Does electricity used in a vacant apartment unit count as residential use that is exempt from Texas sales tax?

Subject

Apartment Complex/Multifamily Dwelling — Vacant Units — Residential Use Of Electricity Guidelines

Plain-English summary

This short letter responds to a taxpayer who sent the Comptroller a diagram illustrating Section 151.317 of the Tax Code. After reviewing the diagram, the Comptroller confirmed that the statute, as amended, defines residential use of electricity to include electricity used in vacant apartments.

That treatment has two exceptions:

• It does not cover electricity used in a separate business that operates in an apartment building or complex.
• It does not apply to electricity used in mixed-use complexes -- complexes that also offer daily or weekly rentals.

The letter is brief and confirmatory in nature; it does not restate the amendment's effective date or address refunds, exemption certificates, or billing mechanics (those topics are addressed in other, related STAR letters answering similar questions from other utility companies).

What this means for you

Apartment complex owners and property managers

Electricity used in a vacant apartment unit is treated as residential use, which qualifies for the sales tax exemption, subject to the two exceptions below.

Utility companies serving multifamily housing

When billing electricity to apartment complexes, vacant-unit accounts generally qualify as residential use under Section 151.317, as amended -- except electricity used by a separate business operating within the building or complex, and except electricity used in mixed-use complexes that also offer daily or weekly rentals.

Accountants and tax professionals

Note the two carve-outs from the vacant-apartment residential-use rule: (1) electricity used by a separate business operating in the building or complex, and (2) electricity used in mixed-use complexes that also offer daily or weekly rentals. This letter does not address effective dates, refund periods, or exemption-certificate requirements -- consult the underlying statute and related guidance for those mechanics.

Common questions

Q: Is electricity used in a vacant apartment unit exempt from Texas sales tax as residential use?
A: Yes. The Comptroller determined that Section 151.317 of the Tax Code, as amended, defines residential use of electricity to include electricity used in vacant apartments.

Q: Are there exceptions to this vacant-apartment treatment?
A: Yes. It does not include use in a separate business that operates in an apartment building or complex, and it does not apply to electricity used in mixed-use complexes that also offer daily or weekly rentals.

Q: Does this letter address refunds or exemption certificates?
A: No. This letter only confirms how the amended statute defines residential use for vacant apartments; it does not discuss refunds, exemption certificates, or billing procedures.

Citations and references

Statutes:

• Texas Tax Code Section 151.317 (as amended)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9607L1418G09

Original ruling text

July 17, 1996

Dear ***:

Thank you for sending *** diagram of Section 151.317 of the Tax Code.

After reviewing ***'s diagram, I have determined that the statute, as
amended, defines residential use of electricity to include electricity used
in vacant apartments. However, residential use does not include use in a
separate business that operates in an apartment building or complex, and
this does not apply to electricity used in mixed-use complexes (complexes
that also offer daily or weekly rentals).

I hope this satisfactorily answers your questions. Should you have additional
questions, please contact me at 111 E. 17th Street, Austin, Texas 78774, or
call me at 1-800-531-5441, extension 3-4004.

Sincerely,

Wade Anderson
Director, Tax Policy

NOTE: Previous Accession Number 9607361L