Could a nursing-home lessee claim the residential-utility exemption and a refund when the utility account still named a former owner?

Plain-English summary

The utility account still identified the nursing home's former owner even though a lessee paid the bills and operated the facility. The Comptroller said the utility could initially accept an exemption certificate only from the purchaser shown in its records.

For future purchases, the lessee could provide written confirmation that it operated the facility and used the electricity. For refunds covering earlier periods, it also had to prove through deeds, contracts, or similar records that it operated the home and paid the bills during those periods.

The letter said nursing homes were treated as residential for natural gas and electricity for billing periods beginning on or after January 1, 1988. State, county, and MTA/CTD tax was exempt, while city tax could still apply if the city retained or reimposed it.

Common questions

Was paying the bill by itself enough for a refund? No. The claimant also had to establish that it was the operator and purchaser.

Could the lessee obtain the exemption prospectively? Yes, after confirming in writing that it operated the facility and used the electricity.

Were all local taxes exempt? No. The letter said city tax could remain due depending on the city's action.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9002L0979B01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller February 14, 1990

Dear ***:

Thank you for your letter regarding a sales tax refund on electricity
and natural gas for COMPANY A, d/b/a/ * Nursing Home.

You asked for assistance in determining if COMPANY A is eligible for
a refund of tax based on the following facts:

1. The meter deposit and utility bill are in the name of "***
   Nursing Home", the original owner. The utility account was not
   changed when the nursing home ownership changed.

2. There are two new owners now in California, which leased the nur-
   sing home to LESSEE A December 1, 1988, for twenty years, according
   to the nursing home administrator;

3. The utility bill is mailed to and is paid by COMPANY A, LESSEE A.

Additional information obtained in our telephone conversation is
that OWNER 1 (original owner) has no connection with the current
owners or with the lessee, LESSEE A; the utility account was not
changed when the nursing home ownership changed; and the bills are
currently being sent to COMPANY A in Plano.

A sales tax exemption certificate can be accepted only from the
purchaser who is indicated in your records to be the original
owner. Although COMPANY A is paying the utility bills, they can-
not issue an exemption certificate nor receive a tax refund when
they are not indicated to be the purchaser.

If COMPANY A writes to you that it is the person operating the
facility and using the electricity, then you may accept an exemption
certificate from them for future electricity purchases. They may
get a refund for earlier periods only if they complete the above
and convince you (by deed, contracts, etc.,) that they were ope-
rating the nursing home (and were paying the electricity bills) for
any earlier period for which a refund is requested.

OWNER 1, the original owner, may issue an exemption certificate
to you claiming sales tax exemption on utilities for the nursing
home for billing periods when he was the operator.

Nursing homes are considered to be residential for natural gas and
electricity purposes only for billing periods beginning on or
after January 1, 1988. Residential natural gas and electricity is
exempt from the state, county, and MTA/CTD sales taxes. City
sales tax is due on residential use if the city retained the tax
or repealed and reimposed the tax on residential use.

If you have any questions or need additional information, you may
call me toll free at 1-800-252-5555, extension 3-4666. You may
write to Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Jo Ann Dieck
Tax Correspondence