Must a Texas manufacturer obtain a new engineering study to keep a predominant-use exemption for natural gas or electricity?

Plain-English summary

The Comptroller said a manufacturer did not need a new or updated engineering study merely to continue claiming the predominant-use exemption for natural gas or electricity. A study finding that the utility was used predominantly for exempt manufacturing remained valid as long as that use stayed the same.

The letter identified the relevant continuity factors as the product manufactured, equipment, building size, production levels, location, and the rest of the business operation. It directed the taxpayer to Rule 3.295(f)(2).

What this means for you

An existing predominant-use study can continue to support the exemption when the underlying operation has not changed. The letter does not approve relying on the old study after operational or utility-use changes; it says the study is valid only as long as the utility use remains the same.

Common questions

Is a new study required when nothing has changed? No. The letter says no new or updated study is required if the business operation remains unchanged.

What kinds of changes matter? The letter lists the manufactured product, equipment, building size, production levels, and location among the relevant facts.

Does this letter automatically protect another manufacturer? No. It was based on the facts presented, and the letter says different or additional facts could change the opinion.

Citations and references

• 34 Tex. Admin. Code Rule 3.295(f)(2) — 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/9110L1134G13

Original ruling text

October 1, 1991

Dear **:

Thank you for your letter of August 21, 1991, concerning the exemption
for natural gas or electricity claimed under the predominant use theory.

An exemption claimed based on an engineering study that determines that
the predominant use of the utility is for exempt manufacturing use is
valid as long as the use of the utility remains the same. If your
business operation has remained unchanged (product manufactured, equipment,
building size, production levels, location, etc.), a new or updated
engineering study is not required. Please refer to section (f)(2) of Rule
3.295 - Natural Gas and Electricity.

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

You may call toll free 1-800-252-5555 if you have any questions or need
more information. You may write to Tax Administration Division,
Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Administration Division