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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Are a club tennis pro's lesson fees, billed on members' monthly club statements, taxable as club dues?
Not taxable — but only if four conditions are met. Asher Kahn (d/b/a Fenway Tennis Shop) is an independent contractor who runs the tennis operation at a private golf club and gives lessons; a member b…
If a corporation's only shareholders personally own the building it leases and pay for improvements to it, can either the corporation or the shareholders claim New York's economic development zone investment tax credit for those improvements?
No -- the credit is denied to both sides: the tenant corporation didn't purchase the property (its shareholders did, as separate legal owners), and the shareholder-landlords, though they did purchase …
Douglas Condon (Trager, Glass & Co., CPAs) asked how New York's Article 22 personal income tax treats a New York resident's income or loss from a corporation that has federal S-corporation status but has not made (and cannot make) a New York S-corporation election, because the corporation does not do business in New York and is not subject to New York's Article 9-A corporate franchise tax.
The New York S-corporation election under Tax Law § 660, and the S-corporation-related modifications tied to it (§ 612(b)(18)-(21), § 612(c)(21)-(22), and § 615(c)(6)), simply do not apply when the fe…
Does a telemarketing charge trigger Texas sales tax, and does soliciting Texas clients from out of state create nexus for those clients?
An out-of-state company's charge to clients for marketing their goods and services by telephone is not itself taxable, so the telemarketer does not need a Texas sales tax permit to solicit accounts. S…
Are transaction-processing services that reformat a customer's own data into reports taxable data processing or a nontaxable information service in Texas?
Reformatting a Texas customer's own transactions into reports that only that customer can use is a taxable data processing service under Rule 3.330(a) — not a nontaxable information service. But a 'lo…
How did Texas tax a leased tractor-trailer containing MRI equipment when the equipment was attached or separately purchased?
The Comptroller's internal response treated the MRI tractor-trailer as a motor vehicle regardless of its medical equipment or function. Equipment attached when the lessor bought the trailer was includ…
When one contract covers both new construction and remodeling, and includes demolition, which charges are taxable in Texas?
When a single contract covers both new construction and remodeling/repair, the taxable and nontaxable portions must be separately stated or the entire project is treated as taxable. Demolition work in…
Is the freight a printer/distributor charges to ship stored business forms to a customer's offices taxable, even when billed separately later?
Yes. Under the revised Rule 3.303, transportation charges billed by the seller to the customer are taxable. A business-forms distributor that stores a customer's forms and later ships portions to the …
Is a refundable country-club or athletic-club initiation fee taxable in Texas, and what about the membership transfer fee?
A refundable initiation fee for membership in a country club or athletic club is not taxable in Texas, but the club's membership transfer fee is taxable. The Comptroller's Tax Policy Committee reached…
Are admission charges to a small folk-music cafe taxable as cabaret charges when food sales are only a small part of the business?
No — the admission charges are not taxable. Philip Ciganer (d/b/a The Towne Crier Cafe) presents small folk-music concerts (about 95 seats, no dance floor) and also sells food and drink. He asked whet…
If a company spins off a manufacturing division (including its New York plant) into a new wholly-owned subsidiary tax-free under IRC section 351, does it have to pay back the New York investment tax credit it already claimed on that plant?
No recapture is required -- because the spin-off qualifies as a tax-free reorganization under IRC section 351 and meets the federal mere-change-in-form conditions (same trade or business, transferor r…
Are freight and installation charges taxable in Texas when equipment is sold delivered and given its final assembly at the customer's location?
When equipment is sold to be delivered and installed, and its final assembly happens at the customer's location, the separately stated freight and installation charges are taxable in Texas. The Comptr…
Are powdered drink mixes like Kool-Aid taxable in Texas after the food exemption was repealed?
Powdered drink mixes such as Kool-Aid are taxable in Texas. The exemption that once covered these mixes was repealed effective October 1, 1987, so their sale has been subject to sales tax since that d…
Were a volunteer Coast Guard-related auxiliary and its separate nonprofit National Board exempt from South Carolina sales and use tax?
No. The volunteer civilian auxiliary was not a federal instrumentality, so its sales and purchases were taxable. Its separate National Board also was taxable because South Carolina gave charitable and…
Are rent-to-own contracts taxable operating leases in Texas, or exempt 'prior contracts' or conditional sales?
The Tax Policy Committee determined that the taxpayer's 'rent to own' contracts — which the taxpayer had argued were actually 'conditional sales' — are operating leases, and they do not qualify for ex…
Are hyperbaric oxygenation, colon hygiene, and cranio-sacral therapy sold for a separate fee by a Texas health club taxable?
