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In Texas a magazine published and sold over the internet by a non-profit corporation was considered exempt from sales and use taxes. The company was seen as a charitable and educational organization by the Internal Revenue Service and was exempt from federal income tax. Some publications sold by educational organizations are considered taxable but this particular one was exempt because they did not associate themselves with the "systematic dissemination of knowledge through a formal program of instruction." It should be noted also that even though the publications were made available electronically, via the internet, did not particularly disqualify it from an exemption. (Letter, Texas Comptroller of Public Accounts, No. 200209413L, September 9, 2002)


Because a contractor purchases a security service to monitor a job site during the construction of a university’s student housing, the purchase is considered exempt. Although the exempt status a university carries does not pass through to the contractor, Texas does have an exemption for taxable services used in the performance of a contract for exempt organizations. The exemption is however, limited to those services needed in order to improve reality. The contractor must expressly require the security service to be provided. (Letter, Texas Comptroller of Public Accounts, No. 200207286L, July 22, 2002)


When Texas customers purchased information services over the Internet from companies that sold their information on a nation wide basis, 80% of the transaction was considered taxable. In Texas, 20% of the value of the sale of information services is exempt from state and local tax. However, if these were out-of-state customers, but still accessed information both within and outside Texas, they would be only exempt from Texas sales and use tax if they provided an exemption certificate. (Texas Comptroller of Public Accounts, TX—Letter 200202787L, February 28, 2002)


This occurred because the manufacturing process was not completed until the papers were packaged for shipping. The conveyor that delivered the newspapers for packaging was not a taxable intraplant transportation system. Instead, it was an integrated component of the exempt manufacturing process of a completed newspaper. (Decision of the Texas Comptroller of Public Accounts, Hearing No.37,858, November 1, 1999)


The method by which a fabric company transformed finished second quality fabric, purchased from fabric mills, into first quality fabric constituted processing rather than remodeling and, thus the electricity used at its facility, of which more than 50% was consumed in processing, was exempt from Texas sales tax. The company's process qualified for the manufacturing exemption because it turned unmarketable fabric unsuitable for any retail use into fabric sold in the consumer market. The fact Tthat the area in which processing occurred took up less than 50% of the facility was of no consequence since processing areas normally consume more electricity than office or retail space and the company's utility study confirmed that its processing area used more than 50% of the total electricity consumed in the building. (Haber Fabrics Corp., Texas Court of Appeals, Third District No. 03-99-00272-CV, March 2, 2000.)



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