Which gas and electricity uses qualified for Texas's manufacturing exemption when powering required pollution-control devices or cleaning water for pollution control and manufacturing?

Plain-English summary

Pollution-control equipment required by a regulatory authority for a particular manufacturing process was treated as necessary and essential to manufacturing and qualified for the phased-in exemption.

Natural gas and electricity powering those devices counted as exempt use when calculating exempt and nonexempt utility consumption. The letter said this treatment applied to all periods still within the statute of limitations.

Electricity used to clean water consumed in pollution control also qualified. Electricity used to clean water for manufacturing itself did not: the Comptroller treated that as indirect energy use rather than the direct manufacturing use required by Rules 3.300(d)(1) and 3.295(a)(4).

Common questions

Utilities powering required pollution-control devices exempt? Yes.

Electricity cleaning water for pollution control exempt? Yes.

Electricity cleaning water for manufacturing exempt? No, because it was indirect use.

Citations and references

• Comptroller Rules 3.295(a)(4) and 3.300(d)(1).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9007L1031D11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

BOB BULLOCK July 17, 1990

Comptroller

Dear **:

Your letter was transferred to me by Ms. Jo Ann Dieck of our Tax
Correspondence Division for review and response. Your inquiry
concerned the determination of exempt or non-exempt status of gas
and electricity used in (1) powering pollution control devices
and (2) used in cleaning water used in various manufacturing and
pollution control processes.

Based on a recent court case, pollution control equipment required
by a regulatory authority in connection with a particular manufac-
turing process is now considered necessary and essential to the
manufacturing process and will qualify for the phased-in exemption.

The natural gas or electricity used to power the pollution control
devices will also be considered exempt for purposes of calculating
exempt and non-exempt utility use. This exception to the prevail-
ing requirements for exemptions for these items is effective for
all periods within the statute of limitations.

Electrical power used to clean water that is used or consumed in
pollution control would also qualify as exempt use under the excep-
tion cited above.

Electricity used to clean water that is in used in manufacturing
is considered an indirect use of energy and does not meet the
criteria of direct use in manufacturing as required for exemption
under Rule 3.300 (d)(1) or 3.295 (a)(4).

I want to thank you for your patience during the period that we
were working on your inquiry.

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

If you have any questions or need more information, please call
our toll- free number 1 -800- 531- 5441. The regular number is
512/463-4502. You may write me at Taxability, Legal Services Divi-
sion. [FAX (512) 475-0900]

Sincerely,
Gilbert Zamora
Taxability, Legal Services Division