This is to provide customers with specific information regarding the tax-related charges listed on their electric bills. In Texas, companies that sell electricity in the retail market are subject to the Public Utility Gross Receipts Assessment (PUCA), and possibly the Miscellaneous Gross Receipts Tax (MGRT), on their gross receipts from the sale of electricity. These companies must collect from their customers and remit to the Comptroller any applicable state or local sales tax that is due on their retail transactions. To ensure compliance with the various tax laws, electric companies should be aware of certain billing issues relating to their payment and collection of taxes in this state.
Miscellaneous Gross Receipts Tax on Electricity (Texas Tax Code, Chapter 182) An MGRT is imposed on each utility company in Texas that makes local sales of electricity within an incorporated city or town having a population of more than 1,000, according to the last federal census. The rate at which the tax is imposed depends on the population of the city within which the electricity is delivered. The tax rates are:
• 0.581 percent (0.00581) of gross receipts from business done in an incorporated city or town with a population of more than 1,000 but less than 2,500.
• 1.07 percent (0.0107) of gross receipts from business done in an incorporated city or town with a population of 2,500 or more but less than 10,000; and
• 1.997 percent (0.01997) of gross receipts from business done in an incorporated city or town with a population of 10,000 or more.
Public Utility Gross Receipts Assessment on Electricity (Texas Utilities Code, Chapter 16) The PUCA is imposed on each electric utility, retail electric provider and electric cooperative that serves the ultimate consumer in Texas. The assessment is equal to one-sixth of one percent (0.001667) of the electric utility’s, retail electric provider’s or electric cooperative’s gross receipts from rates charged to the ultimate consumer in this state.
Sales Tax Exemptions for Electricity
Tax Code §151.317 provides that electricity is exempt from sales tax when sold for these purposes:
• residential use, except in certain cities as noted above;
• use in powering equipment exempt under §151.318 or §151.3185 by a person processing tangible personal property for sale as tangible personal property, other than preparation or storage of prepared food described by §151.314(c-2);
• use in lighting, cooling and heating in the manufacturing area during the actual manufacturing or processing of tangible personal property for sale as tangible personal property, other than preparation or storage of prepared food described by §151.314(c-2);
• use directly in exploring for, producing or transporting a material extracted from the earth;
• use in agriculture, including dairy or poultry operations and pumping for farm or ranch irrigation;
• use directly in electrical processes, such as electroplating, electrolysis and cathodic protection;
• use directly in the off-wing processing, overhaul or repair of a jet turbine engine or its parts for a certificated or licensed carrier of persons or property;
• use directly in providing, under contracts with or on behalf of the United States government or foreign governments, defense or national security-related electronics, classified intelligence data processing and handling systems, or defense-related platform modifications or upgrades;
• a direct or indirect use, consumption or loss of electricity by an electric utility engaged in the purchase of electricity for resale; or
• use in timber operations, including pumping for irrigation of timberland.