Did gas and electricity used at a container division and brewing operation qualify for Texas's manufacturing-utility exemption under the predominant-use test?

Plain-English summary

The container division and Fort Worth brewing operation performed manufacturing activities qualifying for the utility exemption.

Under the predominant-use test, if more than half of the gas or electricity measured by a single meter was used for exempt purposes, all utility use through that meter was exempt.

Battery charging, warehousing, keg cooling, and office use were nonmanufacturing and could not count as exempt. But the submitted equipment and usage information showed that exempt manufacturing use substantially exceeded 50%, supporting the exemption already claimed.

Common questions

Did the manufacturing operations qualify? Yes.

What was the predominant-use threshold? More than half of the usage on a single meter.

Were battery charging and office use exempt manufacturing use? No.

Did those nonexempt uses defeat the claim? No, because exempt use still substantially exceeded 50%.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9005L1023A03

Original ruling text

May 7, 1990

Dear *****:

We have reviewed the material you submitted on behalf of
***** concerning the company's use of utilities in
its manufacturing operations. Our review of that material
confirms the opinion expressed during our recent meeting
about the gas and electricity used at the Container
Division and in the brewing operation at Fort Worth.

These facilities are clearly performing manufacturing
activities of the type that qualify for the exemption. The
description of the equipment and the utility usage
involved show that the great bulk of usage is for exempt
purposes.

As you know, this area is governed by the "predominant
use" concept: if more than half of the utility usage measured
by a single meter is for exempt purposes, then all usage
through that meter is considered exempt.

You have correctly noted that non- manufacturing usage,
such as battery charging, warehousing, keg cooling and
office use, may not be considered exempt. However, the
information you have provided shows exempt usage substantially
exceeds fifty percent, and this supports the company's belief
that the exemption has been properly claimed.

If you have other questions, please contact me. I can be
reached at 512/463-4606, or toll-free at 1/800-531-5441.

Sincerely,

Martin Cherry
Assistant Director
Legal Services Division