Ezel / Tax Rulings / TX
TX 9003L1114G10 Gross Receipts Tax 1990-03-02

Was city gross-receipts tax or a local franchise fee due from companies outside city limits when a nonutility producer sold electricity to a utility for resale?

Short answer: No. The companies were outside the city, two were not utilities, and the electricity producer sold to an electric utility for resale under § 182.023. If the area were later annexed, the utility serving it would include receipts from the annexed area in its state gross-receipts report.

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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

The internal memo concluded that no city gross-receipts tax or local franchise fee was due under the stated electricity arrangement.

Two companies were not utilities, an electricity producer sold power to an electric utility for resale under Tax Code § 182.023, and all three companies were outside the city's limits.

If the area were later annexed, the utility serving the city would have to include receipts from the annexed area in its gross-receipts-tax report to Texas.

Common questions

Was tax due under the current facts? No.

Why did the resale matter? The memo relied on § 182.023's resale provision.

What changed after annexation? The serving utility would include annexed-area receipts in its state report.

Source

Original ruling text

Date: March 2, 1990

To: Karen Sue McBee

From: Burrell Lankford

Subject: City of ** - Gross Receipts Tax

This is in reference to your request of February 26, 1990,
concerning the City of ** 's inquiry about gross receipts
tax.

Based upon the information furnished in ** 's letter of
February 21, no gross receipts tax would be due for the following
reasons:

  • COMPANY A and COMPANY B are not utility companies.

  • Electricity produced by COMPANY D is sold to COMPANY E who is an
    electric utility who will be reselling the electricity. Section
    182.023 of Chapter 182, provides for a type of resale provision.

  • All three companies involved are located outside the city limits
    of ** .

Since the companies are located outside the city limits of
Sweetwater, I don't think any gross receipts or local franchise
fees would be due the city of Sweetwater.

If the area is annexed, the utility company providing service to
the City of ** , would have to include receipts from the
annexed area in their gross receipts tax report to the State of
Texas.

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