Three services a health club offers members for a separate fee are all nontaxable in Texas. Hyperbaric oxygenation and a colon-hygiene session are each nontaxable personal services, and cranio-sacral …
Are the fees a shared computer reservation system charges hotel and vehicle-rental affiliates taxable data processing, or a nontaxable information service?
The reservation-system operator (CORP X) is not providing taxable data processing services to the reservation companies (CORP A and CORP B). It is providing information, but information gathered or co…
Does a direct-response advertising firm charge sales tax to its clients, or pay tax on its own purchases?
It pays tax on its own purchases and does NOT collect tax from clients. Names in News/Direct Response Inc. assembles advertisers into a mass card-deck mailing: it takes each client's printing 'mechani…
If Form 3800N rounds my employee growth up to two, do I qualify for Nebraska's employment-expansion tax incentive without actually hiring two?
No — rounding on the form isn't enough; you must actually add two. Under Revenue Ruling 29-88-3, an expanding business does not meet the increased-employment requirement for tax incentives under the E…
Are high-sugar snacks like fruit roll-ups, cookies, and sugary cereals taxed as candy in Texas, or exempt as food?
Under the 1988 rules, candy is taxable while food and food products are exempt, and the line between them turns not just on ingredients but on marketing intent and other criteria — chocolate kisses (c…
Are enteral and parenteral feeding systems and their supplies exempt from Texas sales tax as prosthetic devices?
Yes. Enteral and parenteral feeding systems are considered prosthetic devices and are therefore exempt from Texas sales tax under Rule 3.284, because they perform the function of one or more vital org…
Is moving a customer's sign to a new location taxable in Texas, and how are servicing, re-facing, and lettering signs taxed?
Simply moving a customer's own sign from one location to another — where you do nothing to the sign but relocate it — is nontaxable third-party transportation, and the re-installation and hole-digging…
How does Texas tax coupons and deli food sales, and what transition relief applied to grocery retailers?
Texas treats all coupons — manufacturer's or store's — as a price discount that reduces the taxable sales price. The Comptroller gave retailers until October 1, 1988 to comply (time to reprogram scann…
Is aerial photogrammetry performed by licensed surveyors and engineers a taxable sale, an exempt professional service, or an exempt information service?
It depends on what is sold. This Modified Advisory Opinion reconsiders TSB-A-87(26)S after Lockwood Support Services supplied fuller facts showing it performs aerial photogrammetry using licensed land…
Is testing commercial underground gasoline storage tanks taxable in Texas?
Testing commercial underground gasoline storage tanks is a nontaxable service in Texas. The equipment used to provide that testing service is, however, taxable to the service provider — the provider p…
Does a 'Write Your Own' flood insurance company owe Texas sales tax on claims-processing services it buys, even though the federal government reimburses it?
A 'Write Your Own' (WYO) company in the National Flood Insurance Program must pay Texas sales tax on the claims-processing and claims-adjustment services it buys, even though the federal government re…
Is resurfacing tennis courts and playgrounds — applying colored coatings and coal-tar sealant, and repairing asphalt or concrete — taxable in Texas?
Repairing existing asphalt and concrete areas, applying colored materials to tennis courts and play areas, and applying protective coatings like coal-tar pitch emulsion are all taxable in Texas — unle…
My 1958 lease, grandfathered because it predates New York's Real Property Transfer Gains Tax, already contains two 30-year renewal options with a rent formula built in. The tenant is now exercising the first renewal, and we're negotiating the exact renewal rent (per the lease's own formula) plus a brand-new, THIRD 30-year renewal option we're independently agreeing to grant, on similar terms. Does either step -- setting the renewal rent, or granting the new independent option -- break the lease's grandfathered status?
Neither step is taxable -- setting the rent for the already-provided-for first renewal option isn't a substantial modification, and the brand-new additional renewal option is analyzed completely indep…
Is stone that a company digs from the earth and cuts to size, then sells uncrushed, taxable in Texas?
Sales tax is due on cut stone. A company that digs stone out of the earth and cuts it to different sizes — selling it without washing, screening, or crushing — has produced tangible personal property,…
How does Texas tax software licensing, customization, installation, and maintenance, and when is related engineering design nontaxable?
Licensing a computer program to a customer is taxable in Texas, and tax is due on the total charge — including customizing, installing, and maintaining it — as is a license to technology conveyed thro…
Is a weather-recording device used to time crop spraying taxable in Texas, or can a farmer buy it under the agricultural exemption?
