Could a business use one store's natural-gas predominant-use study to claim the utility exemption at another store?

Plain-English summary

A business wanted to use a natural-gas study prepared for its City B store to claim a utility exemption at a newly opened City A store. It said the stores were identical.

The Comptroller would not approve reuse based only on that statement. If the stores were in fact identical and the City B study was valid, another study would not be required. But identical meant the store size and construction, lighting, air conditioning, heating, use hours, products, operating hours, and other relevant items were all the same.

The letter also explained that a valid allocation for food-preparation equipment had to reflect the kinds and quantities of products prepared and the quantities sold ready and not ready for immediate consumption. The allocation could not be based on sales price.

What this means for you

Reusing a predominant-use study across locations required more than a similar store format. The physical site, equipment and building uses, operating pattern, products, and production quantities all had to match, and the original study itself had to be valid.

Common questions

Did the Comptroller approve the City B study for City A? No definitive approval was given on the submitted facts.

When could a second study be avoided? When both stores were truly identical and the first study was valid.

Could allocations be based on sales dollars? No.

What food data mattered? Product types and quantities prepared, including quantities sold ready and not ready for immediate consumption.

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/9106L1116F12

Original ruling text

June 20, 1991

Dear *****:

Thank you for your letter regarding sales tax exemption on natural
gas for your City A store that opened in January 1991.

You asked that you be allowed to use the study that was prepared
for your City B store to claim sales tax exemption on natural gas
for the City A store. You stated that the two stores are identical.

Because you are reporting taxable sales for both stores, I assume
that you are also preparing food ready for immediate consumption
which is a taxable use of utilities. I also assume that this was
considered in performing the study for the City B location and
that proper allocations of utility uses for all food preparation
equipment were made. These allocations must have been based on
the kind of products prepared, the quantity made, and the product
and quantity sold ready for immediate consumption and not ready
for immediate consumption. These allocations cannot be based on
sales price.

I cannot advise you that the study for the City B store can be
used for the City A store. If, in fact, the two stores are
identical and the study for the City B location is a valid study,
another study would not be required. Identical for the purposes of
this exemption means that the store size and construction, all
items (including lighting, air conditioning and heating), hours of
use, products produced, hours of operation, etc. are identical.

This opinion is based on the facts presented. If there are
additional or different facts, the opinion may change.

If you have any questions in this matter, please call me toll free
at 1-800-252-5555, extension 3-4666. You may write to me at Tax
Administration Division.

Sincerely,

Jo Ann Dieck
Tax Administration Division