Could a commercial-property tenant obtain a sales-tax refund for natural gas bought by its landlord and passed through at cost?

Plain-English summary

The Comptroller denied the requested sales-tax refund for natural gas purchased from October 1, 1990, through September 30, 1991.

During that period, the building owner's representative was the utility customer. The bills went to the owner's representative, and the cost was passed directly to the tenant. The tenant later applied for service in its own name, but that happened after the refund period.

For the period at issue, the property owner bought the gas in connection with commercially leasing the property. The tenant's status as a manufacturer and its reimbursement of the landlord did not change the commercial nature of the purchaser's use. The letter therefore said the tax could not be refunded.

What this means for you

The identity and use of the utility purchaser controlled this refund decision. Passing the exact cost to a manufacturing tenant did not convert the landlord's commercial purchase into the tenant's use for tax purposes.

Common questions

Who bought the natural gas during the refund period? The property owner, through the building owner's representative.

Did the tenant reimburse the landlord? Yes, through a direct cost pass-through.

Did the tenant's manufacturing activity change the result? No.

Was the refund allowed? No for the period when the lessor was the purchaser.

Citations and references

The letter cited no specific 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/9204L1166F01

Original ruling text

April 20, 1992

Dear *****:

The information you sent regarding a sales tax refund on
behalf of your client, COMPANY XYX, has been reviewed.

As I understand, the refund claim in question is for the
period October 1, 1990, through September 30, 1991. The
natural gas customer for this period was COMPANY A (Bldg.
Owner-Rep). The bills for this period were sent to the
building owner's representative with a direct pass-thru
of cost to COMPANY XYZ. In October 1991, COMPANY XYX,
applied with the utility company for natural gas service.

During the above-mentioned period, the natural gas was
purchased by the property owner in conjunction with leasing
the property which is commercial use. The fact that the
tenant is a manufacturer or that it reimburses the lessor for
the natural gas does not change the nature of the lessor's
(purchaser) use (commercial). Sales tax cannot be refunded
on the natural gas for the period of time that the property
lessor was the purchaser of the natural gas.

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 me toll free at 1-800-252-5555, extension 3-4666.
You may also write to Tax Administration Division.

Sincerely,

Jo Ann Dieck
Tax Administration Division