A device that records weather conditions to determine the best time to spray crops is taxable tangible personal property in Texas, but it qualifies for the agricultural exemption when used on a farm o…
Is testing and balancing air-conditioning and heating systems taxable in Texas, and does separately stating the testing matter?
Balancing air-conditioning and heating systems is not taxable when it is part of new construction or a residential renovation, but the whole lump-sum charge is taxable when done for a non-residential …
When a New York florist takes an order and wires it to another florist, where — and whether — is sales tax collected?
It depends on whether the sale runs through a florist wire (telegraphic/telephonic delivery) association. John Raspante, CPA, asked about a New York client who takes flower orders from the public and …
Are storage charges taxable in Texas — for fur garments, motor vehicles, and other items?
Storing fur garments and storing motor vehicles are specifically taxable services in Texas. But a charge to store other kinds of items — when it is not connected with the sale, lease, or rental of the…
Is a grease-control service that adds bacteria to a plumbing system to break down grease taxable in Texas?
A grease-control service that introduces grease-digesting bacteria (Mitey-Bac G) into a plumbing system connected to a sewer is not taxable in Texas. It is not taxable garbage or solid-waste collectio…
Does a vendor owe New York sales tax when an out-of-state buyer has the goods shipped to a New York address?
Yes — the vendor must collect New York tax. C.R. Daniels, Inc., a Maryland corporation registered as a New York sales tax vendor, sells to a purchaser in Pennsylvania and, at that purchaser's request,…
Is an economic-commentary newsletter that comes out only 'approximately' quarterly an exempt periodical?
No — it is taxable. Sage Alternatives, Inc. publishes 'Sage Advisory,' an economic commentary reviewing and analyzing past events for subscribers, which it says comes out 'approximately' quarterly. It…
Are an investment adviser's phone consultations, hotline, and newsletter subject to New York sales tax?
Mostly no — none of the three services is taxable here. Harmonic Research, Inc., an SEC-registered investment adviser, offers (1) consultations, (2) a telephone hotline, and (3) newsletter subscriptio…
Is collecting and transporting materials taxable in Texas when the customer keeps control, and does it matter whether the materials are 'waste'?
Whether collecting and transporting materials is taxable in Texas turns on what the materials are. If they are 'waste,' the collection fee is taxable — and it stays taxable even though the customer ke…
For a car wash, fuel, and quick-oil-change business in Texas, which charges are taxable and which are not?
For a combined car wash, fuel, and quick-oil-change business, the Comptroller said not to collect sales tax on car wash receipts, gasoline sales, or lump-sum quick-oil-change and wiper/belt/hose-repla…
Is collecting and disposing of industrial solid waste taxable in Texas after October 1, 1987, and how do customers claim the exemption and get refunds?
Collecting industrial solid waste — as defined by the Texas Solid Waste Disposal Act (Art. 4477-7), except waste that is garbage or municipal solid waste — stopped being taxable in Texas effective Oct…
New York Advisory Opinion TSB-A-88 (9)I: Issue raised is whether New York State will waive interest and penalties for a 10 year period, on net rental income from a New York building, where the illness and death of a taxpayer's parent caused personal income taxes thereon to be paid inadvertently to the state of the taxpayer's residence.
No. The Department ruled that interest under Tax Law § 684(a) can never be waived, for any reason, once a personal income tax payment is late. As for the separate penalties under § 685(a), a taxpayer …
Is gutting a mall space down to bare walls and slab, then finishing it out, taxable remodeling or nontaxable new construction in Texas?
Stripping a previously occupied mall space down to its bare walls and slab and then finishing it out for a new tenant is taxable remodeling in Texas — not new construction. Remodeling is the replaceme…
When one savings bank buys another for cash through a merge-then-liquidate structure (a reverse triangular cash merger followed by upstream liquidation), do the banks or their shareholders owe New York corporate or personal income tax on the deal?
No New York tax results for the banks or the target's shareholders beyond whatever they owe federally: because the deal is a qualified stock purchase under IRC section 338(d)(3) followed by a tax-free…
Is offshore corrosion-monitoring equipment exempt as drilling equipment in Texas, and when is delivery to a Texas onshore location taxable?
Stray-current corrosion-monitoring systems (the Weld-Alarm and Pola-trak) and the I-Clip storage hardware are taxable in Texas — they are not 'drilling equipment' under Rule 3.332, and they aren't use…
Can a Texas school treat its yearbook sales as its one-day tax-free fundraiser, and what happens to other sales and to delivery timing?
