Is residential gas and electricity exempt from Texas county sales tax?

Texas AG Opinion JM-1079: Is Residential Gas and Electricity Exempt From County Sales Tax?

Plain-English summary

Comptroller Bob Bullock spotted what looked like a contradiction in the Tax Code and asked the Attorney General to sort it out. The question was narrow but had real money behind it: when a county levies a sales tax, does that tax reach residential gas and electricity bills, or are home utilities exempt?

The confusion came from two neighboring statutes. Section 323.206(a) says the county sales tax applies to a sale only if the state sales tax also applies. The state exempts residential (non-commercial) gas and electricity from sales tax under section 151.317, so under 323.206(a) the county tax would not reach home utilities either. But section 323.206(c) said subsection (a) does "not apply" to county taxes on gas and electricity for residential use, which read as if it were pulling home utilities back into the county tax. Meanwhile, section 323.207 pointed the other way, applying the state exemptions (including the one for residential utilities) to the county tax. The Comptroller wanted to know which provision controlled.

The Attorney General agreed the provisions were ambiguous read together, and resolved the ambiguity by looking at where they came from. Title 3 of the Tax Code, which contains sections 323.206 and 323.207, was enacted in 1987 as a recodification, and the 1987 act expressly said it was "intended as a recodification only," with "no substantive change in the law." When a recodification is unclear, courts look back at the source statutes to figure out what was meant. The source law for section 323.206 was former article 2353e, and nothing in that repealed article withdrew the county exemption for residential gas and electricity. In other words, subsection (c) had no counterpart in the old law; it appears to have crept in during the codification process. A letter to the AG's office from the Legislative Council, which drafted the codification, confirmed the insertion was inadvertent.

Because the legislature intended no substantive change, and no source provision authorized taxing residential utilities at the county level, the AG concluded the legislature did not intend to subject residential gas and electricity to the county sales tax. To the extent subsection (c) purported to withdraw the exemption, it should not be given effect. Residential-use gas and electricity remained exempt from the county sales tax under sections 323.206(a) and 151.317(a).

Currency note

This opinion was issued in 1989. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The Tax Code sections discussed here have been amended since 1989, and the drafting glitch this opinion identified may have been corrected by later legislation. The section numbers and the exemption described here reflect the Tax Code as it stood in 1989. Anyone with a present-day question about local sales tax on utilities should check the current Tax Code text and current Comptroller guidance.

Who this opinion affected (as of 1989)

The Comptroller and taxing counties: The opinion told the Comptroller, who administers the tax, to treat residential-use gas and electricity as exempt from the county sales tax and not to give effect to the conflicting subsection (c).

Residential utility customers in counties with a sales tax: The opinion meant home gas and electricity bills were not subject to the county sales tax, matching their treatment under the state sales tax.

Utility companies collecting the tax: The opinion resolved which provision to follow when billing, confirming the residential exemption applied at the county level as well as the state level.

Common questions

Were home gas and electricity bills subject to the county sales tax?
No. The Attorney General concluded residential-use gas and electricity were exempt from the county sales tax under Tax Code sections 323.206(a) and 151.317(a).

What about section 323.206(c), which seemed to say the opposite?
The AG found that subsection had no counterpart in the prior law and had been inserted inadvertently during the 1987 recodification. Because the recodification was meant to make no substantive change, subsection (c) should not be given effect to the extent it purported to withdraw the exemption.

How did the Attorney General decide which provision controlled?
By tracing the statutes to their source. The 1987 act said it was a recodification only. Courts resolve unclear recodified provisions by looking at the statutes they came from, and the source law (former article 2353e) did not withdraw the county exemption for residential utilities.

Does the state also exempt residential gas and electricity?
Yes. Section 151.317 exempts gas and electricity from the state sales tax except when sold for commercial use, and because the county tax applies only where the state tax applies, the same exemption carried over to the county tax.

