Texas Utility Sales Tax Exemption

Manufacturers and industrial processors with facilities located in Texas, may be eligible for a utility tax exemption. Texas offers an exemption from state and local sales tax on the purchase of electricity, natural gas, and water used in qualifying production activities. This tax exemption is authorized by Texas Admin. Code Rule §3.295 (c)(5).

Exemption Language of Texas Admin. Code Rule §3.295 (c)(5)

"Natural gas and electricity are exempted from sales and use taxes when sold for direct use in powering equipment that qualifies for exemption under Tax Code, Section 151.318 (Property Used in Manufacturing)."

Utility Study Requirement for Exemption Qualification

A Texas predominant use study must list every piece of equipment and appliance (production and non-production) that uses the utility and the annual consumption of each. Additionally, the study must be signed by an engineer. Failure to properly calculate or classify utility usage is cause for denial of the exemption.

Texas Statute of Limitations on Tax Refund

4 years

State Sales Tax Rate: 6.25%

Average Local Sales Tax Rate: 1.94%

Helpful Resources

Texas Utility Exemption Certificate: Form 01-339

Texas Utility Exemption Statute/Rule: Texas Admin. Code Rule §3.295 (c)(5)

Texas Claim Form for Tax Refund: Claim for Refund