A Texas school or educational organization may elect its yearbook sales as its once-a-year, one-day, tax-free fundraiser — a policy in place since 1984, regardless of the organization's internal order…
Are data-processing services an owner provides to his own S corporations exempt in Texas as transactions between affiliated entities?
Data-processing services that an individual provides to Subchapter S corporations in which he owns more than 50% of the stock are taxable in Texas. The Tax Code § 151.346 exemption for services perfor…
Which surveying services are taxable in Texas, and how should mixed taxable/nontaxable survey jobs be billed?
In Texas, the taxable part of 'surveying' is work that establishes or recovers boundaries; services that don't involve boundaries — such as topographic surveys — are not taxable. Firms doing both must…
Are public-records research, lien searches, and ad valorem tax checks taxable information services in Texas, and is document filing taxable?
Public-records research — title reports, UCC and financing-statement searches, judgment and tax-lien searches, court-suit searches, and ordering certified copies — and checking on payment of ad valore…
Did corporations filing a South Carolina consolidated return have to compute each company's South Carolina net income separately?
Yes. Following Emerson Electric Co. v. Wasson, RR 88-10 required each corporation in a South Carolina consolidated return to compute its own South Carolina net income using its own apportionment ratio…
Could affiliated corporations elect a South Carolina consolidated return, defer gain on an intercompany asset sale, and use one group apportionment formula?
The affiliated companies could elect a consolidated return if they met the control and filing requirements, but South Carolina recognized gain on the intercompany asset sale because it had not adopted…
Could a fiberglass manufacturer buy glass electrodes exempt from Texas sales and use tax?
Yes. Texas concluded that glass electrodes used to manufacture fiberglass qualified for exemption because the electrodes entered into or became an ingredient or component part of the manufactured fibe…
Were charges to maintain cemetery grounds subject to Texas sales tax as lawn-care services?
No. The Texas Comptroller said cemetery grounds would not be considered lawns, so charges to maintain those grounds were not subject to sales tax. The letter described this as a prior ruling intended …
Were unprocessed sand, dirt, gravel, and their transportation charges subject to Texas sales tax under the Comptroller's 1988 policy?
No. A general Texas Comptroller notice said sales tax was no longer due on unprocessed sand, dirt, gravel, or similar materials, and transportation charges for those materials were also nontaxable. Th…
Did a West Virginia resident owe South Carolina sales tax on a car bought from a South Carolina dealer, and could the buyer claim a refund of tax paid?
No South Carolina sales tax was due because West Virginia did not impose sales tax on motor-vehicle sales; its separate 5% title privilege tax did not count. The buyer could not claim the refund direc…
Does Texas tax an event ticket based on where the ticket is sold or where the amusement event occurs?
Texas treated the event's location as decisive. A Texas sale for a Texas event was subject to sales tax on the ticket's face value and convenience charge; a Texas sale for an out-of-state event was no…
New York Advisory Opinion TSB-A-88 (11)I: Issues raised are (1) whether the purchase and sale by the Petitioner, for its own account, of futures contracts on commodities, foreign currencies, debt obligations, indexes and eurodollars will cause the Petitioner to be engaged in a business, trade, profession or occupation in New York State within the meaning of Section 631 of the Tax Law and (2) whether the writing, by Petitioner, of options on indexes, foreign currencies, debt obligations and futures contracts and the exercise, closing out or expiration of such options will cause the Petitioner to be engaged in a business, trade, profession or occupation in New York State within the meaning of Section 631 of the Tax Law.
No. The Department ruled that Kenneth S. Davidson Partners' own-account purchase and sale of futures contracts (on commodities, foreign currencies, debt obligations, indexes, and eurodollars), and its…
Did a change in Texas's dirt-hauler rule alter a drilling-mud seller's deficiency, and how could partial payments preserve a refund claim?
No. The tax policy committee unanimously concluded that the dirt-hauler rule change did not affect the drilling-mud seller, so the deficiency remained in place. Texas would not hold a refund hearing o…
How should a cash-basis university allocate a partial student payment between taxable meals and nontaxable dorm rent?
Texas required the university to allocate each partial payment proportionally between taxable meals and nontaxable dorm rent, using taxable charges divided by total charges excluding tax. In the lette…
Were newspaper advertising inserts shipped into Texas subject to sales or use tax?
It depended on the shipment. Texas said inserts shipped into the state by the advertiser were taxable regardless of transportation method, without requiring constructive possession. But inserts sent d…
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