State Tax Rulings
Free state tax letter rulings and advisory opinions with plain-English summaries, full citations, and the original source on every page.
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Does a private corporation that remodels and operates a detention facility for a city owe Texas sales tax on its purchases and on the remodeling work?
Yes on its inputs, even though the service itself is not taxable. A private corporation that operates a detention facility for a city is providing a nontaxable service to the city, and the city in tur…
Is a license to use prepackaged, off-the-shelf software — and its technical support — subject to New York sales tax?
Yes. A license to use prepackaged software that does not require an analysis of the customer's requirements or adaptation by the vendor is taxable as tangible personal property under Tax Law § 1105(a)…
Are home drinking-water lead-test kits and a faucet-mounted water filtration system exempt from sales tax as medical equipment?
No. Home drinking-water lead-test kits and a faucet-mounted water filtration system are both subject to New York sales and use tax; neither qualifies for the exemption for medical equipment under Tax …
Was a multiple-sample blood-collection needle and vacuum container exempt as a hypodermic needle or syringe?
No. Although Texas exempted medical hypodermic needles and syringes, it treated the combined multiple-sample needle and vacuum collection container as taxable.
Did a golf cart modified to transport a totally disabled person qualify for Texas's prosthetic-device exemption?
No. Texas said the golf cart was not prosthetic medical equipment even after modification, so the purchaser was not entitled to a tax refund.
Were fees for combining advertisers' videos and playing copies in malls and airport lounges taxable?
No. Texas treated the display service as nontaxable, but the provider had to pay tax on monitors, dubbing equipment, blank tapes, and other inputs.
Were advertising charges in a home-shopping publication taxable, and who paid tax on its production?
The advertising charges were not taxable. The publisher paid tax on production materials and supplies and on outside printing charges.
Can a provider of taxable amusement services buy the gas and electricity it uses tax-free in Texas?
No. Utilities used to provide taxable amusement services are themselves taxable — the Legislature chose not to exempt utilities used to provide amusement services, and gave no utility exemption to any…
Was a 10% handling charge added to a third party's taxable seismic-tape copying cost itself taxable?
No. The geophysical provider correctly paid tax to the copying vendor, but its 10% handling add-on was part of its nontaxable service.
Can a parent company take over its wholly owned subsidiary's assets without owing sales tax on the transfer?
Yes — if the assets come up to the parent as a liquidating dividend. The distribution of property by a corporation to its stockholder as a liquidating dividend is excluded from the definition of 'reta…
Did a manufacturer rebate received after buying a battery reduce the taxable sales price?
No. The full price remained taxable because the rebate came later. Cash discounts, coupons, or store rebates reduced tax only when taken at the time of sale.
Is a body-worn appliance that protects the hips from fracture in a fall exempt from sales tax as medical equipment or a prosthetic aid?
No — it is taxable. Robert C. Ferber (of Prevent-Wise, Inc.) invented HIP-GUARD, a protective body-worn appliance meant to shield an older person's hips from fracture or dislocation if they fall onto …
A mail-order company distributes catalogs through an airline's on-board program (paying the airline a sales commission) and ships merchandise to New York customers who order from those catalogs — does the company owe New York franchise tax, and does it have to collect New York sales tax?
The company is exempt from Article 9-A franchise tax under federal Public Law 86-272 because its only New York activity is order solicitation followed by shipment from outside the state. But it must s…
When does adding square footage or finishing out space in an existing Texas structure count as 'new construction'?
The work is treated as new construction. New construction includes all new improvements to real property, including finish-out work done at any time before an area is first occupied (for example, fini…
Are services a parent corporation provides to its subsidiaries — and services one subsidiary provides to a joint venture — subject to Texas sales tax?
The parent corporation's services to its two subsidiaries are not taxable, but only if all the entities report to the IRS on a single consolidated income tax return for the tax year the transactions o…
Which charges for surveying and drafting to locate a pipeline right-of-way are subject to Texas sales tax, and which are not?
Charges to establish a pipeline right-of-way are taxable surveying of real property, because the work determines the boundaries of the right-of-way and of the land the pipeline crosses. Taxable work a…
Is dry ice and packing material used to ship perishable products in disposable coolers subject to Nebraska sales tax?