Background and statutory framework

The Comptroller asked how to resolve an apparent conflict between sections 323.206 and 323.207 of the Tax Code over whether residential gas and electricity sales are exempt from the county sales tax. Section 323.101 authorizes certain counties to adopt a sales tax, imposed on "the receipts from the sale at retail of taxable items within the county." Tax Code § 323.103.

Section 323.206(a) provides that the county sales tax does not apply to the sale of a taxable item unless the state sales tax imposed by Subchapter C, Chapter 151, also applies. The state sales tax is imposed on the sale of a taxable item in the state, Tax Code § 151.051, subject to the exemptions in Subchapter H of Chapter 151, including section 151.317, which exempts gas and electricity from the state sales tax except when sold for commercial use. See Tax Code § 151.317(c) (defining "residential" and "commercial" use). Subsection 323.206(c), however, states that subsection (a) does not apply to county taxes on the "sale, production, distribution, lease, or rental of . . . gas and electricity for residential use," which appeared to say residential utilities were not exempt from the county tax even though they are exempt from the state tax. Section 323.207, by contrast, provides that the exemptions in Subchapter H of Chapter 151 apply to the county tax (except as provided by section 151.317(b), which deals with city taxes), which would carry the residential exemption over to the county tax.

The opinion agreed these provisions, read together, were ambiguous. It resolved the ambiguity through the history of the recodification. Title 3 of the Tax Code was enacted in 1987 as part of the state's statutory revision program, which contemplates revising the statutes "without substantive change." Tax Code § 301.001; Acts 1987, 70th Leg., ch. 191, at 1410. Section 13 of the 1987 act stated the act was "intended as a recodification only," with no substantive change intended. When recodified provisions are unclear, courts look to the statutes from which they were derived. See, e.g., Stevens v. State, 159 S.W. 505, 506 (Tex. Crim. App. 1913); see also Gov't Code § 311.023 (a court may consider former statutory provisions in construing a statute, whether or not it is ambiguous).

The source law for section 323.206 was former V.T.C.S. article 2353e. See generally H.B. 79, Acts 1986, 69th Leg., 3d C.S., ch. 10. Reviewing repealed article 2353e, the opinion found nothing that withdrew the county sales tax exemption for residential-use gas and electricity as subsection (c) purported to do. The source provision carried forward as subsection (a) imposed the county tax on items subject to the state tax; the other indicated source provision dealt with excise, not sales, tax. Article 2353e was repealed by Senate Bill 888. Acts 1987, 70th Leg., ch. 191, § 12, at 1466.

Because the paramount object of statutory construction is the legislature's intent, and the numerous indications were that the recodification into Title 3 was without substantive change, the opinion concluded the legislature did not intend to subject residential-use gas and electricity to the county sales tax. To the extent subsection (c) purported to withdraw the exemption, it should not be given effect. See, e.g., Ex parte Copeland, 91 S.W.2d 700 (Tex. Crim. App. 1936); Attorney General Opinions JM-136 (1984); H-622 (1975) (giving effect to legislative intent despite a clerical omission in an enrolled bill); see also Jessen Assoc. v. Bullock, 531 S.W.2d 593 (Tex. 1975) (ascertaining legislative intent is the primary object of statutory construction). A letter to the office from the Legislative Council, which drafted the codification, confirmed the insertion of subsection (c) was inadvertent, there being no counterpart in the source law.

Citations

Statutory authorities:

• Tax Code § 323.101 (authority for county sales tax); § 323.103 (tax on receipts from retail sales in the county); § 323.206 (county tax applies only where state tax applies; subsection (c) on residential gas and electricity); § 323.207 (state exemptions apply to county tax); § 151.051 (state sales tax); § 151.317 (gas and electricity exemption; residential vs. commercial use); § 301.001 (statutory revision program)
• Gov't Code § 311.023 (courts may consider former statutory provisions)
• V.T.C.S. art. 2353e (repealed source law for section 323.206)
• Acts 1987, 70th Leg., ch. 191 (recodification of Title 3; § 12 repealing article 2353e); H.B. 79, Acts 1986, 69th Leg., 3d C.S., ch. 10 (source session law)

Cases:

