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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If I buy something from an out-of-state company that delivers it into Texas, who has to pay or collect the use tax — me or the company?
It depends on whether the seller is permitted in Texas. The Comptroller told this individual purchaser that because COMPANY A (the vendor they bought from) is permitted in Texas, COMPANY A is required…
Is sales tax owed on wireline services performed on oil/gas wells to obtain seismic or geological data in Texas?
No. The Comptroller ruled these wireline services are not subject to sales & use tax. Instead, the receipts are subject to the 2.42% well servicing tax under Texas Tax Code 191.081. Sales tax is still…
I'm structuring a turnkey deal where I sell my client a vacant lot, buy it back at the same price, build a building on it as construction financing, then sell (or lease) the finished building back to the client. Will New York's Real Property Transfer Gains Tax apply when I transfer the finished building back?
The Department wouldn't give a yes-or-no answer -- it depends on facts an Advisory Opinion can't resolve. Deegan Development Group, Inc. owned a parcel of land and proposed a turnkey arrangement for i…
For a Texas motor vehicle repair, can the repairman charge the customer sales tax on parts at a price lower than what the repairman paid for those parts?
No. In a separated repair contract (materials and labor billed separately), the agreed sales price of parts and consumable supplies that the repairman charges the customer sales tax on cannot be less …
Is a 'lane closure' (barricade) service provided to a highway contractor a taxable service, or is it treated as equipment rental for Texas sales tax purposes?
It is not a taxable service. The Comptroller ruled that the total charge for 'lane closure' (barricade) services is treated as a rental of equipment to the contractor, and is taxable as a rental — jus…
Is thin capitalization tested on a book or fair market value basis, and is interest on a loan used to fund a distribution exceeding shareholder equity deductible for Article 9-A?
Thin capitalization is tested on a fair market value basis, not a book basis. Indopco borrowed $700 million from a brother/sister corporation to pay a dividend to its parent when its book capital was …
If a 501(c)(3) nonprofit and a for-profit company form a 50/50 joint venture to build affordable housing, can the joint venture buy construction materials free of Texas sales tax?
Only partly. The Comptroller ruled the joint venture may issue an exemption certificate for 50% of the cost of the incorporated building materials and consumable supplies — matching the nonprofit part…
Is installing a patented lawn-fertilization control device as part of a new or existing underground sprinkler system a tax-exempt capital improvement, and does that change if it's just replacing an existing pump?
Yes -- installing the device as part of a new underground sprinkler system, or adding it to an existing one, is a capital improvement and not subject to sales tax, because it permanently increases the…
How did South Carolina Revenue Ruling 93-12 calculate the historical retirement-income deduction for a surviving spouse?
A surviving spouse could claim one deduction for the survivor's own retirement income and a separate deduction for income attributable to the deceased spouse. For the inherited stream, the survivor ge…
Are the entry fees participants pay to enter a tournament subject to Alabama sales (amusement) tax when the organizer collects the fees and pays them all back out to participants as prize money?
No. A 501(c)(3) sponsor ran a national tournament hosted in one Alabama city in 1994 and another in 1997, drawing more than 50,000 entrants who each paid an entry fee. Alabama's § 40-23-2(2) imposes a…
When a manufacturer expands by adding a new product line that shares some processes and equipment with an existing line, does the manufacturing sales tax exemption cover equipment used by both lines?
It depends on whether the equipment is used exclusively by the new line or shared with the existing line. Equipment used exclusively for the new product line qualifies for Utah's manufacturing exempti…
Do X-ray dyes and contrast materials used in hospital diagnostic imaging, and surgical appliances like pacemakers, sutures, and bone cement, qualify for Utah's sales tax exemption for 'medicine'?
No to both. The Tax Commission ruled that X-ray dyes and contrast materials, and surgical appliances/substances such as pacemakers, sutures, and bone cement, do not qualify for Utah's sales tax exempt…
Did the Comptroller change the manufacturing exemption policy for equipment (dies, photoengravings, presses) used by printers and publishers?
