Is electricity used to power a telephone on a farm or ranch exempt from Texas sales tax under the farm/ranch exemption?

Plain-English summary

A taxpayer asked the Texas Comptroller about the tax treatment of electricity provided to the shipping pen area of a ranch, where the electricity was used exclusively to power a telephone. Tax Code Section 151.316 exempts a variety of items used on a farm or ranch from sales tax. However, the Comptroller's office explained that telecommunications services do not qualify for that exemption. Because telecommunications services themselves are outside the exemption, the electricity used to operate telephones on a farm or ranch does not qualify for exemption either. The letter notes that this opinion is based on the facts submitted, and that other, similar facts could yield different results.

What this means for you

Farm and ranch operators

If you run electricity to a farm or ranch location for the specific purpose of powering a telephone, that electricity is not covered by the farm/ranch sales tax exemption in Tax Code Section 151.316. The exemption covers various farm and ranch items, but telecommunications services are excluded, and that exclusion carries over to electricity used solely to power telecommunications equipment like a telephone.

Accountants and tax professionals

When advising farm or ranch clients on Section 151.316 exemption claims, keep in mind that electricity dedicated to powering telecommunications equipment (such as a telephone) is treated the same as the underlying telecommunications service — non-exempt. The exemption analysis should look at what the electricity is being used for, not just where it is delivered on the property.

Common questions

Q: Does Tax Code Section 151.316 exempt electricity used on a farm or ranch?
A: Section 151.316 exempts a variety of items for use on a farm or ranch from sales tax, but the letter clarifies that telecommunications services do not qualify for that exemption.

Q: Why isn't electricity powering a farm telephone exempt?
A: Because telecommunications services do not qualify for the farm/ranch exemption, the Comptroller concluded that electricity used to operate telephones on a farm or ranch does not qualify for exemption either.

Q: Can other taxpayers rely on this letter for their own situation?
A: The letter itself states the opinion is rendered based on the facts submitted, and other facts, though similar, may yield different results. STAR letters generally may be relied on as the basis of a detrimental reliance claim only by the taxpayer to whom they were issued.

Citations and references

• Tax Code Section 151.316

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9502L1343C04

Original ruling text

February 8, 1995

Dear **:

Thank you for your recent letter regarding the tax treatment of
electricity provided to the shipping pen area of a ranch for the
exclusive purpose of powering the telephone.

Tax Code Section 151.316 exempts from sales tax a variety of items
for use on a farm or ranch. However, telecommunications services do
not qualify for exemption. Accordingly, the electricity used to
operate telephones on a farm or ranch does not qualify for exemption.

This opinion is rendered based on the facts you submitted. Other
facts, though similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 3-4680. The direct
line is 512/463-4680. You may also write to Tax Administration,
Comptroller of Public Accounts.

Sincerely,

Al Van Allen
Tax Administration Division

NOTE: Previous Accession Number 9502031L