Not if it's part of the disposable package sold to the customer. Under Revenue Ruling 01-88-7, dry ice placed with other packing materials into an insulated cooler containing meat products the taxpaye…
Is the electricity used in timeshare condominiums that are occupied for less than 30 days at a time taxable in Texas?
Tax is due. Electricity used in the timeshare condos does not qualify as exempt residential use under Rule 3.295 when a unit is occupied for periods of less than 30 days, so the electricity consumptio…
New York Advisory Opinion TSB-A-88 (16)I: Issue raised is whether an individual domiciled outside New York State is a New York State resident, pursuant to section 605(b)(1)(B) of Article 22 of the Tax Law, when the individual spends in the aggregate more than 183 days in New York State but maintains a permanent place of abode in New York State for only a portion of the year.
No. The Department ruled that a non-New York-domiciled individual is not a New York statutory resident under Tax Law § 605(b)(1)(B) - even after spending 200 days in New York during the year - because…
Does Texas sales tax apply to the sale and hauling of dirt, sand, caliche and rock, and does it matter whether the material has been processed?
As of June 13, 1988, Texas no longer taxes the sale or transportation of unprocessed materials such as sand, dirt, and gravel. Materials that have been processed — crushed, mixed, or subjected to any …
Can a Direct Payment Permit holder get a refund of only the local (city) sales tax it paid a seller, using an exemption certificate?
No. A buyer that holds a Direct Payment Permit cannot obtain a refund of only the local sales tax it paid to a seller; the exemption certificate it issued for that purpose is not valid, and the local …
Are the data-processing services a jointly owned title plant buys taxable, and are the shareholders' cost-share reimbursements taxable too?
The data-processing services are taxable to the title plant when it purchases them. When the jointly owned title plant later charges its title-insurance shareholders for their share of those costs, th…
Does a corporate insurance general agency owe New York franchise tax merely because it's licensed by the New York Insurance Department, licenses independent agents in New York, reviews insurance applications from New York residents, or has its issuing insurers accept and sell policies in New York?
No. None of those activities — insurance licensing, licensing/appointing independent agents in New York, reviewing applications generated by those agents outside New York, or the issuing insurer selli…
When a mortgage banking company packages New York mortgage loans into FNMA/GNMA certificates and sells them, how much of its origination fees, servicing fees, sale gains, and interest income counts as New York business receipts for the corporate franchise tax?
Only the gain -- not the full sale price -- on FNMA and GNMA certificate sales counts as a business receipt, and it (along with origination fees, servicing fees, and interest) is New York-sourced only…
Which dirt, sand, gravel, and limestone products are taxable in Texas, and does washing, sizing, crushing, or mixing make a difference?
Materials sold in their natural state are not taxable, and neither is the transportation charge — this covers sand, fill dirt, and top soil dug from the earth, gravel that has only been washed and scr…
Is a tour that is primarily transportation to and from a destination a taxable amusement service in Texas?
No. Where a tour is primarily transportation to and from a destination — here, a ranch to which customers buy their own admission tickets and pay tax on those tickets separately — the tour is not an a…
Is installing a legally required underground vapor-recovery system at a gas station a capital improvement (so the contractor's charge is not taxable)?
It can be — but only if the installation is intended to be permanent. Larry E. Tyree Co., Inc. asked whether installing a vapor-recovery system (underground piping that returns gasoline fumes to the u…
Are charges for boat lift and boat ramp services — used to launch and reload boats — taxable amusement services in Texas?
No. Charges for a boat lift — a hoist operated by the business to lift customers' boats for launching and re-loading — and for boat ramp services that let customers use the ramp to launch and load the…
Is the transportation charge to return a repaired trailer taxable, and does it matter whether the repaired item is a motor vehicle?
The transportation charge to return a repaired trailer is not taxable. Because a tube trailer is a motor vehicle, its repair labor is nontaxable and the separately stated parts are taxable — and the c…
When a contractor assembles or installs lockers, racks, and similar items, which charges are subject to Texas sales tax?
It turns on assembly versus installation. If you assemble tangible personal property — such as bolting together locker parts, building a wire cage, or hooking together pallet/drive-in racks — the tota…
Is the merchandise a security company buys during secret (mystery) shopping taxable, and how should it be billed alongside the taxable security service?