No. The Comptroller reviewed the proposed policy change and decided not to change the existing manufacturing exemption policy that had applied to printers and publishers for several years. Because the…
If a 501(c)(3) organization bundles hotel lodging, meals, and tuition into one lump-sum price for an educational seminar, does it owe sales tax on the meals and hotel tax on the lodging?
The meals charge is exempt from sales tax (the organization can issue an exemption certificate for meals whether eaten at the lodge or off-site), but the organization still owes hotel occupancy tax on…
Is a hyperbaric oxygen chamber exempt from Texas sales tax when it is rented to a for-profit hospital?
No. A hyperbaric oxygen chamber is a therapeutic device that is exempt when rented directly to an individual patient under a doctor's prescription, but it is taxable when sold, leased, or rented to a …
Is a real-time financial-data terminal service (stock tickers, quotes, market news) delivered over leased telephone lines to desk-top display units subject to the additional 5% telephone/telegraph tax on top of the regular information-service tax?
No -- the service is a taxable information service under Tax Law Section 1105(c)(1) because it isn't personal or individual to any one subscriber, but it escapes the additional 5% tax under Section 11…
If a city installs speed bumps in a neighborhood and bills the private citizens or businesses who requested them, does the city have to collect sales tax on that charge?
No. The Comptroller ruled that installing speed bumps is remodeling of nonresidential realty (a taxable service), but the city does not have to collect sales tax on the charges billed to the citizens,…
Is a tree/plant examination and disease-treatment consultation service (arborist services) taxable under Texas sales tax, and can a referral fee paid to another business reduce the tax base?
Yes. The Comptroller ruled that arborist services — consultation, diagnosis, and treatment of landscape plants — are taxable, and tax must be collected on the entire charge to the customer, including …
Do a surviving corporation's pre-merger Connecticut net operating loss carryovers survive an ownership-change merger, free of the federal Section 382 limit?
Yes. Where a corporation is the SURVIVING corporation in a merger (here a reverse triangular merger in which the purchaser's new subsidiary merged into the holding company, and the holding company sur…
Can a mail-order company use an average industry shipping rate to calculate its exempt, separately stated shipping charges for periods before September 1, 1991, and does the shipping exemption still apply after that date?
No -- an Advisory Opinion can't resolve a factual question like whether $1.04 per package matches an industry-prevailing shipping rate, and there was never any rule letting an average rate substitute …
How is Texas sales tax applied to selling, renting, installing, or servicing water softeners and reverse osmosis units — and does it matter whether the units are plumbed into a building or whether the customer just pays for a water-conditioning service?
It depends on three variables: whether title to the equipment passes to the customer (sale vs. rental vs. service), whether the unit is plumbed into the building (making it an improvement to realty) o…
Is transferring property to a brand-new, not-yet-capitalized corporation in exchange for 100% of its common and preferred stock a taxable sale under Texas sales tax?
No. The Comptroller confirmed that transferring property to a non-capitalized corporation in exchange for 100% of that corporation's stock — even if the stock is split between common and redeemable pr…
Does producing a motion picture, video, or audio recording for sale, license, distribution, broadcast, or exhibition count as manufacturing for Texas sales tax purposes, and can a producer buy or rent production materials, equipment, and services (like film processing, dubbing, and editing) tax-free?
Yes. The Comptroller ruled that producing a motion picture, video, or audio recording that will be sold, licensed, distributed, broadcast, or exhibited is treated as manufacturing. A producer can use …
If a parent company spins off an equipment subsidiary and that subsidiary then leases the equipment back to the parent or a sister company, is tax due on the lease payments?
Yes. The Comptroller ruled the lease payments Equipment Company A receives from the parent (ABC) or from sister company Company B are taxable, because these are operating leases between related corpor…
Is manufactured brine water (made by pumping fresh water into an underground salt formation) exempt from Texas sales tax the same way plain water and table salt are exempt, and is non-food salt like rock salt or ice cream salt taxable?
