What certificate wording can apartment complexes and multifamily property managers use to claim the residential exemption on electricity purchased from utility companies?

Subject

Apartment Complex/Multifamily Dwelling Owners/Property Management Companies — Wording Or Language Used In Exemption Certificates Given To Utility Companies To Claim Residential Exemption

Plain-English summary

A major Texas electric utility company sent the Comptroller's Tax Policy Division proposed wording for the exemption certificates its customers would use to claim residential use of electricity. The utility asked whether, if this language appeared on customer-signed certificates, it would be adequate for audit purposes -- in other words, whether utilities could rely on certificates using this wording in good faith and be relieved of further responsibility for sales tax on those electricity sales.

The Comptroller's Director of Tax Policy responded that the language was acceptable, describing two separate scenarios in the proposed form:

• First box (100% residential): This language may be used to claim an exemption for electricity used in an apartment complex, as long as the complex does not rent units for less than 30 days. A certificate using this language may be accepted in lieu of tax on the meters at the complex. The letter cautions that residential use does not include use in a complex office -- tax is still due on electricity measured by a meter serving an office.
• Second box (predominant residential use): This language may be used when claiming an exemption on electricity measured by a single meter where the predominant use of the electricity is residential (for example, a meter serving both common facilities/an office and residential units), generally supported by an engineering study.

The letter is short and simply confirms that the proposed wording works for both scenarios.

What this means for you

Apartment complex and multifamily property owners

If your property rents units for 30 days or more (not short-term stays), you may be able to certify 100% residential use of electricity on a meter basis using the first-box language described in this letter, exempting that meter from tax. Keep in mind that a meter serving a leasing office or other non-residential common area is not covered by the residential exemption -- tax is still due on that portion.

Property management companies handling utility paperwork

When you're completing exemption certificates for utility companies on behalf of ownership, use the two wording options described here: a straightforward "100% residential" certification for complexes with no short-term rentals, or the "predominant use is residential" certification (supported by an engineering study, unless the meter serves only common facilities and an office) for mixed-use meters.

Utility companies collecting exemption certificates from customers

This letter is a good-faith basis for accepting the proposed certificate language from customers claiming residential use. Using this approved wording supports treating the certificates as accepted in good faith for audit purposes, per the request that prompted the ruling.

Common questions

Q: Can an entire apartment complex claim a residential electricity exemption?
A: Yes, according to this letter, if the complex does not rent units for less than 30 days, the first-box certificate language may be used to claim the exemption for the meters at the complex.

Q: Does the exemption cover electricity used in the complex's leasing office?
A: No. The letter specifically notes that residential use does not include use in a complex office, and tax is due on the electricity measured by that meter.

Q: What if a single meter serves both residential units and common areas?
A: The second-box language may be used when the predominant use of electricity on that single meter is residential, generally supported by a completed engineering study (unless the meter serves only common facilities and an office).

Q: Is an engineering study always required for the predominant-use certificate?
A: Based on the proposed form quoted in the letter, no -- if only common facilities and an office are served by the meter, the study is not required; otherwise a valid, complete engineering study showing the residential-use percentage, sealed by a registered engineer, is called for.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9610L1441D01

Original ruling text

October 23, 1996

Dear ***:

You sent proposed wording for utility customers to claim residential use of
electricity.

The language in the first box may be used to claim an exemption for
electricity used in an apartment complex provided the complex does not rent
units for less than 30 days. In this situation, a certificate containing this
language may be accepted in lieu of tax on the meters at the complex. (Please
keep in mind that residential use does not include use in a complex office,
and tax is due on the electricity measured by that meter.)

The second box may be used when claiming an exemption on electricity measured
by a single meter when the predominate use of the electricity is residential.

I hope this satisfactorily answers your question.

Sincerely,

Wade Anderson
Director Tax Policy

October 18, 1996

Mr. Wade Anderson
Director of Tax Policy
Texas Comptroller's Office

Dear Wade:

A copy of the language that the major electric utility companies in texas
proposed to incorporate in their exemption certificate forms is enclosed. If
this wording is on the certificates that are executed by the utility companies'
customers, is it adequate for audit purposes? In other words, will exemption
certificates containing this language that are later presented at the time of
audit be considered accepted in good faith, thereby relieving the utility
companies of any further responsibility concerning the sales tax on sales of
electricity made to those customers?

Your prompt attention is appreciated.

Sincerely,

Proposed wording for residential exemptions - to be used for residential
use accounts in a commercial name:

To claim residential use of electricity, please complete the section that
applies to your account(s):

100 percent Residential
Check this box if you claim that all residential dwelling accounts at the
following address(es) are for 100 percent residential use.
See Attached List of Addresses

OR

The predominant use is residential. NOTE: If ONLY common facilities and an
office are served by a single meter, no engineering study is required.
Please complete the following:

1. Only common facilities and an office are served by the meter.
   Yes
   No
   (If yes, do not complete items 2 and 3.)

2. A valid and complete study has been performed which shows that ____
   percent of electricity is for residential use.

3. Affix seal of registered engineer here

Or

Complete the following -

I ____ having an engineering degree from an accredited
engineering college, certify the accuracy of the above mentioned
utility study.

Signature of Engineer
Date Signed

Signature of Owner
Date Signed

NOTE: Previous Accession Number 9610823L