Frequently Asked Questions
1. What is the miscellaneous gross receipts tax?
The miscellaneous gross receipts tax is a tax imposed on each utility company located in an incorporated city or town having a population greater than 1,000, according to the last federal census; utility company includes retail electric providers making sales to customers located in an incorporated city or town having a population greater than 1,000, according to the last federal census.
2. What is a utility company?
For the purpose of the miscellaneous gross receipts tax, a utility company is a person who does one of the following:
- owns or operates a gas or water works, or water plant used for local sale and distribution located within an incorporated city or town in this state;
- owns or operates an electric light or electric power works, or light plant used for local sale and distribution located within an incorporated city or town in this state; or
- a retail electric provider, as that term is defined in Section 31.002, Utilities Code, that makes local sales within an incorporated city or town in this state.
3. What is a retail electric provider, and do they pay the miscellaneous gross receipts tax?
A retail electric provider (REP) sells electric energy to retail customers in Texas. A REP makes sales only and is subject to the tax when selling electricity within an incorporated city or town.
4. How is the tax calculated?
The tax is computed by applying the prescribed tax rate to the utility company's gross receipts from business in an incorporated city or town.
- For business done in cities of more than 1,000 but less than 2,500 population, the rate is 0.581 percent;
- in cities of 2,500 or more but less than 10,000, the rate is 1.07 percent; and
- in cities of 10,000 or more, the rate is 1.997 percent.
5. How long has Texas had a miscellaneous gross receipts tax on utility companies?
The tax has been in effect since May 12, 1907.
6. If a company pays the public utility gross receipts assessment fee, does the utility company also owe the miscellaneous gross receipts tax?
Yes, if the company meets the definition of a utility company and is located in an incorporated town or city that exceeds the set population number. See Question No. 1.
7. If the miscellaneous gross receipts tax is levied on utilities, why is there a charge for gross receipts tax on a customer's bill?
Some utility companies itemize the gross receipts tax on the invoice they send to their customers. If a utility company chooses to separately charge its customers to recoup the gross receipts tax that the company pays, it must include the amount collected from customers as additional gross receipts. The utility company then pays tax on the total gross receipts, which includes the reimbursement amount collected.
8. Is there tax on gross receipts from businesses in a city that was not incorporated at the time of the last census?
No, because the tax is based upon official federal census figures. If a city was not incorporated at the time of the last official census, no tax applies until the next federal census is issued. For example, assume a city is incorporated in 2001. Because the last official census was done in 2000, a utility company located in that city would not owe tax on gross receipts earned in that city until the next federal census.
9. Does the miscellaneous gross receipts tax apply to all utility companies or just to those providing electricity?
The tax applies to utility companies that sell and distribute water, gas, or electricity within an incorporated city or town.
10. Does the miscellaneous gross receipts tax apply to utilities operated by municipalities and electric cooperatives?
No, but the tax applies to municipal and co-op utilities if they elect to enter the competitive market.
11. How does a utility company get set up to report and pay the miscellaneous gross receipts tax?
A utility company should complete a Texas Application for Miscellaneous Gross Receipts Tax form, AP-110.
12. When is the tax report due?
Tax reports and payments are due quarterly on the last day of January, April, July, and October, for gross receipts from business done during the preceding quarter.
If the due date falls on a Saturday, Sunday or legal holiday, the next business date is the due date.
13. How is the tax paid?
Gross receipts taxes are paid in advance for a future period based on receipts for a prior period.
- When beginning business, a utility owes $50.00, payable in advance.
- The $50.00 is the tax owed for the first quarter.
- At the end of the first quarter, another payment, based on receipts for the first quarter, will be due and represents an advanced payment for the second quarter.
- If the utility ceases doing business during a prepaid quarter, a tax is not required at the end of that quarter.