Sales Tax Articles
Sales Tax State Activity Update - January 2005
Texas Clarifies Water Related Exemptions
In an advisory letter, the Tax Policy Division clarified some perceived contradictions appearing between various documents on water related exemptions.
Effective September 1, 2001, legislation was enacted to exempt equipment, services, or supplies used solely to construct or operate water or wastewater system certified as a regional system by Texas Commission of Environmental Quality.
With respect to construction companies involved with the building of these facilities, an exemption from tax is extended to all equipment (purchased or leased), services, and supplies used solely on that particular certified project. The provision applies to both lump-sum contracts and separated contracts. It also includes office equipment, but only if it is used solely at the regional system site. If a taxable divergent use of any property is made on any item purchased tax free as provided under Rule 151.355 one should consult Rule 3.318(e), which addresses this issue.
A similar exemption is also provided to construct or operate a water supply or wastewater system by a private entity that is member of a public-private partnership, as certified by the political subdivision that is a party to the project. See subsection 6 of Rule 151.355 for further details. A construction company would have to be the private entity in the partnership with the political subdivision to avail itself of the allowed exemptions.
To view the ruling in detail please click here.
(Texas Comptroller of Public Accounts, Letter No. 200411894L, Sales and Use 11/23/04)
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