No — the Comptroller ruled that brine water made by pumping fresh water into a salt formation to dissolve the salt is 'processed' water, not naturally occurring brine, so the charges for the brine wat…
If an information provider subcontracts the gathering of proprietary information to a third party, does the information stop being 'proprietary' for Texas sales tax purposes?
No. The Comptroller overruled an earlier letter that had taxed these charges, holding that information gathered by a subcontractor for a provider who then sells it to a client still keeps its propriet…
Which supplies could Kansas auto body and repair shops buy tax-free, and which remained taxable?
Kansas auto dealers and body or repair shops could buy qualifying items tax-free when the items were consumed in providing a taxable repair service or became a component of the repaired vehicle, and t…
Can a flooring/cabinet manufacturer buy display systems and promotional materials tax-free with a resale certificate when it sells them to its distributors along with its products?
Yes, if the manufacturer is genuinely reselling the displays and promotional materials to distributors (who in turn resell them to retailers), it can issue a resale certificate to its own vendors for …
When a rental company rents out a package that mixes exempt film-production equipment with taxable items, how should sales tax be charged on the package?
If the taxable and exempt items are rented together for one bundled price, the whole charge is taxable. If the rental company separately states the charge for equipment used directly in production (wh…
Were two named Texas Medical Center cooperative associations exempt from motor vehicle sales tax on their purchases?
Yes. The approved verbal response accepted that Texas Health and Safety Code §§ 301.013(a) and 301.042(a) exempted the named hospital laundry and heating-and-cooling cooperatives from tax or assessmen…
Our hotel financing, structured through an industrial development agency, needs a workout: we're restoring previously-waived loan proceeds (increasing the secured debt back up), adding a brand-new loan the IDA won't be a party to, and then consolidating everything into one lien after the IDA exits the deal entirely. Which of these steps trigger new mortgage recording tax, and which don't?
It depends on which step and whether the IDA remains a party -- a genuinely mixed outcome. Coliseum Hotel Associates financed and built a Marriott hotel at Mitchel Field, Nassau County through the Tow…
Does a tax-exempt nonprofit's sheltered workshop, where disabled clients perform auto detailing for paying customers, have to collect sales tax on those charges?
No -- the nonprofit's auto detailing (washing, window cleaning, vacuuming, waxing) is a sale of a SERVICE, not tangible personal property, and it doesn't fall into any of the specific carve-outs (reta…
Is an airline's purchase of on-line computer systems -- flight control, crew management, reservations, baggage tracing, and similar tools -- exempt from sales tax as personal or individual information when each system is built around the airline's own confidential operating data?
Mostly yes -- the Flight Control, Crew Management, AFTN, Flight Plan, ACTS, Baggage Claims Central File, and Sub-Host Reservations systems are all exempt, because each is based only on the airline's o…
Is a self-operated condominium rental pool treated as a taxable property management company, and are repairs to the condo units and common areas taxable as commercial real property?
Yes to both. The Comptroller ruled that a self-operated rental pool serving 72% of a condominium regime's owners is treated as a property management company for sales tax purposes, so the exemption fo…
Does a plant and equipment used to convert liquid cryogens into compressed gas qualify for the Article 9-A investment tax credit?
Yes, if the other tests are met. A company that buys liquid cryogens, converts them into vapor with pumps, vaporizers, and compressors, and bottles the gas in high-pressure cylinders for sale is engag…
Price Waterhouse asked New York, on behalf of a Nebraska-domiciled employee called Mr. A, whether Mr. A remains a nonresident of New York for personal income tax purposes when a fixed 4-year employment contract requires him to work in New York City and use a company apartment there for more than 183 days a year.
Yes, Mr. A remains a New York nonresident throughout the four-year contract. Because his New York City company apartment is kept only for a fixed and limited assignment - not indefinitely - it is not …
Can a contractor that improves a government facility under an informal but binding agreement buy the incorporated materials free of Connecticut sales tax?
Yes. A limited partnership that operates a Connecticut political subdivision's facility and makes agency-funded improvements to it may purchase, free of sales and use tax, the materials and supplies t…
Is the separate, optional amount a racetrack charges for reserved seating at tables/counters taxable, given that general admission is charged separately?
