Which purchases by a Texas electric cooperative qualified for its sales-tax exemption?

Plain-English summary

The Texas Comptroller concluded that an electric cooperative formed under the Electric Cooperative Act could claim its exemption for the laundry service used on towels in its meter shop. The same exemption did not cover laundry service for kitchen towels or cable service on the facts presented.

The dividing line was whether the purchase was used in a way related to the cooperative's purpose. The meter-shop towels met that test; the letter says the kitchen towels and cable service did not.

What this means for you

Electric cooperatives

Exempt status did not make every purchase exempt. This ruling applied a use-based test: the cooperative had to connect the purchased service to its organizational purpose.

Service providers

A customer's cooperative status alone did not establish that every charge was exempt. The specific use of the service mattered.

Accountants and tax professionals

The letter is from 1985 and cites the Electric Cooperative Act. It shows the Comptroller's reasoning on the stated facts, but current law and the customer's present use should be checked before applying the result.

Common questions

Q: Was laundry service automatically exempt because the customer was an electric cooperative?
A: No. Meter-shop towel laundry was exempt, but kitchen towel laundry was not.

Q: Was cable service exempt?
A: No, not on the facts presented. The letter says it would have to be used in a way related to the cooperative's purpose to qualify.

Q: Can another cooperative rely on this letter?
A: Not automatically. The opinion was based on the facts presented, and STAR letters may no longer reflect current policy.

Citations and references

• Tex. Rev. Civ. Stat. Ann. art. 15286 (Electric Cooperative Act, as cited in the letter)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8501L0611E06

Original ruling text

January 23, 1985

Dear ***:

Thank you for asking about the exemption allowed electric cooperatives
formed under the Electric Cooperative Act (Tex. Rev. Civ. Stat. Ann.
art. 15286).

It is our opinion that the cooperative is exempt from the tax on the
laundry service of towels used in the meter shop.

The laundry service for the towels used in the kitchen would not be
exempt nor would the cable service be exempt. In order to qualify for
exemption, these last two items must be used in a manner which relates
to the purpose of the cooperative.

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

You may write to the Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division