The merchandise itself is not taxed if it is bought and then returned to the client for a refund — that is treated as a return of merchandise, separate from the taxable surveillance and polygraph serv…
Does Texas use tax apply to equipment brought in from out of state, and what is the one-year exception?
Equipment brought into Texas from out of state is subject to Texas use tax on its purchase price. You get credit against the Texas tax for sales or use tax legally due and paid to another state on non…
Were amusement tickets given in exchange for advertising or other promotions subject to South Carolina's admissions tax?
Yes. RR 88-11 held that amusement tickets exchanged for radio or television advertising or other promotional services are 'paid admissions' subject to the 4% admissions tax under § 12-21-2420, because…
Did a pharmaceutical company's South Carolina representatives stay within Public Law 86-272's protection for soliciting orders?
No. The combined activities exceeded protected solicitation: representatives effectively accepted promotional orders and issued rebates, broker managers supervised independent brokers, and national-ac…
Does Texas sales tax apply to frac tank rentals and the set-up, transportation, and related charges billed with them?
Frac tank rentals are taxable in Texas, and so are the set-up charges (mobilizing, transporting, testing, connecting, and disconnecting the tanks) because those are services connected with the rental.…
When a photographer briefly lends a client a print or transparency just to reproduce it (then gets it back), is that a taxable sale?
No — it is not a taxable sale. Jim Bush Photography, a commercial photographer, lets clients temporarily hold a print or transparency solely to reproduce it in a promotional publication; the client ma…
Is the labor to install parts like batteries, shocks, and mufflers during a motor vehicle repair subject to Texas sales tax?
No, under the rule change described in this September 1988 policy letter. The Deputy Comptroller said batteries, shock absorbers, mufflers, and similar items sold as part of an automobile repair, toge…
Are claims-adjusting services an insurance agency performs for an insurance carrier taxable in Texas?
Yes. Claims-adjusting services an insurance agency performs for an insurance carrier are taxable insurance services under Rule 3.355. Insurance coverage (for which premiums or sales commissions are pa…
Do I owe Nebraska income tax on a lump-sum payment I got from the railroad as an early-retirement incentive?
Yes — it's taxable. Under Revenue Ruling 22-88-5, individuals who receive lump-sum railroad payments as incentives for early retirement must include those distributions as income for Nebraska individu…
Can an out-of-state life insurance company that isn't licensed to do business in New York buy mortgages secured by New York real estate for investment without owing New York franchise tax?
Yes -- because the company isn't authorized to transact business in New York under an insurance certificate of authority, it owes no premiums tax under section 1510, and section 1505 caps its total Ar…
New York Advisory Opinion TSB-A-88 (15)I: Issue raised is whether income from trading activities is exempt from personal income tax pursuant to section 631(d) of the Tax Law, where a nonresident individual trades a security account under an arrangement with a partnership that does nothing but trade securities for its own account.
No. The Department ruled that a nonresident individual who trades a securities account funded by a partnership's capital, in exchange for an increasing percentage share of the account's net trading pr…
Douglas Condon (Trager, Glass & Co., CPAs) asked how New York's now-repealed 1987-1988 tax on unearned income applies to a resident individual's income from an S corporation that made the New York S election, and from rental real property, across five ownership/participation/salary scenarios.
New York unearned income includes S-corp and rental-property income that flows into New York adjusted gross income, reduced only by whatever portion qualifies as 'earned income' - a reasonable allowan…
Is a data-transmission service taxable as telephone/telegraph service, and must the provider charge tax on the receivers it sells and installs?
Yes on both, with an interstate carve-out. Peat Marwick Main & Co. asked, for a client ('XYZ Corporation'), how New York sales tax applies to a data-transmission business that moves data over dedicate…
When a printer produces free advertising materials mailed in and out of New York, who owes sales/use tax and on how much?
It depends on who does the mailing. Freed Maxick Sachs and Murphy, P.C. asked how sales/use tax applies when it hires advertising agencies and printers to make promotional materials (ads, catalogs, li…
Can a trade-show installer subtract its supervisors' costs and other expenses from the amount of a taxable service charge?
