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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Is a glamour photography studio's session fee (covering wardrobe, makeover, and a private photo session) taxable, even if the customer receives no tangible personal property at the session and only orders photographs — if ever — at a later date?
Yes, the session fee is taxable. The Comptroller ruled that the session-fee services (wardrobe, makeover, private photo session) are part of the sale of any photographs, image copies, negatives, or pr…
Are massage services by a New York State licensed massage therapist subject to New York City and New York State sales tax?
They are taxable for New York City but not for New York State. New York City taxes massage services under Tax Law section 1212-A(a)(2) and NYC Administrative Code section 11-2002(h). Those laws exclud…
Is a power lift recliner exempt from sales tax as medical equipment?
No. A power lift recliner sold by a retail furniture store does not qualify as exempt medical equipment under Tax Law section 1115(a)(3). To be exempt, equipment must be primarily and customarily used…
Are chocolate-covered cookie bars like PB Max and Twix taxed as candy or exempt as food?
It depends on how they are packaged, marketed, and sold. PB Max and Twix are chocolate-coated wafer cookie bars. When sold in family packs and advertised, marketed, and sold as packaged cookies or sna…
Does an orthotist owe sales tax on braces, canes, crutches, and walkers it buys, and is fitting a brace a taxable medical service?
No, the purchases are exempt, because the orthotist is not performing a medical service. Braces (with component parts), canes, crutches, and walkers are exempt medical equipment under Tax Law section …
When a cable TV company adds new cable lines to utility poles, is that remodeling or new construction — and does it matter whose poles the lines are being attached to?
It depends on whose poles are involved. This internal Comptroller memo concludes that when a cable company adds new lines to poles it already owns, that is remodeling, consistent with prior guidance (…
Is dredging dirt, mud, silt, and sand out of a boat slip or waterway taxable as real property repair/remodeling, or exempt as new construction, and is the fee charged for disposing of the dredged material at a spoils facility taxable?
It depends on what is being dredged. Dredging to create a brand-new slip or dock (as part of new construction) is new construction labor and is NOT subject to sales tax. But dredging an existing man-m…
Is a Section 468B escrow settlement fund subject to New York franchise or personal income tax, and will New York waive penalties as the IRS did?
No tax is due, and the penalty question is moot. The SEC v. Vaskevitch escrow fund, treated as a qualified settlement fund under Section 468B, is not subject to New York franchise tax or New York Stat…
Is a paper-and-pencil personality profile testing service, used by employers to screen job applicants for honesty and suitability, taxable in Texas as a security service?
Yes, currently — but that changes soon. The Comptroller confirmed that a client's paper-and-pencil personality profile testing service is taxable as a security service under Rule 3.333(a). However, ef…
If a manufacturer buys back equipment from a customer under its own satisfaction guarantee (separate from the retailer's original sale), can the retailer refund the sales tax it collected, or can the retailer get that tax refunded from the state?
No. The Comptroller ruled that the doctors were not due a refund of the sales tax paid to the equipment retailer, and if the retailer refunds the tax to the doctors anyway, the Comptroller will not re…
Is a two-hour boat trip to watch dolphins in the wild a taxable amusement service in Texas?
Yes. The Comptroller ruled that a two-hour dolphin-watching boat trip on the Gulf of Mexico (with no food or drinks provided) is a taxable amusement service under Rule 3.298, because the trip does not…
Our company's Employee Stock Ownership Plan (ESOP), an ERISA-covered retirement plan, owns nearly all the stock of our company, which itself holds leasehold interests counting as New York real property. If the ESOP sells all its stock in the company for $100 million allocable to that real estate -- a controlling-interest transfer -- does New York's Real Property Transfer Gains Tax apply?
The gains tax would otherwise apply, but ERISA preempts it as long as the selling entity remains an ERISA-covered employee benefit plan. Avis, Inc.'s Employee Stock Ownership Plan (Avis ESOP), created…
A husband and wife subdivided lakefront land into lots, sold four, and later put the remaining nine lots into a family trust for estate planning, gradually gifting beneficial interests to their children. When the trust liquidates and distributes the lots to all nine beneficiaries proportionally, does New York's Real Property Transfer Gains Tax apply to that distribution, and are the beneficiaries' later individual sales of their lots aggregated with each other for the $1 million threshold?
The trust's liquidation and distribution of lots to its nine beneficiaries counted as a taxable partition, with all the beneficiaries' shares aggregated to test the $1 million threshold -- but each be…
Our eight-unit condominium (each unit is a two-family semi-attached house with its own 12.5% interest in the shared common elements/yards) wants to terminate the condominium declaration entirely. Under our plan, all eight owners would first become tenants-in-common in the whole property, then each owner would receive a deed from the other seven conveying their combined 87.5% share of that owner's home-and-yard, so each owner ends up owning 100% of just their own unit and yard outright (no more condo regime). No money changes hands since everyone's share is roughly equal in value. Will this termination-and-partition trigger New York's Real Estate Transfer Tax or Real Property Transfer Gains Tax? And if the gains tax applies, is each owner's 'consideration' measured on the increase in their property's value, and do all eight owners' shares get combined to see if we cross the $1 million threshold?
