How did Texas's 1988 state, city, county, and transit sales taxes apply to residential and nonresidential electricity?

Plain-English summary

Under the letter's 1988 rules, residential electricity was exempt from state, county, and MTA/CTD sales tax. It was also exempt from city tax except in cities that had voted to retain the 1% city tax on residential use.

Many cities added a half-percent city tax effective January 1, 1988. That additional tax applied to residential electricity only where the city had retained its 1% residential tax.

For nonresidential electricity, adopted half-percent city and county taxes applied to billings for service beginning on or after January 1, 1988. A customer qualifying for a sales-tax exemption on electricity was also exempt from the additional city and county taxes.

What this means for you

This page documents a historical transition in local utility taxation. It is not a current rate guide. The source body discusses electricity only, despite STAR's caption mentioning gas.

Common questions

Was residential electricity subject to state tax? No.

Was residential electricity always exempt from city tax? No. The letter described an exception for cities retaining the 1% residential tax.

When did the new nonresidential local taxes apply? To service billings beginning on or after January 1, 1988 in adopting jurisdictions.

Citations and references

The letter did not cite a rule or statute by number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8803L0866G14

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

March 22, 1988

Dear ****:

This is to follow up our telephone conversation about sales tax
applicable to electricity.

Electricity for residential use is exempt from the state, county, and
Metropolitan Transit Authority/City Transit Department (MTA/CTD) sales taxes.
The electricity is also exempt from the city tax except in those cities that
voted to retain the 1% city tax on residential use. Effective January 1, 1988,
many cities imposed an additional 1/2% city tax. This additional 1/2% city tax
is due if the city retained the 1% city tax on residential use.

The 1/2% city tax and 1/2% county sales taxes are due on nonresidential
use of electricity in those cities and counties that adopted the tax effective
January 1, 1988. The tax was due on billings for service beginning on or after
January 1, 1988. Customers that are claiming sales tax exemption on
electricity are also exempt from the additional city and county sales taxes.

Enclosed are several brochures and rules for your information.

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,
(Mrs.) Jo Ann Dieck
Tax Policy Division