sales tax on the amount it charges a customer for a rented piece of equipment that was stolen during the rental period?
No. The Comptroller ruled that sales tax is not due on a charge by a rental company for a rented item that was lost, misplaced, or stolen, because sales tax applies to the transfer of a taxable item f…
Is the labor to develop a multimedia presentation, desktop-published literature, or graphic art (booth graphics, ads, slides) taxable in Texas when it's delivered to the client on a diskette or as film/output, and can the developer buy reproduction materials tax-free?
Yes, taxable. The Comptroller told this developer that charges (labor and materials) to create a multimedia presentation delivered on diskette are taxable as the sale of a computer program, and that l…
Is a business that prints and mails advertising coupons directly to consumers on behalf of retailers providing a taxable sale, or a nontaxable advertising service, under Texas sales and use tax law?
It's a nontaxable advertising service, not a taxable sale of coupons. The Comptroller told this business that printing coupons out of state and mailing them directly to consumers in specific zip codes…
If a nonprofit hospital system creates a new tax-exempt subsidiary to own its medical office buildings, does that new subsidiary qualify for the same Texas sales and use tax exemption, and can supplies, services, and construction purchases for the buildings be bought tax-free?
Yes, largely. The Comptroller ruled the new nonprofit subsidiary (COMPANY), as a Section 501(c)(3) organization, is eligible for the same exemption under Texas Tax Code Section 151.310(a)(1) and (2) a…
Three home building companies pooled land into a joint holding corporation, then each builder sold its allotted lots (with houses already built by that builder) to individual home buyers -- sometimes using a redundant second deed from the builder since the builder never actually held title. Do all these individual home sales get added together for New York's $1 million Real Property Transfer Gains Tax threshold, since they all trace back to one big parcel?
No aggregation required -- each home sale was tested on its own. Four individuals, through three separate home-building companies (A, B, and C), pooled their resources into a jointly-owned holding cor…
My mortgage lender foreclosed on 10 unsold condo units and bought them back at a foreclosure sale. Is New York's Real Property Transfer Gains Tax consideration the actual foreclosure bid price, or the much larger unpaid mortgage debt -- and does construction money my lender agreed to cover on my behalf also count as consideration?
The higher of the two figures -- the total mortgage debt, not the (lower) bid price -- plus the lender's covered construction costs. Port Jefferson Development Corp. built 133 condominium units financ…
My new accountant didn't realize we had to pay a few days early, so we were late — can we avoid the penalty since it was an honest oversight and we always pay on time?
No. A tax penalty for missing New Mexico's early-payment deadline for large taxpayers stands when the miss was due to the accountant's failure to check the rules — that negligence is attributed to the…
New York Advisory Opinion TSB-A-95(36)S: In Donaldson, Lufkin & Jenrette's 22-year NYC IDA headquarters-relocation deal -- where a single affiliate, Leasing Corp., handles all outright equipment purchases -- are the purchases, improvement materials, rent, maintenance contracts, debt service, reimbursements, and buyout all exempt from sales and use tax?
Yes, exempt across all nine questions raised, subject to the usual strict agency documentation. Donaldson, Lufkin & Jenrette, Inc. ("DLJ") and its affiliates (the "DLJ Group") proposed a roughly 22-ye…
New York Advisory Opinion TSB-A-95(35)S: In a 15-year NYC IDA deal to keep Travelers Group and Smith Barney headquartered in New York City, are the group's equipment purchases, maintenance contracts, debt-service payments, intercompany cost-sharing, option buyout, and lease-removal penalties all exempt from sales and use tax?
Yes, exempt across all six questions raised, subject to strict documentation conditions. Travelers Group Inc. ("TGI"), Smith Barney Inc. ("SBI"), and their New York City-based affiliates (together "Tr…
Is a service, estimate, or trip charge taxable if a customer gets an estimate to repair an appliance but decides not to have the repair done?
No. A service, estimate, or trip charge made in connection with the repair of tangible personal property is generally taxable, but there is no taxable charge if an estimate is rendered for a fee and t…
Is painting, patching, and seal coating work on a neglected strip shopping center's walls and parking lot considered nontaxable maintenance, or is it taxable repair/remodeling/restoration?
It's taxable repair, remodeling, and restoration, not nontaxable maintenance. The Comptroller explains that maintenance under Rule 3.357(a)(4) means scheduled, periodic work done to sustain or support…
If a customer paid tax on parking space rent before getting a Texas sales tax permit, and later gets a permit, can the tax already paid be refunded?
Generally no. A customer cannot issue a resale certificate for purchases made before the effective date of its sales tax permit, so tax collected before that date should not be refunded. The only way …
Is an interior decorator's design fee, purchasing fee, administrative charge, freight/move-in charge, or consultation fee taxable under Texas sales and use tax?
It depends on how the charge is billed. A separately stated interior design fee or a stand-alone consultation fee is not taxable. But a design fee folded into a lump-sum charge for taxable property be…
Are vibrating shaker screens used at a sand, gravel, and aggregate processing plant exempt from Texas sales tax as manufacturing equipment?
It depends on where in the process the shaker screens are used. Shaker screens used before the aggregate material undergoes any physical or chemical change (such as crushing) are not part of manufactu…
Is cleaning out debris from an existing farm irrigation canal a taxable service in Texas, and does the agricultural exemption cover it?
Yes, it's taxable. Cleaning debris out of an existing irrigation canal to restore it to near its original working order is nonresidential repair and restoration of real property, which is taxable unde…
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