Texas Cities That Tax Residential Electricity

Two Tax Layers, Two Rules

Texas electricity sales tax has two components. The state portion is 6.25 percent. The local portion varies by city, typically 1 to 2 percent, and applies in cities that have adopted it.

The residential exemption from state sales tax is broad. Apartment common area electricity -- hallways, pool equipment, laundry rooms, parking garages, exterior lighting -- qualifies regardless of where the property is located in Texas. The state exemption is statewide and applies everywhere.

The local exemption works differently. Some Texas cities can impose local sales tax on residential electricity. Some cities never adopted this local tax. Some adopted it and later dropped it. Some dropped it and later re-adopted it. Whether your city currently imposes local sales tax on residential electricity depends entirely on that city's history and the Comptroller's current published list.

How the Local Tax Rules Work

Texas law distinguishes between cities based on when they first adopted a local sales tax. The rules around which cities can impose local sales tax on residential electricity, and whether they retained that right continuously or exercised it by later action, are tracked by the Comptroller. The specifics of how each city's authority was established are less important for most property owners than the practical question: is my city on the list or not?

The Comptroller publishes and maintains the current list at: comptroller.texas.gov/taxes/sales/utility/cities.php

The list is long. It includes most of the major Texas cities -- Abilene, Amarillo, Arlington, Beaumont, Brownsville, Corpus Christi, El Paso, Frisco, Garland, Irving, Killeen, Longview, Lubbock, Mesquite, Midland, Nacogdoches, Odessa, Plano, San Angelo, Sherman, Texarkana, Tyler, Victoria, Waco, Wichita Falls -- and hundreds of smaller cities across the state.

Some of the most significant markets for multifamily -- Dallas, Fort Worth, Houston, Austin, Denton, San Antonio -- are on the list as well, though in some cases they are listed with a reimposition date after 1979, meaning they dropped the tax at some point and later reinstated it.

What This Means for Your Refund Claim

If your property is in a city that does not impose local sales tax on residential electricity, your refund claim covers only the state portion (6.25 percent). That is still meaningful. On $4,000 per month in common-area electricity spend, the state portion is $250 per month, or $12,000 over four years.

If your property is in a city that does impose local sales tax on residential electricity, your retail electricity provider has likely been charging you both the state rate and the local rate on those common-area meters. The refund claim can cover both the state portion and the local portion, depending on how the local tax authority applies to the specific use.

This is worth checking before assuming your claim is limited to the state portion. An additional 1 to 2 percent local tax on $4,000 per month adds another $40 to $80 per month to the refund potential -- or $1,920 to $3,840 over four years on a single property.

How to Check Your City

The simplest approach is to look up your city on the Comptroller's list at comptroller.texas.gov/taxes/sales/utility/cities.php.

If your city is on the list, local sales tax is being applied to your residential electricity accounts. Your refund claim and going-forward exemption filing should address both the state and local portions.

If your city is not on the list, the local portion does not apply. Your retail electricity provider should not be charging local residential electricity sales tax on those accounts. If they are, that is a billing error separate from the standard refund claim process.

For properties in cities near the Texas-Louisiana or Texas-Oklahoma border, or in special jurisdiction areas with transit authority or special purpose district taxes, the local tax calculation can have additional layers. Those situations are less common but worth noting when preparing the claim.

The Dallas-Fort Worth Picture

For multifamily owners in the DFW market specifically, most of the major cities impose local sales tax on residential electricity. Dallas, Fort Worth, Arlington, and most of the surrounding municipalities are on the Comptroller's list. The net effect is that DFW multifamily owners are likely paying both state and local sales tax on qualifying common-area meters, and both components are potentially recoverable.

The same is true in Houston, where the city is on the list along with most of the Houston-area municipalities. In the Austin market, the city of Austin is on the list with a reimposition date. In San Antonio, the pattern is similar.

This does not change the fundamental analysis of whether a refund claim is worth pursuing. It adds to the potential recovery amount on a per-property basis and makes it more important to check the Comptroller's list before estimating the refund.

Where This Fits in the Overall Claim

The local tax component is an add-on to the state refund claim, not a replacement for it. The state exemption claim -- which covers the 6.25 percent -- is the primary driver of the refund amount for most properties. The local portion is additional.

PowerCord calculates the recoverable amount from both components when preparing a claim for a property in a city that imposes local sales tax on residential electricity. The claim submitted to the Texas Comptroller addresses both, supported by the same invoice history and use documentation.

If you want to see what the refund estimate looks like for your property, the calculator at powercordenergy.com/tax-recapture gives you a starting figure based on monthly electricity spend. The calculator focuses on the state portion. If your city is on the Comptroller's list, the actual recoverable amount is higher than the calculator estimate.