Yes. The Comptroller's Tax Policy Division concluded the separate optional charge for seating at tables/counters is taxable, comparing it to paying extra for a box seat at an amusement event. Charging…
Is vacuuming up industrial waste (including EPA-hazardous flue dust) from a steel manufacturing plant a taxable 'building or grounds cleaning' service, or nontaxable waste 'collection'?
Nontaxable. The Comptroller reversed its earlier position and ruled that vacuum-truck removal of mill scale, flue dust (EPA-hazardous), lime dust, and sludge from a steel manufacturer's plant is 'coll…
Is providing and servicing air freshener/deodorizer dispensers installed in a customer's building a taxable service in Texas, and can the dispenser, batteries, and liquid be bought tax-free for resale?
Yes. The Comptroller ruled that Company A's air freshener/deodorizer service — installing a dispenser it owns in a customer's restrooms and servicing it by replacing the battery and refilling the liqu…
Are limited partnerships, a trust, and the holders of the trust interests subject to Texas franchise tax?
None of them owed the tax. The Comptroller advised that two limited partnerships (ABC and EFG) and a Trust were not subject to the pre-2008 Texas franchise tax because they were not corporations, and …
If casualty-loss repair labor was performed and finished before October 1, 1993, but most of the payment isn't collected until October 1993, is that labor taxed under the new law that took effect October 1, 1993?
No. The Comptroller ruled that for casualty-loss repairs, the taxability of the labor depends only on the date the labor was performed — not the date of the casualty/disaster and not the date payment …
Is adding bulk heading to a natural lake, or paving over a worn dirt cart path, new construction or remodeling for Texas tax purposes at an existing golf course?
Both are new construction. The Comptroller ruled that adding concrete bulk heading (gabions) around part of a completely natural lake is new construction, and that paving a naturally worn dirt cart pa…
If I provide answering services (human or automated) to Texas customers from a location in Arkansas, do I owe Texas tax, and do I have to collect it from my customers?
Either human or automated answering service would be subject to Texas tax if the provider were located in Texas. Because the provider is in Arkansas, it must collect Texas Use Tax from its Texas custo…
As trustee of an estate, I'm selling a farmhouse where two disabled beneficiaries lived, plus two adjacent vacant farm parcels, to the same buyer. Is the house sale exempt from New York's Real Property Transfer Gains Tax as a residence, and do I have to add its sale price to the two land parcels' prices to test the $1 million threshold?
Split answer: the house sale was exempt on its own terms, but still had to be combined with the land sales to test the $1 million threshold. Mary and Seely Ward's ~100-acre Orange County farm, with a …
Did the October 1, 1993 tax law change move mobile office trailers and rental bunkhouses from motor vehicle tax to sales tax?
Only office trailers changed. House trailers designed as an office, sales outlet, or other workplace moved from Motor Vehicle Tax Code Chapter 152 to Limited Sales Tax Code Chapter 151 as of October 1…
Does a company that performs pre-employment psychological testing, drug testing, and background-check services still have to collect Texas sales tax on those services?
It depends on the specific service. As of August 30, 1993, pre-employment psychological/attitude/honesty testing no longer requires a Private Investigators and Private Security Agencies Board license …
Is a shopping mall's lease-based charge to tenants for redistributed electricity (plus an administrative fee) a taxable resale of a utility service, or is it untaxed rent?
It's untaxed rent, not a taxable utility resale -- because the electricity and administrative-fee charges are billed under the terms of the mall's leases as 'additional rent,' following the Court of A…
I own a nine-acre beachfront parcel that I've treated as my principal residence, with a main house, a separate beach house, and an old barn, none of which I've ever rented out or depreciated. If I subdivide and sell just the beach house and barn (on six of the nine acres) to a buyer, does New York's Real Property Transfer Gains Tax apply?
