Was electricity used to operate pipeline telemetering devices exempt from Texas sales tax?

Plain-English summary

The Texas Comptroller said electricity used to operate gas-pipeline telemetering devices was taxable.

The taxpayer explained that the devices transmitted volumes, pressures, alarms, and other data over telephone lines and that the data was necessary to move gas to customers. The Comptroller nevertheless focused on the devices' function: they did not actually transport the gas through the pipelines.

What this means for you

Pipeline operators

Operational importance alone did not establish exemption. The letter distinguished transmitting data about gas movement from physically transporting the gas.

Telemetry and metering businesses

Electricity powering data transmitters and receivers remained taxable on the stated facts, even though the transmitted information was necessary to operations.

Accountants and tax professionals

Document the equipment's actual function. This letter treated monitoring and data transmission differently from the transportation process itself.

Common questions

Q: Did the devices transmit pipeline operating data?
A: Yes. The request identified volumes, pressures, alarms, and similar data.

Q: Was that data necessary to deliver gas to customers?
A: The taxpayer said it was, but the Comptroller still found the electricity taxable.

Q: Why was the electricity taxable?
A: Because the telemetering devices did not actually transport gas through the pipelines.

Citations and references

• The letter cites no statute or administrative rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8412L0606C06

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

BOB BULLOCK
Comptroller December 19, 1984

Dear **:

Thank you for your recent letter to Mrs. Hutcheson, she has asked me to
respond.

The telemetering devices you mention do not actually transport the gas
through the pipelines. Therefore the electricity to operate them is
taxable.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact me if you have additional questions. You
may write me, call toll free 1-800-252-5555 from anywhere in Texas or
phone 512/475-1931.

Sincerely,
Al Van Allen
Tax Policy Section
Tax Administration Division

November 29, 1984

Ms. Wanda Hutcheson
Tax Policy Division
P. O. Box 13528
Austin, Texas 78711

Re: Sales Tax Exemption

Dear Ms. Hutcheson:

Pursuant to our telephone conversation, I am writing you concerning
the taxability of electricity used to operate certain telemetering
devices
used in the transportation of gas through pipelines.

A telemeter is an instrument which transmits data from point to point.
There is a transmitter at one end and a receiver at the other end, and
the
data which is transmitted is carried over telephone lines. The data
trans-
mitted includes volumes, pressures, alarms etc. Without this data, the
transportation of gas to the customer could not be accomplished.

It is my belief that the electricity used to run these devices should
be exempt from sales tax. I would appreciate your reply to this request
as soon as possible. Should you have any questions, please feel free to
contact me at **.

Very truly yours,