Mixed result -- the condominium termination itself is fully exempt from both taxes, but the follow-on exchange among the individual owners is a separate, potentially taxable event for gains tax purpos…
How does New York sales tax apply to selling, leasing, and using a medical PAP-smear screening device and a slide-scanning service?
It depends on the transaction and delivery point. Selling or leasing the 'Classifier' device to a New York laboratory that uses it in performing medical services for compensation is taxable, because t…
For a company that has fixed places of business in some cities but also sells from mobile trucks that travel to customers around the state, is local (city/county) sales tax on the truck sales based on the truck's location when the sale happens, or on the company's place of business that supplies/dispatches the truck?
Local (city and county) sales tax on sales made from the trucks is based on where the truck is when the sale actually happens — that is, the location where the customer looks over the merchandise, sel…
When a Texas repair shop services foreign (Mexican) aircraft — repairing, remodeling, or installing parts and engines — is the labor or the parts subject to Texas sales tax?
Separately stated labor charges to repair, remodel, restore, or maintain aircraft are not subject to Texas sales tax, whether the aircraft is foreign or domestic. Aircraft repair and replacement parts…
Could a Texas vehicle rental company pass county property tax to customers, and was the reimbursement subject to rental tax?
The rental company could recover the cost, but could not tell customers they owed county property tax because only counties collected that tax. Any reimbursement was part of the rental company's taxab…
Is maid/janitorial service provided by a condominium property management company's own employees exempt from sales tax as an employee-wage exclusion, when the cost of that service is bundled into the management company's overall rental commission rather than billed separately?
Generally no. The Comptroller ruled that the maid service employees provide to condominium owners and guests is a taxable real property service, and the wage-exclusion exemption in Rule 3.356(n)(1) do…
Are fenders used by a lightering workboat to protect tankers during a lightering operation exempt from Texas sales tax as a component part of the vessel, even though the fenders are not physically attached to the boat?
Yes. The Comptroller ruled that the fenders (Yokohama Fenders) are an integral part of the lightering workboat and will be considered a component part of the vessel even though not physically attached…
Did South Carolina PLR 93-3 require a petroleum-hauling coordinator that leased trucks and used independent drivers to apportion income as a motor carrier?
Yes. Although independent contractors owned and drove the trucks, APC leased them, solicited and coordinated hauling, insured the vehicles, and billed customers, so it was a motor carrier required to …
If a bank writes off a customer's unpaid credit-card balance and recourses (charges back) the uncollectible amount to the vendor, can the vendor claim a sales tax bad debt credit?
Only in one of the two scenarios described. A vendor cannot take a bad debt credit just because a bank identifies and recourses the sales tax portion of a written-off account back to the vendor — tax …
Is the compensation a receiving racetrack pays a sending racetrack for simulcasting a horse or dog race, for wagering purposes, subject to Texas sales or use tax?
Yes. The compensation (fees or commission) a receiving racetrack pays a sending racetrack for simulcasting a race — the live audio/video transmission of a race from a sending track to a receiving loca…
If a company places copy machines at retailer locations and charges a monthly fee based on the number of copies sold, is that a lease of the copier, and can the retailer buy paper and toner tax-free with a resale certificate?
Yes, it is a lease. The Comptroller confirmed that a company placing copy machines at various business locations and charging a monthly fee based on the number of copies made (here, 5 cents per copy, …
Is soil aeration (core plugging) performed on golf courses and athletic fields by an independent contractor a taxable service in Texas?
Yes. The Comptroller ruled that punching holes in the soil to aerate turf is "lawn maintenance" as defined in Rule 3.356(a)(5), even if the contractor does not fill the holes afterward. Charges for th…
Is a Section 468B qualified settlement fund subject to tax under Article 9-A or Article 22 of the New York Tax Law?
No. A qualified settlement fund under Section 468B of the Internal Revenue Code is not subject to tax under either Article 9-A or Article 22 of the New York Tax Law -- even where the defendant, the fu…
Is a $100 million Section 468B civil claims settlement fund subject to New York franchise tax or New York State and City personal income tax, and what must it file?
No tax, no return. The Salomon civil claims fund -- a $100 million settlement fund created by federal court order and treated as a qualified settlement fund under Section 468B -- is not subject to New…
Is assigning the unexpired term of a nonrenewable 99-year ground lease subject to Connecticut's real estate conveyance tax?
