Could a business obtain an electricity-tax refund when the utility account remained in the prior owner's name?

Plain-English summary

The business had paid electricity bills for years while the utility account remained in the previous owner's name. The Comptroller said the utility company could refund the tax to the current business for periods still within the statute of limitations if the previous owner gave the business a letter assigning the refund right. That assignment letter had to be delivered to the utility company.

The business sold automotive parts and supplies at wholesale. It could claim an electricity sales-tax exemption if a valid twelve-month usage study showed that more than 50% of the electricity was used directly in manufacturing or processing items for sale by operating production equipment. A refund for earlier periods was available if the electricity use had been the same.

The letter stated that the statute of limitations restricted refunds to four years measured from the written refund request. The business also had to retain the electricity study for audit verification; without a valid study, tax, penalty, and interest could be assessed.

Common questions

Did the old account name prevent a refund? No, if the previous owner assigned the refund right in writing for periods still open under the limitation period.

What usage level supported the electricity exemption? More than 50% of electricity over a twelve-month period used directly in manufacturing or processing items for sale.

Could the business claim earlier periods? Yes, if its past electricity use was the same and the periods were within the stated four-year limit.

What records had to be kept? A copy of the valid electricity-usage study.

Citations and references

The reproduced letter does not identify the statute governing the exemption or refund period.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8604L0713C07

Original ruling text

April 1, 1986

Dear ***:

Thank you for your letter regarding sales tax refund on electricity for
periods where you paid the bill under the previous owner's account.

You explained that a sales tax refund has been applied for from COMPANY
A. It was discovered that the electricity account was not transferred
from the previous owner, ***, to you when you purchased the
business in May 1974. The account was transferred to you in August 1983.

After researching your question, it has been determined that the utility
company can refund tax paid under the previous owner's account to you if
you get a letter from the previous owner assigning the right to the
refund to you for those periods within the statute of limitations. The
letter must be given to the utility company.

Our records show that you sell automotive parts and supplies at wholesale.
If you have a valid electricity study of the electricity uses at this
location which shows that over 50% of the electricity over a twelve-month
period is used directly in manufacturing or processing items for sale (to
operate production equipment), you are entitled to claim sales tax exemption.
A tax refund can be claimed if the past use of electricity was the same. The
statute of limitations limits refunds to four years them your written request
for refund.

A copy of the study must be kept in your flies for verification in the
event of an audit by this department. Without a valid electricity usage study,
the tax plus applicable penalty and interest will be assessed.

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

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at the
Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division