Could multiple gas suppliers rely on copies of one engineer-sealed predominant-use utility study, or did each exemption certificate need an original seal?

Plain-English summary

Industrial customers bought natural gas from several affiliated corporations through the same pipeline and meter. Because exemption certificates were not transferable from one corporate entity to another, each seller needed a certificate addressed to it.

Rule 3.295 ordinarily required the engineer's original seal, or a nonregistered engineer's original signed certification, to be attached to the exemption certificate supporting predominant exempt utility use.

For customers buying from several suppliers, the Comptroller waived that original-seal requirement when the copy covered the same location and same meter. A copy of the original certificate or certification could be attached to a new original exemption certificate issued to the appropriate supplier.

A copy was not acceptable for a separate meter. Each meter measuring taxable and exempt uses had to qualify independently through its own predominant-use study certified by an engineer.

Common questions

Could one exemption certificate transfer among affiliated sellers? No.

Could the engineer-sealed study be copied for another supplier? Yes, for the same location and meter and when attached to a new original certificate for that supplier.

Could the copy support a different meter? No.

What did a different meter require? Its own engineer-certified predominant-use study.

Citations and references

• 34 Tex. Admin. Code Rule 3.295

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8909L0961A06

Original ruling text

September 18, 1989

Dear ***:

Thank you for your letter regarding the acceptance of exemption certificates.
Your specific situations and questions are restated below with my response.

Because of changing regulation and environment of the gas industry, many
industrial customers of COMPANY A, a Division of CORP X also purchase gas from
subsidiaries of CORP X. The purchases are delivered through the same pipeline
and are measured by the same meter no matter which corporation actually makes
the sale. Since exemption certificates are not transferable from one
corporation entity to another, each corporation making tax-free sales to this
customer requires that the customer provide an exemption certificate for
taxfree purchases. Therefore, over a period of time, the customer may be
required to furnish several exemption certificates, one to each corporate
entity which sells to the customer so that each seller is in compliance with
state law and rules.

Most industrial customers are manufacturers. A problem arises when the
customer had a utility study performed to establish predominant use to be
exempt. Rule 3.295 specifically states that the engineer's original seal, or
the original signed certification by a non-registered engineer, must be affixed
to the exemption certificate in order for the seller to honor it. If the
customer had a utility study performed to establish that exempt use is
predominant, but fails to obtain several exemption certificates with the
engineer's original seal (or the original signature of a non-registered
engineer on the certification must the customer then locate the engineer to
obtain the other original seals or signatures to affix to the certificates
furnished to the other seller corporation: Would the answer change if
different meters measure the gas delivered to the customer even though the use
by the customer is the same, no matter which meter measure the delivery?

A similar situation occurs when one of the CORP X's sells gas to a new customer
who previously purchased gas from another seller (not affiliated with the CORP
X group). If the customer had a predominant use utility study performed, then
the customer would have provided the first seller its only exemption
certificate bearing the original engineer's seal, or original signed certified
statement. In this situation does the Comptroller require that the customer
contact the engineer to obtain another seal or certified statement to enable
the customer to furnish the required original signatures to the new seller?

Response: In the above situations where the customer may purchase natural gas
from several suppliers, the requirement that the engineer's stamp or seal or
signed certified statement must be an original will be waived. A copy of the
original document (exemption certificate or statement) attached to an original
exemption certificate issued to the appropriate subsidiary (supplier) will be
acceptable.

The copy of the document must show the same location and same meter for which
exemption from the subsidiary is being claimed. If the natural gas enters
through a separate meter from the meter on which predominant exempt use was
originally determined, a copy of the original document would not be acceptable
since each meter must qualify for exemption on its own. The purchaser must
perform a study for each meter measuring taxable and exempt uses to determine
if the predominant use is exempt use before claiming exemption. Each study
must be certified by an engineer.

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, please call me toll
free at 1-800-252-5555, extension 3-4666. You may write to Tax Correspondence.

Sincerely,

Jo Ann Dieck
Tax Correspondence