| (E) If a person appoints an agent to act on its behalf,
the person must execute a power of attorney clearly stating the agent
is attempting to qualify the principal for a sales tax exemption.
(2) A person in business less than 12 consecutive months
may still apply for a sales tax exemption if a registered engineer
or a person with an engineering degree performs a natural gas or electric
utility study based upon projected uses of the natural gas or electricity
which shows the predominant use to be exempt. A person claiming an
exemption based upon projected use must be able to support the claimed
exemption with a study of actual use after 12 consecutive months of
operation if requested by the comptroller.
(3) A natural gas or electric utility study must be
completed and on file at the location of the person claiming the exemption
at the time an exemption certificate is submitted to the utility company.
Without the study, the claim for exemption will be presumed to be
(4) Persons obtaining a sales tax refund from a utility
company without a valid study will be assessed tax, penalty, and interest
by the comptroller on the full amount of the refund, if the exemption
is not proved.
(5) The comptroller may request a copy of a natural
gas or electric utility study for review, either before or after the
sales tax exemption is granted. Neither the comptroller's review of
a study nor the utility company's acceptance of an exemption certificate
confirms the study's accuracy. If the comptroller subsequently determines
a study is incomplete or inaccurate, tax, penalty, and interest will
be assessed against the person claiming the exemption to the extent
that the predominant use of the natural gas or electricity is taxable.
(6) If a person claims a sales tax refund, and the
utility study establishing the predominant use of the natural gas
or electricity was performed retrospectively, the study must take
into account any changes in equipment or other items using utilities,
any changes in business activities, and any changes in square footage
being served by the meter that occurred during or after the sales
or use tax refund period. The comptroller will not accept a predominant
use study that cannot be independently verified, such as a predominant
use study performed for a closed utility account.
(7) This subsection does not apply to persons who use
natural gas or electricity for processing, manufacturing, or another
exempt function if an industry-wide study for that particular industry
reflects that the natural gas or electricity used would always qualify
as exempt use. The industry-wide study must be submitted to the comptroller's
office for review and approval. A subsequent study may be required
if factors relative to the original study change.
(8) If a business claiming a sales tax exemption for
natural gas or electricity purchases based on predominant use changes
its natural gas or electric utility provider, but does not change
its natural gas or electricity usage, it is not required to perform
a new utility study. A copy of the study must be on file at the business
location for which the study was performed, and a properly completed
exemption certificate must be filed with the new utility provider
before the exemption may be claimed.
(h) Exemption certificates.
(1) An exempt user may issue an exemption certificate
to the utility company to claim a sales tax exemption on its purchase
of natural gas or electricity, or request the utility company to refund
sales tax paid to the utility company in error. Exempt users may also
request a refund of sales and use taxes paid on purchases of natural
gas and electricity from the comptroller as provided in §3.325
of this title (relating to Refunds and Payments Under Protest).
(2) A natural gas or electricity utility company may
only accept an exemption certificate in lieu of tax if the exemption
certificate is specific as to the reason for the claimed exemption.
For example, if a person is claiming that the predominant use of the
utility is for processing, the reason for the exemption must state,
"A valid and complete study has been performed which shows that (insert
the actual exempt percentage) of the natural gas or electricity is
for processing tangible personal property for sale in the regular
course of business." For more information regarding the exemption
certificates, see §3.287 of this title (relating to Exemption
(3) If an exemption certificate is fully completed
with all information required by this section and bears an original
seal of a registered engineer or is attached to a signed statement
with an original signature from the owner of the business and a person
with an engineering degree from an accredited engineering college,
as required by subsection (g) of this section, the utility company
is not required to make any additional inquiry before honoring the
(4) The exemption is valid only as long as the person
continues to use natural gas and electricity predominantly for exempt
purposes. If the use of the natural gas or electricity changes so
that the predominant use becomes taxable, it is the person's responsibility
to notify the utility company in writing that the exemption is no
(5) A person who uses natural gas or electricity solely
in a single-family residence is not required to furnish an exemption
(6) A person whose use of natural gas and electricity
is in multifamily apartment complexes, housing complexes, nursing
homes, or other residential buildings may be required to issue an
exemption certificate if one is necessary for the utility company
to distinguish exempt residential use from taxable use.
(7) A multifamily residential property may issue a
blanket exemption certificate for vacant apartments that will be occupied
as residences and billed under the property's corporate name or the
name of the property owner, if at least one unit in the property is
occupied for residential use.
(8) A person who claims an exemption for natural gas
or electricity used for agricultural or timber operations must provide
an exemption certificate to its utility provider that contains the
person's Texas Agriculture and Timber Registration Number issued by
the comptroller and the expiration date.
(9) A qualifying owner, qualifying operator, or qualifying
occupant of a qualifying data center or a qualifying large data center
project who claims an exemption for natural gas or electricity used
for a qualifying data center or used for a qualifying large data center
must provide an exemption certificate that contains the Qualifying
Data Center or Qualifying Large Data Center Project Registration Number
and the Qualifying Owner, Qualifying Operator, or Qualifying Occupant
Registration Number issued by the comptroller to its utility provider.
(i) Transportation of a material extracted from the
(1) Sales or use tax is not due on natural gas or electricity
used to transport a material or its components extracted from the
earth. Examples of materials or components extracted from the earth
would be oil, natural gas, coal or coal slurry, crushed stone, sand
and gravel, and water.
(2) Sales or use tax is due on natural gas or electricity
used to transport products that have been manufactured from a material
extracted from the earth. Products which were manufactured from a
material extracted from the earth include substances which do not
exist in nature or are not components of crude oil, natural gas, coal,
or other minerals extracted from the earth.
(3) For purposes of this section, a material is not
considered to be manufactured when an additive is combined with the
material for ancillary reasons, for example, when odorant is added
to natural gas.
(j) Pipeline safety fees. Sales or use tax is not due
on any surcharge for pipeline safety fees added to the existing rates
of each investor-owned and municipally owned natural gas distribution
company and each natural gas master meter operator pursuant to Texas
Utilities Code, §121.211 (Pipeline Safety and Regulatory Fees).
(k) Natural gas and electricity purchased by lessors
of nonresidential real property.
(1) A lessor of nonresidential real property that purchases
natural gas or electricity directly from a utility provider is the
consumer of the natural gas or electricity, and is making a taxable
use of that natural gas or electricity, unless the lessor is otherwise
exempt from sales and use tax. See §3.322 of this title (relating
to Exempt Organizations). A utility provider may not make a tax-exempt
sale for resale to the lessor of the nonresidential real property.
(2) A lessor of nonresidential real property may not
claim an exemption for the purchase of the natural gas or electricity
based on a lessee's exempt status or a lessee's use of the natural
gas or electricity.
|Source Note: The provisions of this §3.295 adopted to be effective January 1, 1976; amended to be effective October 25, 1978, 3 TexReg 3571; amended to be effective November 26, 1984, 9 TexReg 5836; amended to be effective February 9, 1987, 12 TexReg 311; amended to be effective February 1, 1988, 13 TexReg 348; amended to be effective January 1, 1990, 14 TexReg 6675; amended to be effective June 25, 1991, 16 TexReg 3195; amended to be effective March 7, 1996, 21 TexReg 1583; amended to be effective September 20, 2000, 25 TexReg 9220; amended to be effective April 13, 2005, 30 TexReg 2082; amended to be effective March 7, 2017, 42 TexReg 1034