No. I & D Inc. assembles and disassembles trade-show exhibits and asked whether it could carve its supervisory-personnel costs (and their related duties — hiring laborers, arranging shipment, buying p…
Is a monthly financial newsletter of stock recommendations a tax-exempt periodical, or a taxable information service?
It is a taxable information service, not an exempt periodical. Generic Stock Investment Service, Inc. publishes a monthly newsletter of financial investment information — mostly analysis and buy/sell …
What tax exemptions applied to Texas university employees' hotel stays and vehicle rentals on official business?
The letter allowed an official-business employee to give a hotel a state-tax exemption certificate, with local hotel tax still due. STAR later clarified the vehicle rule: an employee may issue a renta…
Are freight charges billed directly by a third-party carrier to the buyer part of the taxable sales price in Texas?
No. The Comptroller agreed that transportation charges a third-party carrier bills directly to the purchaser are not included in the taxable 'sales price' — so no sales or use tax is due on them — whe…
In a nonresidential remodeling job, which installation, freight, and service charges are taxable, and which stand-alone services can be excluded?
In a nonresidential remodeling job (here, a hotel renovation), the renovator charges tax on the total contract price, including installation, warehousing of construction materials, and freight — minus…
Is the sale of sand, dirt, and gravel taxable in Texas, and does washing, sorting, or mixing change the answer?
The sale of unprocessed sand, dirt, and gravel is exempt from Texas sales and use tax. Washing and sorting these materials is not considered processing, so they stay exempt. But crushing, mixing, or c…
Is repair work on a pleasure yacht taxable in Texas, and when does the commercial-vessel exemption apply?
Yes — repairing a pleasure yacht is taxable. Pleasure yachts are tangible personal property under Rule 3.292, so a repairman is a retailer who must hold a tax permit and collect tax on the entire char…
If a New York corporation dissolves but keeps holding title to real property purely as a nominee for other people's benefit, does it still owe corporation franchise tax and stay subject to a franchise-tax lien?
No -- a dissolved corporation that does nothing but hold record title to real property as nominee for the beneficial owners, with no business activity of its own, is not "conducting business" under se…
Does an out-of-state shell corporation that only holds title to New York land, as a nominee to hide the real buyers' identity from neighbors, owe New York corporate franchise tax?
Yes, but only for the years it existed while holding title -- an inactive foreign corporation that is a New York record title holder for others' benefit is doing business under section 209.1 and Regul…
Is the rental of equipment like a sand and gravel plant taxable, and does leasing it together with real property change the answer?
Renting tangible personal property such as a sand and gravel plant is taxable. But the lease is not taxable if the same contract also includes the lease of real property — for example, leasing the pla…
Do professionals like lawyers, engineers, and architects have to charge Texas sales tax on extra copies of documents they give clients?
No. In this internal Comptroller policy memo, the agency states it will not require professionals — such as lawyers, engineers, and architects — to hold a sales tax permit and charge tax on additional…
How does Texas decide whether sand, gravel, and similar materials — and the charge to deliver them — are taxable?
Materials that are only washed or sorted count as unprocessed — the material and its delivery charge are not taxable, however billed and whether the customer picks it up or the seller delivers it. Any…
Must a tax-exempt nonprofit collect sales tax on items sold from a temporary table set up at its meetings?
No — not on these facts. The Richard Wagner Society of NY, Inc., a 501(c)(3) organization exempt under Tax Law § 1116(a)(4), sells Wagner-related books, records, and similar items (mostly by mail, but…
Can a printer get a New York refund of sales tax paid on production machinery after already losing a hearing on the assessment?
No. Express Printing Co. sought a refund of $7,162.33 in sales/use tax it said was paid on machinery and equipment used directly and predominantly to produce tangible personal property for sale. The D…
Does Texas tax charges to access a foreign company's electronic mailbox, and does the company owe Texas franchise and sales tax?
Charges to access a foreign company's electronic mailbox are a telecommunications service, and Texas sales tax applies when the accessing call is placed from a point within Texas — regardless of where…
Is a hospital's purchase of an infant incubator exempt from Texas sales tax?
Yes. A hospital's purchase of an infant incubator is not subject to Texas sales tax because the incubator qualifies as a prosthetic device under Comptroller's Rule 3.284. The incubator maintains an in…
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