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Local Sales and Use Tax on Residential Use of Gas and Electricity


Residential use of natural gas and electricity is exempt from most local sales and use taxes. Counties, transit authorities (MTA/CTD), and most special purpose districts (SPDs) cannot tax residential use of gas and electricity. Any city that adopted local sales tax effective October 1, 1979 or later MAY NOT tax residential use of gas and electricity. See Attorney General Opinion No. H-1282 (1978).

Certain municipalities that adopted local sales tax before October 1, 1979, and two specific types of SPDs associated with those municipalities, can however opt to impose local tax on these purchases.

Municipalities

Legislation enacted in 1978, (House Bill 1, 65th Legislature, Second Called Session) exempted residential use of natural gas and electricity from sales and use taxes. However, the legislation also included a grandfather clause that authorized any city that imposed sales tax prior to October 1, 1979 to either retain the tax by ordinance on or before May 1, 1979; or reimpose the tax at any time after May 1, 1979. See Rule 3.378 regarding municipal tax on natural gas and electricity for more information.

Cities with tax on residential use of gas and electricity is an alphabetized list all cities that currently impose tax on residential use of natural gas and electricity. The effective date of the reimposition of the tax is provided for those cities that did not retain the tax prior to May 1, 1979 deadline.

Cities eligible to reimpose the tax includes all cities that do not currently impose the tax but are eligible to do so. See Rule 3.378 regarding municipal tax on natural gas and electricity for more information.

Any city not included on either list is not eligible to impose the tax.

Special Purpose Districts (SPDs)

Effective Jan. 1, 2010, a fire control, prevention, and emergency medical services district organized under Chapter 344, Local Government Code that imposes sales tax under Tax Code 321.106; or a crime control and prevention district organized under Chapter 363, Local Government Code that imposes sales tax under Tax Code 321.108, that is located in all or part of a municipality that imposes a tax on the residential use of gas and electricity will be allowed to impose tax throughout the special purpose district on residential use of gas and electricity.

Other types of SPDs, including Library Districts, Hospital Districts and Emergency Services Districts, MAY NOT tax residential use of gas and electricity.

Effective Date Information for Eligible SPD's: An eligible SPD may adopt a resolution or order to impose the tax on residential use of gas and electricity on or after January 1, 2010, the effective date of Tax Code Section 321.1055. A resolution or order adopted before January 1, 2010 has no legal effect.

After adoption, the SPD must send a copy of the order or resolution to the Comptroller by United States certified or registered mail. After receipt by the Comptroller, there shall elapse one whole calendar quarter before the order or resolution becomes effective. For example, an order or resolution received on January 11, 2010, becomes effective on July 1, 2010.

If the city associated with the SPD ceases to tax the residential use of gas and electricity in which a SPD is located, the SPD may not tax the residential use of gas and electricity under Section 321.1055(d).

Special Purpose Districts with tax on residential use of gas and electricity is an alphabetized list of all fire control, prevention, and emergency medical services districts and crime control and prevention districts that impose tax on residential use of natural gas and electricity.

Eligible Special Purpose Districts provides an alphabetized list of all fire control, prevention, and emergency medical services districts and crime control and prevention districts located in all or part of a municipality that currently imposes tax on the residential use of gas and electricity. The board of directors of a district on this list may impose the tax by order or resolution adopted in a public hearing held on or after Jan. 1, 2010 by way of a vote of a majority of the membership of the board.

Non-Qualifying Special Purpose Districts is an alphabetized list of fire control, prevention, and emergency medical services districts and crime control and prevention districts located in all or part of a municipality that is ineligible to reimpose tax on the residential use of gas and electricity.

The SPD lists contain the name of each SPD, the associated city and an indicator as to whether the SPD boundaries conform to the city boundaries.

While the Comptroller's Office endeavors to keep this information current, the lists are revised only if we receive formal notice of a reimposition, adoption or repeal of sales and use tax on residential use of gas and electricity from an eligible city or SPD. You may wish to consult your records if you have further questions.

If you have questions about Local Sales and Use Tax on Residential Use of Gas and Electricity, please contact us by e-mail at tax.allocation@cpa.state.tx.us.

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