Ezel / Tax Rulings / TX
TX 8601L0693A14 Sales and/or Use Tax (State,Local,MTA) 1986-01-09

Was electricity used for refrigeration and other operations in a nonprocessing warehouse taxable in Texas?

Short answer: Yes. Electricity used to sell, warehouse, or distribute products without processing was taxable; only qualifying processing-area use could be exempt.

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This page answers the general question as of 1986. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1986
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official 1986 Texas Comptroller taxpayer-response letter addressing electricity used for refrigeration, warehousing, selling, distribution, processing equipment, processing support, displays, and other nonproduction uses. The letter describes Rule 3.295 as it had applied since 1978. Current utility, predominant-use, processing, metering, manufacturing, and sales-tax rules may differ, and STAR documents may no longer represent current policy even when not marked superseded. Letters on STAR can support detrimental reliance only for the taxpayer to whom the letter was directly issued under 34 Tex. Admin. Code Rules 3.1 and 3.10. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The Comptroller said electricity used to sell, warehouse, or distribute a product was taxable commercial use. Rule 3.295 did not treat packing, unpacking, or shelving products as processing, so electricity used in a warehouse where no processing occurred was taxable.

A business that processed items for sale could exempt electricity operating equipment directly used in processing and processing-support equipment in the processing area. Electricity for product displays and other nonproduction uses remained taxable.

Common questions

Was refrigeration electricity in a nonprocessing warehouse taxable? Yes.

Did packing, unpacking, or shelving count as processing? No.

Which electricity could a processor treat as exempt? Electricity for directly used processing equipment and processing-support equipment in the processing area.

Citations and references

  • Texas Comptroller Rule 3.295 — gas and electricity; the letter says the rule had stated since 1978 that processing excluded packing, unpacking, and shelving.

Source

Original ruling text

January 9, 1986

Dear ***:

This is to follow up your request for information on taxability of
electricity for refrigeration in warehousing products for sale.

Electricity used to sell, warehouse or distribute a product has always
been classified as a taxable commercial use.

Since 1978, Rule 3.295 on gas and electricity has stated that processing
does not include packing, unpacking or the shelving of a product.

All of the electricity used by businesses which do no processing, but
which are engaged in selling, warehousing or distributing a product is taxable.

Businesses classified as processors engaged in processing items for sale
can consider the electricity to operate equipment directly used in processing
and used to operate processing support equipment in the processing area as
exempt. Electricity used for operation of equipment used to display
products to the public and any other nonproduction uses is taxable. Electricity
used in a warehouse where no processing is performed is taxable.

Please feel free to contact us if you have additional questions. You may
write us, call toll free 1-800-252-5555 from anywhere in Texas.

Sincerely,

Tax Policy Section
Tax Administration Division

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