Were utilities used in a homeowners association's jointly owned, members-only common areas exempt as residential use?

Plain-English summary

The Comptroller announced a change in the treatment of natural gas and electricity bought by homeowners associations for common areas.

Utilities used for swimming pools, tennis courts, parks, street lighting, signs, and similar common areas were treated as exempt residential use when association members jointly owned the areas and the areas were intended solely for their use.

The extension applied to billing-cycle periods beginning on or after January 1, 1988. To claim it, the association was instructed to give the utility company an exemption certificate stating "common area - residential use" as the reason.

What this means for you

The common-area exemption described in this letter depended on both joint member ownership and exclusive member use. The association also had to document the claim with an exemption certificate to the utility.

Common questions

What common areas were listed? Swimming pools, tennis courts, parks, streets, signs, and similar areas.

What ownership and use conditions applied? Members had to jointly own the areas, which had to be intended solely for members.

When did the treatment begin? Billing cycles beginning on or after January 1, 1988.

How did the HOA claim it? By giving the utility an exemption certificate with the stated reason "common area - residential use."

Citations and references

• No statute or administrative 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/9106L1112D10

Original ruling text

June 10, 1991

Dear **:

This is to notify you of a change in the taxability of natural gas and
electricity purchased by homeowners' associations for use in common areas.

The natural gas and electricity used in common areas such as swimming
pools, tennis courts, parks, and for lighting streets, signs, etc., is now
regarded as exempt residential use if the areas are jointly owned by the
members of the homeowners' association and are specifically intended for the
sole use of the members.

The extension applies to billing cycle periods beginning on or after
January 1, 1988.

To claim the exemption, the homeowners' association should issue the
utility company an exemption certificate. The association should show as the
reason for the exemption, "common area - residential use."

Thank you for disseminating this information to members of the Utility
Excise Tax Association of Texas.

Sincerely,

Jo Ann Dieck
Tax Administration Division