Ezel / Tax Rulings / TX
TX 9003L0994E02 Sales and/or Use Tax (State,Local,MTA) 1990-03-22

Could a contractor buy natural gas tax-free while using it to test and balance HVAC units and keep pipes from freezing during construction of a public high school?

Short answer: Yes. The gas was used in performing the construction contract, so the contractor could claim exemption if the high school was public. The utility exemption certificate had to identify the exempt school entity and the project.

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This page answers the general question as of 1990. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1990
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A general contractor nearing completion of a new high school used natural gas to test and balance large heating and cooling units and to keep pipes from freezing overnight.

The Comptroller treated the gas as used in performing the construction contract. If the high school was a public school, the contractor could claim a sales-tax exemption. The certificate given to the utility had to identify both the exempt entity and the project for which the gas was purchased.

Common questions

Was the construction-period gas exempt? Yes, if the school was public.

What did the certificate need to identify? The exempt entity and the specific project.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller March 22, 1990

Dear *****:

Thank you for your letter regarding sales tax exemption on natural
gas based on the following facts:

We are a general contractor building a new high school. The
building is within 30 days of completion. The building has
very large gas heating and cooling units. We have turned
these units on to test and balance them and to keep pipes
from freezing at night. The school district has already paid
for said units installed in their building. The account is
carried in the name of *****.

The natural gas used in the above manner is considered to be used
in the performance of the contract. If the high school is a
public school, sales tax exemption can be claimed. The exemption
certificate to be issued to the utility company must identify the
exempt entity and the project for which the natural gas is purchased.

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

If you have any questions or need additional information, you may
call me toll free at 1-800-252-5555, extension 3-4666, or the
regular number 512/463-4666. You may write to me at Tax Corre-
spondence, Comptroller of Public Accounts.

Sincerely,
Jo Ann Dieck
Tax Correspondence

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