Were utilities at fee-simple timeshare condominiums exempt residential use when units were occupied only by owners and never rented to nonowners?

Plain-English summary

The October 29 follow-up clarified that every condominium was owned fee simple by multiple owners, owners occupied the units for different periods, and no unit was ever rented or leased to a nonowner. Under those facts, the Comptroller treated the utilities as exempt residential use whenever an owner occupied the unit.

The attached October 17 letter addressed mixed occupancy more generally. It treated stays of 30 or more consecutive days as residential and shorter stays as commercial, required predominant use to be measured for each meter, and allowed exemption when more than half of metered utility use served qualifying long-term occupancy. Common areas in a mixed-use complex did not qualify because short-term occupants used them too.

What this means for you

Owner-only occupancy resolved this taxpayer's question without applying the earlier mixed-use test. A complex with rentals to nonowners would need meter-level occupancy and common-area analysis under the attached guidance.

Common questions

Were owner-only unit utilities exempt? Yes. What if units also had short-term rentals? The earlier letter used a 30-day and greater-than-50% per-meter test. Were mixed-use common areas residential? No under that earlier analysis.

Citations and references

• The paired letters do not identify a numbered statute or administrative rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9110L1140D10

Original ruling text

October 29, 1991

Dear *****:

This letter is in response to additional information you provided
(by telephone) after my letter to you dated October 17, 1991, regarding
the taxability of utilities in timeshare condominiums.

You stated that each of the condo's in the complex are fee simple
owned by multiple owners. Each owner occupies a unit for various
periods of time each year. No one other than an owner occupies
any of the units. In other words, the units are never rented or
leased to non-owners.

Under the above circumstances, when only an owner occupies the
condo, the utilities will be considered exempt residential use.

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 more information, you may call
me toll free at 1- 800- 252-5555, extension 5-0330. The regular
number is 512/463-4600 or write Tax Administration Division.

Sincerely,

Bettie U. Peterson
Tax Administration Division

October 17, 1991

Dear *****:

Thank you for your recent letter regarding sales tax exemption on
natural gas and electricity (utilities) for timeshare
condominium/townhouse complexes.

The utilities used in a condominium/townhouse unit that is occupied
by the same person for 30 or more consecutive days are considered
to be residential use. The utilities used in a unit that is occupied
by a person for less than 30 consecutive days are commercial use.
The predominant use (residential vs. commercial) must be determined
for each meter at the complex. If over 50% of the utilities for a
particular meter are consumed by persons staying 30 or more consecutive
days, the utilities will qualify for exemption as residential use.

In a complex where the units are for both residential and commercial
use, the utilities for common areas such as laundry facilities,
swimming pool, office, hallways and outside lighting, etc., do not
qualify as residential use since these areas are also used by persons
staying less than 30 consecutive days.

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 more information, you may call
me toll free at 1- 800- 252-5555, extension 5-0330. The regular
number is 512/463-4600 or write Tax Administration Division.

Sincerely,

Bettie U. Peterson
Tax Administration Division