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New Texas Law Clarifies Miscellaneous Gross Receipts Obligation For Retail Providers

July 24,2017

Recently adopted SB 559 in Texas has clarified what triggers the obligation of a retail electric provider to collect the miscellaneous gross receipts tax -- the location of the REP, or the location of the customer

The Miscellaneous Gross Receipts Tax (MGRT) is tax imposed upon gas, electric, and water utility companies based upon the gross receipts from business done in cities and towns with certain population ranges.

The prior statute includes the word "located" after utility company in determining who is subject to the tax. The placement of the word "located" had led some to conclude that the location of the utility company (or REP), rather than the location of the customer, is the determining factor of whether tax is due.

"This reading is inconsistent with the history of MGRT provisions and would allow REPs to locate in a city with a population of less than 1,000 inhabitants and sell to any location, regardless of population, without being subject to MGRT. The ambiguity created in this argument now places compliant REPs at a competitive disadvantage," according to a statement of intent accompanying the enrolled bill

S.B. 559 as passed clarifies current policy that MGRT is imposed on a company that sells retail electric service to a customer located in a town or city with a population of 1,000 or more, regardless of where the company is located.

S.B. 559 amended Section 182.022(a) of the Tax Code to read, "A tax is imposed on each utility company that makes a sale to an ultimate consumer in an incorporated city or town having a population of more than 1,000, according to the last federal census next preceding the filing of the report."

"Utility company" is defined by statute to include a REP in this instance.

Previously, the old Section 182.022(a) had read that the tax is imposed on company "located" in an incorporated city or town having a population of more than 1,000

In a memo providing an update on the legislative session, Texas PUC Staff stated concerning the bill, "In statute related to the miscellaneous gross receipts tax, this bill removes references to a utility company's physical location and place of sales to clarify the tax responsibility of utility companies. There had been questions raised with the Comptroller about whether a Retail Electric Provider that has its headquarters outside Houston had to pay the tax for electricity sales inside Houston."

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