Which restaurant electricity uses qualified for exemption in 1987, and when did energy for immediate-consumption food become taxable?

Plain-English summary

The Comptroller cited Rule 3.295 for the gas and electricity exemption. If electricity qualified and an energy study was certified by a registered engineer or graduate of an accredited engineering college, exemption could be claimed with a certificate given to the utility.

Effective August 3, 1987, only electricity for production equipment such as ovens, mixers, and blenders was exempt. Electricity for refrigerators, freezers, lighting, and other support equipment was taxable. Effective October 1, gas and electricity used to prepare food for immediate consumption became taxable, beginning with billings for service on or after that date.

What this means for you

The historical letter distinguished production from support equipment, then imposed a broader October transition for energy used in preparing immediately consumed food.

Common questions

Which equipment used exempt electricity after August 3, 1987? Production equipment such as ovens, mixers, and blenders.

Were refrigerators, freezers, and lighting exempt? No.

When did energy for immediate-consumption food become taxable? October 1, 1987.

How was an otherwise qualifying exemption claimed? With a certified study and exemption certificate given to the utility.

Citations and references

• 34 Tex. Admin. Code Rule 3.295 — cited for the natural-gas and electricity 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/8709L0831F05

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

September 2, 1987

Dear ***:

Thank you for your letter regarding sales tax exemption on electricity
for
your ***, Texas restaurants.

Enclosed is Rule 3.295 which explains the exemption on natural gas and
electricity. If the electricity qualifies for sales tax exemption and
the
electricity study is certified by a registered engineer or graduate of an
accredited engineering college, sales tax exemption can be claimed by
issuing a completed exemption certificate to the utility supplier.

Effective August 3, 1987, only the electricity to operate production
equipment (ovens, mixers, blenders, etc.) is exempt use. Electricity to
operate support equipment such as refrigerators, freezers, lighting and
other nonproduction items is taxable use.

Be advised that effective October 1, 1987 natural gas and electricity
used
in preparing food for immediate consumption is taxable. You should
notify
the utility companies to begin adding the sales tax to your natural gas
and
electricity bills on which you are now claiming exemption. The tax will
be
due on the billings for service beginning on or after October 1.

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, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,
(Mrs.) Jo Ann Dieck
Tax Policy Division