TX 9003L1058D06 Sales and/or Use Tax (State,Local,MTA) 1990-03-30

Did qualifying as a small-power producer or cogenerator automatically exempt the firm's natural-gas or electricity purchases from Texas sales tax?

Short answer: No. Such firms were excluded from the rule's electric-utility definition, so they did not receive the utility provision automatically and needed a predominant-use study to establish any exemption.

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

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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

Qualifying as a small-power producer or cogenerator under Rule 3.295(a)(2) did not automatically exempt the firm's natural-gas or electricity purchases.

The rule excluded those firms from the definition of an electric utility, so the electric-utility provision in subsection (a)(5)(D) did not apply. The firm instead needed a study under subsections (d) and (e) to determine whether its predominant use of natural gas or electricity qualified for exemption.

Common questions

Was qualifying-generator status enough for exemption? No.

Why not? The rule excluded qualifying small-power producers and cogenerators from the electric-utility definition.

What did the firm need to do? Conduct a predominant-use study under the cited rule provisions.

Citations and references

34 Tex. Admin. Code Rule 3.295(a)(2), (a)(5)(D), (d), and (e) (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/9003L1058D06

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller March 30, 1990

Dear ** :

Thank you for your letter of March 21, 1990, requesting confirma-
tion of the information provided by Ms. Candace Miller of our Tax
Assistance Division.

A firm that meets the definition of a "qualifying small power pro-
ducer" or a "qualifying co-generator" as specified in section (a)(2)
of Rule 3.295 - Natural Gas and Electricity does not automatically
qualify for exemption from sales tax on purchases of natural gas or
electricity. Firms qualifying as small power producers or qualifying
co-generators are excluded from the definition of an electric utility.
This means that section (a)(5)(D) does not apply to such firms.

Because your firm is not an electric utility, it is required to have
a study to determine if the predominant use of natural gas or elec-
tricity qualifies for exemption. See sections (d) and (e) of the rule.

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, you may call toll
free 1-800-252-5555, ext. 3-4683. The regular number is 512/463-4600.
You may write to Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Eddie C. Washington
Tax Correspondence

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