Which Texas taxes applied to residential gas and electricity, and how did a mixed-use meter qualify for exemption?

Plain-English summary

A taxpayer asked for an updated list of taxable and nontaxable natural-gas and electricity uses. The Comptroller said the old list had not been updated for many years and recommended using Rule 3.295's definitions instead.

Residential use as defined in Rule 3.295 was exempt from state, county, MTA/CTD, and special-purpose-district taxes. It was also exempt from city sales tax except in cities that had voted to retain the tax or had repealed and reimposed it on residential use.

When one meter served both exempt and nonexempt uses, the predominant-use rule applied. A person claiming exemption needed a utility-use study certified by an engineer and had to follow Rule 3.295's claim procedures.

What this means for you

The letter cautioned against relying on an outdated checklist. Classification under Rule 3.295 and documented meter-level usage controlled the exemption.

Common questions

Was residential utility use exempt from state sales tax? Yes.

Was it exempt from all city tax? Not in cities that retained or later reimposed the tax on residential use.

What if one meter had residential and commercial uses? The predominant-use rule applied.

Who had to certify the study? An engineer.

Citations and references

• 34 Tex. Admin. Code Rule 3.295 (natural gas and electricity)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9011L1056F04

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

BOB BULLOCK
Comptroller November 6, 1990

Dear *:

Thank you for your letter requesting an updated "Partial List of
Taxable and Non-Taxable Sales and Use of Natural Gas and Electric-
ity."

That list has not been updated in many years and similar lists do
not exist. I have made some corrections on the list, however, I
would suggest that you refer to the definitions of commercial and
noncommercial uses in Rule 3.295.

Residential use (as defined in Rule 3.295) is exempt from the
state, county, MTA/CTD, and Special Purpose District taxes.
Residential use is also exempt from the city sales tax except in
those cities that voted to retain or that repealed and reimposed
the city tax on residential use.

Please note that where there are both exempt and nonexempt uses of
electricity on a single meter, the predominant use theory applies.
The person claiming exemption must have a study of the utility
uses performed to determine predominant use and must have the
study certified by an engineer. These requirements and procedures
for claiming exemption are outlined in Rule 3.295.

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 toll free 1-800-252-5555 or the regular number 512/463-4600.
My extension is 3-4666. You may write to Tax Correspondence,
Comptroller of Public Accounts.

Sincerely,
Jo Ann Dieck
Tax Correspondence