Which Texas state and local sales taxes applied to residential electricity delivered in several Austin-area cities?

Plain-English summary

Local sales tax on electricity followed the point of delivery. Residential electricity was exempt from state, county, and metropolitan-transit-authority sales tax. It was also exempt from city tax unless a city retained that tax or reimposed it after repeal; cities first adopting city sales and use tax effective January 1, 1980 or later could not impose it on residential electricity.

On the facts stated:

• Bee Cave, which adopted city tax effective April 1, 1988, did not tax residential electricity.
• West Lake Hills and Sunset Valley had repealed the tax effective October 1, 1978, so it was not due there.
• Pflugerville and Round Rock retained the tax, so it was due.
• Austin repealed the tax effective October 1, 1978 and reimposed it effective January 1, 1988, so it was due.

Before Austin could recover city tax remitted in error, the utility had to refund customers by check or by a written-accepted account credit. Tax billed but not collected had to be credited to the customer. The letter applied a four-year limitation and allowed amended returns or a current-return credit for the appropriate city.

What this means for you

Residential status supplied the statewide exemption, but city tax required a city-by-city history. Refund recovery also depended on first making affected utility customers whole.

Common questions

Did state, county, or MTA tax apply to residential electricity? No.

Was city tax automatically exempt? No; valid retention or reimposition could make it due.

Where was city tax due in the letter? Pflugerville, Round Rock, and Austin.

What had to happen before Austin received a refund? The utility had to refund or credit its customers.

Citations and references

• No numbered statute or rule was cited in the letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9009L1069E01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller September 27, 1990

Fiscal Services Utility Customer Service Office
City of Austin
Austin, Texas 78767

Dear ** :

Thank you for your letter concerning local sales taxes on
electricity for residential use.

Local sales taxes on electricity are due based upon point of
delivery to the customer.

Electricity for residential use is exempt from the state, county,
and MTA sales tax. It is also exempt from the city sales tax
unless the city voted to retain the city tax on residential use or
reimposed the tax if it was previously repealed. Cities adopting
the city sales and use tax effective from January 1, 1980, cannot
impose the city tax on residential use of electricity.

The Village of Bee Cave adopted the city tax effective April 1,
1988; therefore, the city sales tax is not due on electricity for
residential use within the Village of Bee Cave.

The cities of West Lake Hills and Sunset Valley repealed the city
tax on residential use effective October 1, 1978. The city tax is
not due on electricity for residential use.

The cities of Pflugerville and Round Rock retained the city tax on
residential use. The City of Austin repealed the city tax on
residential use effective October 1, 1978, and then reimposed the
tax effective January 1, 1988. The city tax is due on electricity
for residential use for these three cities.

If the city tax was collected in error, the tax must be refunded
to the utility customers before the tax remitted to the state can
be refunded to the City of Austin. The refund can be made by a
check or credited to the customer's account if the customer
accepts the credit memo in writing. If the tax was billed but was
not collected, the tax must be credited to the customer's account.
The statute of limitations limits refunds to four years from the
date on which the tax was due and payable to this office.

To receive a refund of the city tax, the city may file amended
sales and use tax returns for the appropriate reporting periods or
take a credit on its current sales and use tax return against the
tax due for the appropriate city(s). Enclosed is a copy of our
refund procedure for your information.

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 463-4600 or you may call me direct at 463-4666. You may
write to Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Jo Ann Dieck
Tax Correspondence