Were a common carrier's natural gas, electricity, local exchange service, and certain interstate telephone services exempt from Texas sales tax?

Plain-English summary

The Comptroller said Texas law did not exempt natural gas or electricity used by a common carrier. Rule 3.295(a)(1) and (c) taxed those utilities when used to provide a commodity or service.

The carrier also had no general exemption for telecommunications services. As of October 1, 1987, basic local exchange service and certain interstate long-distance services were taxable. An interstate call was taxable when it both originated from and was billed to a telephone number or service address in Texas.

What this means for you

Common-carrier status did not create the exemptions asserted in this 1988 letter. The call-origin and billing test and the quoted effective date are historical.

Common questions

Were the carrier's gas and electricity taxable? Yes.

Was basic local exchange service taxable? Yes, under the historical rule.

Which interstate calls were taxable? Calls originating from and billed to a Texas number or service address.

Citations and references

• 34 Tex. Admin. Code Rule 3.295(a)(1) and (c), cited for natural gas and electricity.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8802L0869A09

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

February 4, 1988

Dear ****:

On behalf of Mr. Bullock, I hope you'll accept my apology for the delay
in answering your question involving changes in the sales tax law. This
isn't the way we normally do business.

Our people were, and still are, swamped by a deluge of inquiries as they
attempted to interpret provisions of the new law and draft rules which
would not adversely impact businesses. In many instances, an answer to a
question just wasn't available when the question arrived.

Natural gas and electricity used by a common carrier in Texas are tax-
able. The Texas sales tax law does not exempt natural gas or electricity
used by carriers. On the contrary, the Texas sales tax law specifically
taxes natural gas and electricity used in providing a commodity or
service. See sections (a)(1) and (c) of Rule 3.295 - Natural Gas and
Electricity.

The Texas sales tax law does not exempt telecommunication services used
by a common carrier. As of October 1, 1987, basic local exchange service
and certain interstate long distance telephone services became taxable.
Interstate long distance telephone services that both originate from and
billed to a telephone number or service address in Texas are taxable.

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 our toll-
free number 1-800-531-5441. The regular number is 512/463-4600. You may
write me at the Tax Policy Division.

Sincerely,
Eddie C. Washington
Tax Policy Division

This document contains the phrase predominate use. The spelling predominate is an alternate spelling for the word predominant.