No. A tenant held a NONRENEWABLE 99-year ground lease of Connecticut land and had built a building on it that would revert, without payment, to the landlord when the lease ended. After the tenant defa…
If an air waybill (bill of lading) covering exported merchandise doesn't itself fully describe the goods, can an attached invoice be used to tie the shipment to the purchase for export tax purposes?
Yes, conditionally. The Comptroller will allow an invoice attached to a bill of lading (air waybill) to identify the goods covered under that bill of lading, but only if the notation tying the invoice…
Can a printer buy its machinery, equipment, and supplies tax-free under the production exemption?
Only when it uses them to produce its own goods for sale. If a printer uses machinery, equipment, and supplies directly and predominantly (more than 50%) to produce printed matter that it will sell --…
Do a software developer's Texas sales, installation, and license fees create franchise-tax nexus, and do a franchisor's initial fee and royalties?
Both out-of-state corporations had Texas franchise-tax nexus. A New Jersey software developer with salespeople soliciting sales in Texas had nexus for both the taxable-capital and earned-surplus compo…
Is a fee an ice skating rink charges to rent ice time ('patch ice') to skating instructors and coaches, for use in training their students, taxable as an amusement service, or is it exempt because the activity is instructional rather than recreational?
Taxable. This internal memo from an Office of the Attorney General attorney to a Comptroller Tax Administration official reports that a bankruptcy judge upheld the Comptroller's position that a rink o…
Do sales/use tax exemptions for services performed between affiliated corporations still apply when some of the corporations in the group are non-profit entities that would otherwise be excluded from the federal definition of an affiliated group?
Yes. The Comptroller ruled that a non-profit parent corporation and its subsidiaries are still treated as 'affiliated corporations' under Texas Tax Code Sec. 151.346 and Rule 3.331, even though the pr…
Does reincorporating a New York corporation in Delaware by merger trigger New York tax, and how many franchise tax reports are required?
Reincorporating a New York corporation as a Delaware corporation by statutory merger -- a mere change in form qualifying as a tax-free reorganization under IRC section 368(a)(1)(F) -- is also tax-free…
Is an auto-parts locator service that gives customers access to a maintained database a taxable computer and data processing service in Connecticut?
Yes. An out-of-state company ran an auto-parts locator that let Connecticut insurers and salvage yards find parts either by logging into the company's mainframe database or by calling an '800' line wh…
As sponsor of a non-eviction cooperative conversion, I estimated the Real Property Transfer Gains Tax consideration for my unsold shares based partly on a wraparound mortgage. I'm now negotiating to give the co-op board back my unsold, underperforming shares, and as an incentive I'll reduce the underlying mortgage by $375,000. Does that mortgage reduction lower my gains-tax consideration?
Only PARTIALLY -- the $375,000 mortgage reduction lowers the gains-tax consideration solely to the extent it's allocable to the STILL-UNSOLD shares being returned to the cooperative board, not to unit…
When a building is gutted to its outer walls, are the construction services taxable renovation or exempt new construction in Connecticut?
Mostly untaxed new construction -- with one taxable exception. A company kept only the exterior walls of a former warehouse and built a new gabled skylight roof (adding cubic footage), new interior wa…
Is natural gas used to fuel boilers at a towel rental (industrial laundry) business exempt from Texas sales and use tax as gas used in processing?
No. The Comptroller ruled the natural gas used to fuel the boilers at a towel rental company was not exempt, because the boilers themselves are not equipment directly used in processing the rental tow…
Is a satellite farm-data subscription a taxable computer service, are its ad transmissions taxable, and who owes tax on the receiving equipment?
A company beamed around-the-clock farm-market data (grain/livestock quotes, weather, news) by satellite to subscribers using company-owned receiving equipment, and also let 'information providers' sen…
Can a property management company buy supplies and services tax-free on behalf of FDIC/RTC-owned properties it manages, and can it fix past sales tax it mistakenly paid?
Yes. A property management company acting as agent for the FDIC or RTC can issue a sales tax exemption certificate to its vendors for purchases made for FDIC/RTC-owned properties, as long as it has do…
Can a contractor buy construction materials tax-free when they will be built into property owned by New York State?
Yes. A subcontractor widening and lengthening a Meadowbrook Parkway ramp owned by the New York State Parks Department may buy the materials without paying sales tax. Although a sale of materials to a …
Is separately-stated labor to install a product excluded from Connecticut sales tax when the product is attached to real property?
It depends on the type of real property. A company sold mailboxes and offered separately-stated installation (sinking a post, attaching the box). Conn. Gen. Stat. § 12-407(8)(e) and (9)(e) exclude sep…
We're merging a related corporation that owns real estate into our company, with its former shareholders receiving stock in ours. The two companies are owned by overlapping family members, but not in identical percentages -- does New York's Real Property Transfer Gains Tax apply to this merger, or does the mere-change-of-identity exemption cover it?
