When did motel electricity and natural gas qualify as exempt residential use, and could the motel claim prospective exemption or past refunds?

Plain-English summary

Utilities used inside a room rented to the same person for at least 30 consecutive days counted as residential use under Tax Code section 151.317, but only for the period of that long-term stay.

Utilities used in shorter-term rooms and in common areas—including laundry facilities, pools, parking lots, and area lighting—were fully taxable commercial use. Office and restaurant use was also commercial. Common-area use was not allocated because short-term guests used those facilities too.

If records showed that more than 50% of the motel's natural gas or electricity was consumed by 30-day guests, the motel could claim exemption and refunds for past use within the limitations period. It could not claim exemption prospectively because predominant residential use could not be established in advance.

The motel needed room-availability and occupancy records, each guest's length of stay, utility-consumption data, and other support for residential use.

Common questions

What stay counted as residential? At least 30 consecutive days by the same person.

Were common-area utilities residential? No.

What consumption level supported the exemption? More than 50% residential consumption.

Could the motel claim exemption on future bills? No under this letter; it could claim supported past use within the limitations period.

Citations and references

• Tex. Tax Code § 151.317.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9005L1021G13

Original ruling text

May 14, 1990

Dear **:

This is to follow up our telephone conversation regarding sales
tax exemption on natural gas and electricity purchased by motels
that rent rooms by the night, by the week, and by the month.

Hotels, motels, rooming houses, etc. which are subject to the
hotel occupancy tax do not qualify as "residential." The hotel
occupancy tax is due on the rental, lease, or use of a room or
space in a hotel or motel costing $2.00 or more each day except
when the rental, lease, or use of the room or space is made by
the same person for at least 30 consecutive days.

The utilities used in rooms that are rented to the same person
for 30 or more consecutive days would be considered "residential"
use for purposes of Section 151.317 of the Texas Tax Code. The
utilities used in rooms rented for less than 30 consecutive days
and in common areas such as laundry facilities, swimming pools,
and parking lot and area lighting are totally taxable as commercial
use and are not subject to allocation since these facilities
are also used by persons staying less than 30 days. The utilities
used in offices, restaurants, etc. are taxable as commercial use.
In other words, the only "residential" use is within the rooms
that are rented for 30 or more consecutive days and only for that
period of time.

If the motel can substantiate that over 50 percent of the natural
gas and/or electricity is consumed by persons staying 30 or more
consecutive days, exemption and refund of sales tax on past use
within the statute of limitation period can be claimed. Sales tax
exemption cannot be claimed on future use since predominant
"residential" use cannot be established before the fact.

The motel owner must maintain records which show the number of
rooms available and occupied, the days each person stayed at the
motel, the amount of natural gas/electricity used by those persons,
and any other information/data to establish residential use.

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 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 Tax Correspondence,
Comptroller of Public Accounts.

Sincerely,

Jo Ann Dieck
Tax Correspondence