Is the electricity used in timeshare condominiums that are occupied for less than 30 days at a time taxable in Texas?

Plain-English summary

A timeshare association asked the Comptroller whether Texas sales tax is due on the electricity used in its condominium units. The association manages 42 timeshare condos owned by several hundred owners; each ownership share entitles the owner to one or more weeks of occupancy per year. Owners pay an annual maintenance fee that includes an amount for electricity, the utility bills the association, and the association pays the electric bill out of that maintenance fee.

The Comptroller's answer: tax is due on the electricity. Residential use of electricity is exempt, but under Rule 3.295 a unit occupied for a period of less than 30 days does not qualify as residential use. Because the timeshare condos are occupied a week or so at a time — well under 30 days — the electricity is treated as nonresidential and the consumption is taxable. It does not matter that the association, rather than the individual owners, pays the utility bill.

What this means for you

Timeshare and short-stay lodging operators

The 30-day line is what controls the residential-use electricity exemption. If your units turn over in stays shorter than 30 days — as timeshares typically do — the electricity is nonresidential and taxable, even when a homeowners' or timeshare association pays the utility bill collectively out of maintenance fees.

Associations that pay utilities out of maintenance fees

Paying the electric bill through pooled maintenance fees does not convert short-stay usage into exempt residential use. The taxability turns on how long units are occupied, not on who cuts the check to the utility.

Common questions

Q: Is electricity used in a timeshare condo exempt as residential use?
A: No, not when occupancy is for periods of less than 30 days. Rule 3.295 excludes stays under 30 days from residential use, so the electricity is taxable.

Q: Does it matter that the association pays the utility bill, not the owners?
A: No. The Comptroller looked at the length of occupancy, not who pays the bill, so the electricity is still taxable.

Q: What is the key threshold?
A: 30 days. Occupancy periods of less than 30 days do not qualify as residential use under Rule 3.295.

Q: Can I rely on this 1988 letter for my own property?
A: Treat it as guidance only. It is based on the specific facts presented and can change with different facts; on the STAR system it binds the Comptroller only as to the taxpayer it was issued to and may no longer reflect current policy.

Citations and references

Rules:

• 34 Tex. Admin. Code Rule 3.295 (residential use of gas and electricity; occupancy of less than 30 days does not qualify as residential use)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8810L0904A13

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller October 5, 1988

Dear ***:

Thank you for your recent inquiry regarding the taxability of electricity
consumed by *** Timeshare owners.

*** Timeshare Association manages a group of forty-two (42)
timeshare condos which are owned by several hundred owners. Ownership in
a
condo entitles the owner to one or more weeks of occupancy. Each owner
pays
an annual maintenance fee which includes an amount for electricity. The
supplier of electricity, UTILITY A bills ** Timeshare Associa-
tion. **** Timeshare Association pays the utility bill for the
condo owner, out of the annual maintenance fee. You asked if tax is due
on the consumption of electricity in the condos.

Based on the information contained in your letter and in a subsequent
phone conversation between you and Tom Grimes of our office, it has been
determined that when a condo is occupied for a period of less than 30
days,
the electricity does not qualify as residential use as defined in Rule
3.295 and tax is due on the consumption of electricity.

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 1-800-252-5555, ext. 34696. The regular number is 512/463-4600.
You
may write me at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
(Mrs.) Jo Ann Dieck
Tax Correspondence