Did Texas require a new utility predominant-use study every year, and when did operational or equipment changes require a replacement study?

Plain-English summary

Customers with taxable and exempt electricity or natural-gas uses measured by one meter had to prove that the predominant use was exempt. A manufacturer or processor operating continually established predominant use over 12 consecutive months.

The Comptroller did not require a study every year. A new study was required when a change in the business's operation or facility could affect electricity use. If the new facts meant the electricity no longer qualified, the exemption had to be withdrawn from the utility company.

For studies prepared on or after August 3, 1987, a registered engineer or a person with an engineering degree from an accredited engineering college had to certify the study.

What this means for you

The historical duty was event-driven, not annual. The existing study could continue until an operational or facility change might alter the predominant-use result.

Common questions

Was a new study required every year? No.

When was a new study required? When an operational or facility change could affect electricity use.

What period applied to continual manufacturing or processing? Twelve consecutive months of use.

What if the utility no longer qualified? The exemption had to be withdrawn from the utility company.

Citations and references

• 34 Tex. Admin. Code Rule 3.295 (utility predominant-use studies)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8711L0848A12

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller November 13, 1987

Dear ***:

Thank you for your letter regarding letters your clients are receiving
about
annual utility studies necessary to claim exemption from sales tax.

Persons having both taxable and exempt uses of electricity and/or natural
gas
measured by a single meter have always been required to prove the
predominant
use of the utility(s) was for exempt uses if they were to be exempted
from
the tax. A study to determine predominant use is not a new requirement.

Persons manufacturing or processing on a continual basis must establish
predominant use on twelve consecutive months of use. This is also not a
new
requirement.

The comptroller does not require a study to be performed each year to
substantiate exempt status. However, if there is a change in the
operation
or facility of a business claiming sales tax exemption which would affect
the
electricity use, a study must be performed to be sure that the
electricity is
still exempt. If the electricity no longer qualifies for exemption, the
exemption must be withdrawn from the utility company.

Effective August 3, 1987, studies prepared to determine predominant use
must
be certified by a registered engineer or a person with an engineering
degree
from an accredited engineering college.

I am enclosing amended Rule 3.295 for your information. This rule
contains
the sales tax law changes effective October 1, 1987.

This opinion is based upon the facts you presented. If there are
additional or different facts, this 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