My client is an FAA/JAA-certified repair station that overhauls jet engines and other aircraft parts for commercial airlines and the military, using one shop with both engine and non-engine work happening under a single utility bill. Is the electricity and natural gas used there exempt?

Plain-English summary

An FAA/JAA-certified repair station overhauls airframe and engine metal ducts, tubes, manifolds, cowlings, doors, fairings, and other components for major aircraft manufacturers (Airbus, Boeing, Douglas, Fokker) and engine makers (Pratt & Whitney), working on both commercial-carrier and military aircraft. All of this happens in one 11,900 sq. ft. climate-controlled shop (9,000 sq. ft. shop floor, 2,900 sq. ft. offices), billed under single electricity and natural gas accounts. The taxpayer asked whether its predominant use of that gas and electricity qualifies for exemption.

The Comptroller's answer draws three distinct lines under Tax Code Section 151.317(c)(2):

1. Exempt: gas/electricity used in off-wing processing, overhaul, or repair of a jet engine or its parts for a certificated or licensed carrier.
2. Taxable: gas/electricity used to repair the airframe, doors, and other non-engine metal components for those same certificated/licensed carriers.
3. Taxable: gas/electricity used on any repairs to military aircraft — engine or non-engine — since the exemption is tied to certificated/licensed commercial carrier work.

Because the shop's single utility meter covers a mix of exempt (commercial engine) work and taxable (commercial non-engine, plus all military) work, the Comptroller couldn't determine an exemption percentage from the facts given — a Rule 3.295 predominant-use study is required, documenting the actual proportion of exempt versus taxable use. The Comptroller enclosed Rule 3.295 (predominant use study basics and the exemption/refund claim procedure), Rule 3.325 (refunds), and Rule 3.339 (the four-year statute of limitations on sales tax refund claims). Water use was confirmed exempt regardless.

What this means for you

Aircraft repair stations doing mixed engine/non-engine or mixed commercial/military work

A single utility exemption doesn't cover your whole shop just because some of your work qualifies. You need a documented predominant-use study under Rule 3.295 that separates exempt off-wing engine work for licensed commercial carriers from taxable non-engine work and all military work.

Businesses claiming any utility tax exemption tied to a specific activity

This letter is a reminder that the Comptroller will not estimate or assume a predominant-use percentage — you must affirmatively document it with a proper study, and any refund claim is capped at four years back under Rule 3.339.

Accountants and tax professionals advising aviation MRO (maintenance/repair/overhaul) clients

Track the three-way split carefully: exempt (commercial engine/off-wing), taxable (commercial non-engine), and taxable (all military) — a facility mixing all three needs a predominant-use study, not a blanket exemption claim.

Common questions

Q: Is electricity used to overhaul a commercial jet engine off the wing exempt from Texas tax?
A: Yes, when the repair is for a certificated or licensed carrier, under Tax Code Section 151.317(c)(2).

Q: Is electricity used to repair a commercial aircraft's airframe or doors exempt?
A: No — non-engine component repairs for licensed/certificated carriers are taxable.

Q: Is any utility use for military aircraft repair exempt?
A: No — the letter states military aircraft repairs are taxable regardless of whether it's engine or other work.

Q: How do I claim the exemption if my shop does a mix of exempt and taxable work on one utility meter?
A: You need a Rule 3.295 predominant-use study documenting the actual exempt-vs-taxable proportion; refund claims are limited to four years back under Rule 3.339.

Q: Can I rely on this letter for my own repair station's utility exemption?
A: No. This opinion is based on the facts presented, and if there are additional or different facts, the opinion may change; it can be relied on only by the taxpayer it was issued to.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.317(c)(2) (natural gas and electricity exemption — off-wing engine repair for certificated/licensed carriers)
• 34 Tex. Admin. Code Rule 3.295 (predominant use study requirements and exemption/refund claim procedure)
• 34 Tex. Admin. Code Rule 3.325 (refunds)
• 34 Tex. Admin. Code Rule 3.339 (statute of limitations — four-year refund window)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9902276L

Original ruling text

February 25, 1999

Dear Mr. **:

Thank you for your recent letter concerning the taxability of your client's use
of electricity and natural gas.

Information Provided:

Your client's only business relates to commercial and military aircraft. The
customers are the majority of the licensed commercial aircraft carriers in the
United States. The client is an FAA/JAA certified repair station holding
license Number **.

The client's resume reads:

...overhaul airframe and engine metal ducts, tubes, manifolds, cowlings, doors,
fairings and other metal components for Airbus, Boeing, Douglas and Fokker
Aircraft; CRM and Pratt Whitney engines. FAA and JAA approved.

The client's entire operation is located in **, Texas. The
structure is 11,900 sq. ft. of concrete tilt-wall construction with complete
coverage for heating and air conditioning. The shop area consists of 9,000 sq.
ft. with the remaining offices the balance of 2,900 sq. ft. **
provides the electricity and ** provides the natural gas. The
** provides water which is billed through the City of
**. The bills for these services the past year averaged
approximately $** per month.

Question: Is your client's predominant use of electricity and natural gas as
used above qualify for exemption?

Answer: The use of natural gas and electricity by your client in the off-wing
processing, overhaul, or repair of a jet engine or its parts for a certificated
or licensed carriers or persons or property is exempt. Use of natural gas and
electricity in performing repairs to the airframe, doors, and other non-engine
metal components for the certificated or licensed carriers is taxable. Use of
natural gas and electricity in performing engine repairs and other repairs to
military aircraft is taxable. See Texas Tax Code Section 151.317(c)(2)
Vernon's Supplement (1999).

We cannot determine the predominant use of the natural gas and electricity used
by your client. The information furnished is not sufficient to determine
predominant use. The enclosed Rule 3.295 discusses predominant use, the basic
elements required in a predominant use study and the procedure for claiming
exemption and sales tax refund. The refund is limited to four years from the
date the taxes became due and payable to the state. The sale and use of water
is exempt.

I am also enclosing Rules 3.325 concerning refunds and 3.339 concerning statute
of limitations.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

You may call toll-free 1-800-531-5441, extension 3-4683, if you have any
questions or need more information. My direct line is 512/463-4683. You may
write to Tax Policy Division, Comptroller of Public Accounts, P.O. Box 13528,
Austin, Texas 78711-3285.

Sincerely,

Eddie C. Washington
Tax Policy Division