The merger is a taxable controlling-interest acquisition, but the mere-change-of-identity exemption applies proportionally -- so gains tax was owed only on the small SLICE of beneficial interest that …
Is a medical-claims processing and collection service a taxable computer service or business management service in Connecticut?
Neither -- it's not taxable. A company processed, managed and collected doctors' and hospitals' insurance and Medicare/Medicaid claims, retaining a percentage of what it collected as its fee, and it g…
Are a management company's nutrition and food-service charges to a nursing home taxable business management services in Connecticut?
It depends on who eats the meal. A management company ran a nonprofit nursing home's food service -- buying food as the home's agent, preparing and delivering meals, cleaning kitchen equipment, and ca…
Is cleaning up an oil spill or remediating contaminated soil at an oil and gas site taxable in Texas?
It depends on location and cause. Cleaning up an oil spill at the well site, or one caused by oil/gas/geothermal exploration, development, or production activity and regulated by the Texas Railroad Co…
Does a Connecticut DRS Ruling stop being reliable when the underlying law or regulation changes, even without notice from the Department?
Yes -- automatically. DRS held that one of its Rulings ceases to have any force and effect once the law or regulation it was based on changes, as of the effective date of that change and without any f…
When were a sales agent's fees subject to Connecticut sales tax on the sale of a business's tangible property?
Only in narrow circumstances -- and this ruling is now obsolete. A company introduced buyers and sellers of businesses and business assets for a contingent fee, without negotiating the deals. DRS held…
Does a Texas health club have to charge sales tax on personal training session fees?
No, not if the training is one-on-one and the trainer actually puts the client through the workout (not just designs a program and shows equipment use). A separately stated charge for that kind of per…
Can a Texas business scan invoices and resale/exemption certificates and store them electronically instead of keeping paper copies?
Yes, with two conditions: the business must keep back-up hard copies of resale/exemption certificates specifically, and it must provide the Comptroller's auditors with sufficient equipment to examine …
Can a publisher treat several differently-named weekly shopping guides as geographical editions of one shopping paper for the sales tax exemption?
No, not on these facts. A publisher wanted its four weekly shopping guides treated as geographical editions of a single 'shopping paper,' so they would count as one issue when testing the shopping-pap…
Can a Connecticut corporation deduct dividends it receives from a regulated investment company that aren't deductible on its federal return?
No -- but note this ruling has been REVOKED by Ruling 93-24, and DRS marks it 'not current ... for reference purposes only,' so do not rely on it. As originally issued, DRS held that a Connecticut cor…
Is the labor to install, connect, and calibrate store refrigeration/freezer display units subject to Texas sales tax?
It depends on how the units are wired together. If several self-contained freezer/refrigeration units are connected to share one compressor, the labor to connect them into that single system is taxabl…
Is a service that reviews a store's cash-register internal controls a taxable information or detective service?
No, as described it is not taxable. A consultant observes how a retail store's cash-register operators ring up sales and make change, then writes a report to management about the store's internal cont…
Will the Department use an advisory opinion to approve a taxpayer's method of computing sales tax?
No. The Department declined to rule. A GM subsidiary that places computers at customer premises asked whether the method it used (and that had been examined on audit) to determine sales tax would be a…
Are hospital gowns, urinary drainage bags, cushions, and benzoin swab sticks exempt from Texas sales tax when purchased by a hospital?
It depends on the item. Hospital gowns are taxable. Urinary drainage bags are exempt. The cushions described were found taxable for lack of qualifying information. Benzoin swab sticks are exempt only …
Does Texas sales tax apply to a dialysis re-use machine and a reverse osmosis water-purification machine used in home dialysis treatment?
It depends on how the equipment is used. The Comptroller told this taxpayer that a Dialysis Re-Use machine (used to clean artificial kidneys after dialysis) and a Reverse Osmosis machine (used to puri…
Is adding fiber optic cable to an existing cable TV distribution system taxed as new construction or as taxable remodeling in Texas?
It depends on how the cable is installed. Adding fiber optic cable as a separate line that supplements (not replaces) the existing coaxial distribution plant is treated as nontaxable new construction.…
Is the income of a court-approved Section 468B qualified settlement fund subject to New York franchise tax or New York State and City personal income tax?
No. A designated settlement fund that is a qualified settlement fund under Section 468B of the Internal Revenue Code is not subject to New York franchise tax or to New York State or City personal inco…
When a New York City resident is about to take a U.S. Senate-confirmed executive-branch position and relocate to Washington, D.C., does his New York domicile change the moment the Senate confirms him, even though his family, home sale, and home purchase are all timed to that same event?
The Department declined to decide when (or whether) the taxpayer's domicile actually changes, because that is an inherently factual question that cannot be resolved in an Advisory Opinion. Instead it …
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