• Stevens v. State, 159 S.W. 505, 506 (Tex. Crim. App. 1913) (courts look to source statutes to construe unclear revisions)
• Ex parte Copeland, 91 S.W.2d 700 (Tex. Crim. App. 1936) (legislative intent given effect despite clerical error)
• Jessen Assoc. v. Bullock, 531 S.W.2d 593 (Tex. 1975) (legislative intent is the primary object of construction)

Attorney General materials referenced:

• Referenced: JM-136 (1984); H-622 (1975)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1079
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1989/jm1079.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative. Case names were confirmed by citation lookup (Ex parte Copeland; Jessen Associates, Inc. v. Bullock).

August 2, 1989

Honorable Bob Bullock
Comptroller of Public Accounts
L. B. J. Office Building
Austin, Texas 78774

Opinion No. JM-1079

Re: Whether the county sales tax applies to residential gas and electricity sales (RQ-1727)

Dear Mr. Bullock:

You suggest that provisions of sections 323.206 and 323.207 of the Tax Code are in conflict with regard to whether residential gas and electricity sales are exempt from the county sales tax. You ask how this conflict should be resolved.

Tax Code section 323.101 authorizes certain counties to adopt a sales tax. If a county has adopted such tax, a sales tax is imposed at a stated rate on "the receipts from the sale at retail of taxable items within the county." Tax Code § 323.103.

Section 323.206 provides in part:

(a) The sales tax authorized by this chapter does not apply to the sale of a taxable item unless the sales tax imposed by Subchapter C, Chapter 151, also applies to the sale.

. . . .

(c) Subsections (a) and (b) do not apply to the taxes authorized by this chapter on the sale, production, distribution, lease, or rental of, and the use, storage, or consumption of gas and electricity for residential use.1

Thus, pursuant to section 323.206(a), the county sales tax applies to a sale only where the state sales tax imposed by the Tax Code applies to the sale. A state sales tax is imposed on the sale of a taxable item in the state. Tax Code § 151.051. The exemptions, which are set out in subchapter H of chapter 151, include section 151.317, which provides that gas and electricity are exempted from the state sales tax except when sold for commercial use. See Tax Code § 151.317(c) (defining "residential" and "commercial" use).

The focus of your inquiry is subsection (c) of section 323.206, which states that subsection 323.206(a) does not apply to county sales taxes on the "sale, production, distribution, lease, or rental of . . . gas and electricity for residential use." Under section 323.206(a), the county sales tax applies only to sales that are subject to state sales tax. Subsection (c) would appear to provide that, although residential gas and electricity sales are exempt from the state sales tax, they are not exempt from the county sales tax.

You say that subsection (c) conflicts on this point with section 323.207 of the Tax Code, which provides:

The exemptions provided by Subchapter H, Chapter 151, apply to the taxes authorized by this chapter, except as provided by Section 151.317(b).2

The exemption in section 151.317(a), for non-commercial gas and electricity sales, is among the state sales tax exemptions provided by subchapter H of chapter 151, which section 323.207 appears to make applicable to the county sales tax. Thus, while subsection (c) of section 323.206 appears to provide that residential-use gas and electricity are not exempt from the county sales tax, section 323.207 indicates that the section 151.317(a) exemption of non-commercial gas and electricity also applies to the county sales tax.

We agree that the provisions of sections 323.206, subsections (a) and (c), and section 323.207, taken together, are ambiguous as to whether residential-use gas and electricity are exempt from the county sales tax.

Title 3 of the Tax Code, of which sections 323.206 and 323.207 are a part, was enacted as part of the state's statutory revision program, which contemplates a "revision of the state's general and permanent statute law without substantive change." Tax Code § 301.001. This title was enacted in 1987. Acts 1987, 70th Leg., ch. 191, at 1410. Section 13 of the 1987 act stated that "[t]his Act is intended as a recodification only, and no substantive change in the law is intended by this Act." See § 13 at 1466; see also Foreword to Proposed Title 3 (Revisor's Report, January 1987); Gov't Code § 323.007 (Statutory Revision Program).

