Were materials, supplies, and equipment bought by Houston Lighting and Power to support litigation for South Texas Nuclear Power Plant participants exempt from Texas sales tax?

Plain-English summary

The Texas Comptroller found no exemption for materials, supplies, and equipment Houston Lighting and Power bought to support litigation for the benefit of all participants in the South Texas Nuclear Power Plant.

The letter distinguished an exemption in City Public Service's plant contract. That contract was a separated contract for an improvement to realty, so incorporated materials were treated as sold to the exempt entity according to its ownership percentage. The litigation-support purchases were not incorporated materials covered by that rationale.

The Comptroller therefore treated Houston Lighting and Power's litigation-related purchases as taxable.

What this means for you

An exemption tied to an exempt participant's share of incorporated construction materials did not automatically extend to other property purchased for a joint project's litigation effort. The purpose and contractual treatment of the purchased property mattered.

Common questions

Were the litigation-support materials, supplies, and equipment exempt? No. The letter says no exemption was available.

Why had City Public Service received an exemption under the plant contract? Because the contract was separated, involved an improvement to realty, and treated incorporated materials as sold to the exempt entity based on its ownership share.

Did that construction-contract treatment cover Houston Lighting and Power's litigation purchases? No.

Does the letter cite a statute or rule? No.

Citations and references

• The letter's operative statement is: “There is no exemption available for the materials, supplies and equipment purchased by HL&P to support the litigation effort.”
• No statute or administrative rule is cited.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8706L0843A13

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller June 30, 1987

City Public Service of San Antonio
P.O. Box 1771
San Antonio, Texas 78296

Dear -------:

Thank you for your letter concerning the taxability of purchases by
Houston Lighting and Power (HL&P) of materials, supplies and equipment
to support the litigation effort for the benefit of all participants in
the South Texas Nuclear Power Plant (STNP).

There is no exemption available for the materials, supplies and
equipment purchased by HL&P to support the litigation effort. The
exemption provided for City Public Service in the STNP contract was
based on the fact that the contract was a separated contract for an
improvement to realty and the incorporated materials were considered
sold to the exempt entity based on their percentage of ownership. HL&P
property paid tax on their purchases for use in the litigation.

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 me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.

Sincerely,
F. Wayne McDonald
Tax Policy Section
Tax Administration Division