Which electricity used by a mobile-home park's water system was exempt, and how did Texas treat a meter serving both exempt and nonexempt uses?

Plain-English summary

A mobile-home park had separate meters for a water well, sewer system, and sign. The utilities did not qualify for the residential-use exemption on the facts presented, but the water-well meter could qualify under a different exemption.

Electricity used to extract water from the earth, move it to holding tanks, and process it was exempt. Electricity used to transport already processed water was not exempt.

If one meter served both exempt and nonexempt uses, the customer had to determine predominant use under Rule 3.295(d) and (e). No study was required when the meter's only use was pumping water from the well, but the exemption certificate had to state the specific use.

What this means for you

The exemption followed what the electricity powered, not merely the property's residential character. Separate process stages could receive different treatment, and mixed-use metering created a documentation requirement.

Common questions

Was the park's electricity exempt as residential use? No, on the stated facts.

Was power used to pump water from the well exempt? It could be.

Was power used to move processed water exempt? No.

Was a predominant-use study always required? No. A meter used only to pump well water did not need one.

Citations and references

• 34 Tex. Admin. Code Rule 3.295(d) and (e) — natural gas and electricity, including predominant use

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9109L1131D10

Original ruling text

September 10, 1991

Dear **

Thank you for your letter regarding a sales tax exemption and refund on
electricity for your client, **, ****, Texas.

The exemption was apparently claimed for the reason that the electricity
was for "residential" use. The utility company asked, that you obtain a
letter from this office stating that the electricity is eligible for tax
exempt status.

In a telephone conversation with * from your office, I understand
that one of the meters is for a water well, one is for a sewer system,
and one is for a sign at the mobile home park.

Based on the above information, the utilities do not qualify for sales
tax exemption as residential use; however, the meter for the water well may
qualify for exemption. Electricity used to extract water from the earth is
exempt. Electricity used to transport the water to holding tanks and to
process the water is exempt. Electricity used to transport processed water is
not exempt. If there are both exempt and nonexempt uses of electricity on a
single meter, the predominant use must be determined as outlined in Sections
(d) and (e) of Rule 3.295, Natural Gas and Electricity. If the only use of
electricity on the meter is to pump water from the well, a study is not needed.
The specific use of electricity must be stated on the exemption certificate
(e.g., 100% use to pump water from a well).

As I also discussed with *, the power of attorney must clearly state
that you are attempting to qualify the principal for a sales tax exemption, and
if a refund of sales tax is involved, the power of attorney must also state
that a sales tax refund will be made by the state through the utility company.
Please see Section (e) of Rule 3.295.

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, you may call toll free
1-800-252-5555 or the regular Austin number 512-463-4600. My extension is
3-4666. You may also write to Tax Administration Division.

Sincerely,

Jo Ann Dieck
Tax Administration Division