Texas Letter Ruling 9210L1198A13: Jail/Prison — Inmates Staying In Facility In Excess Of 30 Days Do Not Meet Definition Of Tenants — Gas And Electricity Is Not Residential Use

Subject

Jail/Prison — Inmates Staying In Facility In Excess Of 30 Days Do Not Meet Definition Of Tenants — Gas And Electricity Is Not Residential Use

Plain-English summary

A taxpayer asked the Texas Comptroller whether electricity purchased for use in a prison qualifies for the sales tax exemption on natural gas and electricity that applies to "residential use."

The Comptroller said no. A prison is not a building "occupied as a home or residence" within the meaning of "residential use" under Section 151.317 of the Texas Tax Code. Instead, a prison is a place of confinement for persons convicted of crimes. The ruling specifically addresses — and rejects — the argument that an inmate staying in the facility more than 30 days should count as residential use: even in that case, the prison is still not residential for purposes of the exemption on natural gas and electricity.

The Comptroller noted that this opinion is based on the facts presented, and that the opinion could change if the facts are different.

What this means for you

Correctional facility operators and their utility contacts

If you purchase natural gas or electricity for use in a jail or prison, you cannot claim the residential-use sales tax exemption on those utility purchases, even if inmates are held there long-term (more than 30 days). The Comptroller treats a prison as a place of confinement, not a home or residence, regardless of length of stay.

Accountants and tax professionals

This ruling is a narrow, fact-specific answer to a single question: does length of an inmate's stay convert a correctional facility into a "residence" for the Section 151.317 utilities exemption? The Comptroller's answer is no — the nature of the building (a place of confinement) controls, not how long any individual occupant stays there. Advise clients that utility purchases for jails and prisons should be treated as non-residential (commercial/industrial) for state sales tax purposes.

Common questions

Q: Does an inmate staying in a prison more than 30 days make the facility "residential" for the utility tax exemption?
A: No. The Comptroller ruled that even if inmates stay in the facility in excess of 30 days, the prison is still not residential for purposes of the sales tax exemption on natural gas and electricity.

Q: Why isn't a prison considered a "residence" under Section 151.317?
A: Because the Comptroller found a prison is not a building "occupied as a home or residence" — it is a place of confinement for persons convicted of crimes, which is a different category from a home or residence.

Q: Could this answer change?
A: The letter states the opinion is based on the facts presented, and that if there are additional or different facts, the opinion may change.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.317 (definition of "residential use" for the natural gas and electricity sales tax exemption)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9210L1198A13

Original ruling text

October 22, 2992

Dear ***:

Thank you for your letter asking if electricity purchased for use in a prison
qualifies for sales tax exemption as residential use.

A prison is not a building "occupied as a home or residence" within the
definition of "residential use" in Section 151.317 of the Texas Tax Code. The
prison is a place of confinement for persons convicted of crimes. Even though
the inmates may stay in the facility in excess of 30 days, the prison is not
residential for purposes of the sales tax exemption on natural gas and
electricity.

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 toll
free 1-800-252-5555 or the regular Austin number 512/463-4600. My extension is
3-4666. You may write to tax Administration Division.

Sincerely,

Jo Ann Dieck
Tax Administration Division