When provisions of statutory revisions are unclear as to their intent and meaning, courts have resorted to the statutes from which the revisions were derived in order to arrive at a proper construction. See, e.g., Stevens v. State, 159 S.W. 505, 506 (Tex. Crim. App. 1913); see also Gov't Code § 311.023 (in construing a statute, whether or not ambiguous, a court may consider former statutory provisions); Collins, Continuing Statutory Revision: Where did the Civil Practice and Remedies Code come from?, 50 Tex. B.J. 134 (1987). The revisor's notes for title 3, the session laws, and the Vernon's edition of the Tax Code all indicate that the source law for section 323.206 was former V.T.C.S. article 2353e.3 See generally H.B. 79, Acts 1986, 69th Leg., 3d C.S., ch. 10, art. 1, §§ 21(B), 23(A), at 21-23. Having reviewed those provisions of repealed article 2353e, however, we find nothing there that withdraws the county sales tax exemption for residential-use gas and electricity, as subsection (c) of section 323.206 purports to do. Section 21(B) provided in part for imposition of the county sales tax on items subject to the state sales tax; this provision is carried forward in the 1987 codification as subsection (a) of Tax Code section 323.206. The other indicated source provision for section 323.206, section 23(A) of repealed article 2353e, dealt with excise and not sales tax. We find no provision, other than subsection (c) of section 323.206, in repealed article 2353e or elsewhere that removes the county sales tax exemption from sales of gas and electricity for residential use.

The paramount object of statutory construction is ascertainment of the legislature's intent. There are numerous indications that the legislature intended that the recodification of law into title 3 be without substantive change. There was no provision among those recodified into title 3 that authorized an exception for residential-use gas and electricity from the exemptions provided for in subsection (a) of section 323.206. Therefore, we conclude that the legislature did not intend to subject residential-use gas and electricity to the county sales tax. To the extent that subsection (c) of section 323.206 purports to withdraw the exemption for such sales, it should not be given effect. See, e.g., Ex parte Copeland, 91 S.W.2d 700 (Tex. Crim. App. 1936); Attorney General Opinions JM-136 (1984); H-622 (1975) (giving effect to legislative intent despite omission of a page of the appropriations bill in the enrolled version due to a clerical error); see also Jessen Assoc. v. Bullock, 531 S.W.2d 593 (Tex. 1975) (ascertaining legislative intent is primary object of statutory construction).

Therefore, it is our opinion that, pursuant to Tax Code sections 323.206(a) and 151.317(a), residential-use gas and electricity are exempt from the county sales tax.4

SUMMARY

Pursuant to Tax Code sections 323.206(a) and 151.317(a), residential-use gas and electricity are exempted from the county sales tax. The provisions of subsection (c) of section 323.206 purporting to except residential-use gas and electricity from county sales tax exemptions should not be given effect.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by William Walker
Assistant Attorney General

Footnotes

[1] Subsections (b) and (d) of section 323.206 deal with excise, and not sales, tax.

[2] Subsection (b) of section 151.317, to which section 323.207 refers, deals with city, and not county, tax exemptions.

[3] Article 2353e was repealed by Senate Bill 888. Acts 1987, 70th Leg., ch. 191, § 12, at 1466.

[4] We think it unnecessary to speculate as to how the provisions of subsection (c), excepting residential-use gas and electricity from county sales tax exemptions, crept into section 323.206 during the codification process. A letter sent to this office in connection with your request from the Legislative Council, which drafted the codification, confirms our conclusion that the insertion of the subsection (c) provisions in question was inadvertent, there being no counterpart provision in the source law on county sales taxes in repealed article 2353e.

Also, we find further examination of section 323.207 unnecessary to the result we reach here, since those provisions indicate consistently with our ruling that non-commercial use gas and electricity are exempt from the county sales tax. We do note, however, that the reference in section 323.207 to subsection (b) of section 151.317 seems anomalous in the context of these codified provisions on county taxes, since the latter provision deals with city, and not county, taxes.