No gains tax, because the beach house and barn were part of the owner's tax-exempt residence, not separate business or investment property. Burton Brous bought a nine-acre Long Island beachfront parce…
Are hollow point needles used with a hypodermic syringe exempt from Texas sales tax?
Yes. The Comptroller ruled that hollow point needles adapted for use with a hypodermic syringe — including anesthesiology, thin wall tuohy, arterial, biopsy, and blood collection needles that are holl…
If a business catches up on years of unfiled sales tax reports, does not having had a valid sales tax permit increase its liability, and is there a limit on how far back the state can go?
Not having a valid sales tax permit does not itself increase the tax liability, but filing more than 30 days late triggers a 10% penalty (or a 50% penalty if the state finds intent to evade tax or com…
How does Texas distinguish nontaxable employee/temporary-help labor from taxable 'contract labor'?
There is no separate definition of 'contract labor' in the Tax Code or Rules. Instead, labor is nontaxable if it qualifies either as an employee's service under Tax Code Section 151.057 (or the parall…
We're the fee owner of an office building. To help a prospective tenant (Newsweek) get NYC Industrial Development Agency economic-development benefits and a real estate tax abatement, we're converting our building to a condominium and conveying title to the tenant's units to the IDA for nominal consideration, then leasing those units back from the IDA at nominal net rent under an 'Overlease' lasting about 15 years and 8 months. We'll keep all the economic benefits and burdens (condemnation/insurance proceeds, income-tax ownership treatment, the right to sell/mortgage/transfer), and the IDA's title will end automatically on a set date or earlier if certain events happen (like the Prime Lease terminating), with title reverting to us. Are the conveyance to the IDA, the eventual title reversion, the Overlease, the Prime Lease with our tenant, and the related financing all exempt from New York's Real Estate Transfer Tax, Real Property Transfer Gains Tax, and Mortgage Recording Tax?
Exempt at every step -- Midtown Realty Company kept all the real economic benefits and burdens of ownership throughout. Midtown Realty, the fee owner of the office building at 1775 Broadway in Manhatt…
Can each school-sponsored student organization within a school district hold its own two one-day tax-free sales or auctions each year?
Yes. The Comptroller confirmed that the school district, each school in the district, and each school-sponsored student organization within each school (examples given: FFA, Spanish Club, Drama Club, …
Is a country club's 'Non-Resident' membership class — for members who live more than 100 miles from the club, some of them out of state — subject to Texas sales tax on dues and fees?
Yes. The Comptroller ruled that because the country club itself is located in Texas, sales tax applies to all membership dues, initiation fees, and other assessments charged for the Non-Resident membe…
When a customer returns merchandise, gives a late resale/exemption certificate, or was billed tax in error, how does a seller get back the sales tax it already remitted to Texas?
The seller can get a refund or credit from the Comptroller two ways: file amended sales/use tax returns for the periods the tax was remitted, or take a credit on its next return. Either way, the selle…
Is a company that supplies law-library staff and looseleaf filing to law firms providing taxable personnel services in Connecticut?
It splits. When the company supplies temporary LIBRARY PERSONNEL (librarians, paraprofessionals, clerks) to law firms, that IS a taxable personnel service under Conn. Gen. Stat. § 12-407(2)(i)(C): the…
Does Texas sales tax apply to municipal franchise fees passed through on cable TV and garbage collection bills, and to tickets for an amusement event?
**Yes — all three items described in the letter are subject to Texas sales tax.** The Comptroller's letter explains that under Texas Tax Code Sec. 151.007(a)(2), 'sales price' includes the total amoun…
Can a Medicare-related printing/forms contractor buy printed forms, booklets, and publications tax-free with a resale certificate because they're ultimately used for the federal Medicare program?
**Only if the contract with the federal government specifically provides that title to the items passes to the federal government upon receipt, and the items are not used before title passes.** The Co…
Is labor to repair residential property damaged by a fire, flood, or other casualty taxable in Texas?
**No — labor to repair residential improvements to realty is not taxed in Texas, regardless of the cause of the damage.** The Comptroller's letter clarifies that a 1993 legislative update on the disas…
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