A clinic in leased space sends you its IRS determination letter and asks you to price the account exempt. You can’t, and the letter is not the reason. Under 34 TAC §3.295, a nonresidential lessor is the consumer and may not claim exemption based on a lessee’s exempt status or use. If the landlord is the party buying power at that ESI ID, your client’s exemption does not reach the meter you’re quoting against — and the all-in number you’re about to send says otherwise.
Nobody lied. The worksheet had “tax exempt” in a cell nobody sourced, and Texas doesn’t work that way.
The Texas rule, stated exactly
Start from the presumption. Texas Administrative Code §3.295 says the furnishing of natural gas or electricity is a sale of tangible personal property and is presumed to be taxable. Exemption is the exception, and the burden of establishing it sits with the purchaser.
The Comptroller’s guidance for nonresidential and commercial use sets out the mechanism. You must be using electricity predominantly for an exempt purpose to claim the exemption. A utility study determines the percentage of electricity used for exempt and taxable purposes, and a person claiming single-meter predominant use for processing, manufacturing, or another exempt function must establish that use over 12 consecutive months. If the study supports exempt predominant use, the customer provides a completed exemption certificate to its utility service provider and retains a copy of the study at the business location.
Read the operative words again: predominantly, single meter, 12 consecutive months, certificate to the provider, study retained at the location. Four of those are documentary conditions. None of them is satisfied by a NAICS code.
The manufacturing guidance says the same thing from the other side. Gas and electricity used to power exempt manufacturing equipment may qualify, subject to a predominant use study — and the same guidance identifies exclusions. Manufacturer status alone is not enough. It has never been enough.
Nonprofits are not simpler, they are differently complicated. For a religious organization, the Comptroller applies its own test: an organized group of people regularly meeting at a particular location, with a state application required. The Comptroller’s FAQ is blunt that a nonprofit religious organization in Texas must apply to the Comptroller’s office for exemption from franchise, sales, and hotel occupancy taxes. Federal status does not carry over automatically — the IRS says churches meeting the requirements of §501(c)(3) are automatically considered tax exempt federally and are not required to apply to the IRS for recognition, and that federal automaticity is exactly what makes people assume the state works the same way. It doesn’t.
And when a qualified nonprofit does claim exemption on a purchase, it does so by giving the seller a completed Form 01-339. The Comptroller also notes that sellers are not required to accept an exemption certificate.
Which brings back the leased-space problem, the one that catches more deals than the others combined. The §3.295 lessor rule does not care how solid your client’s exemption is. It cares who buys the power. Establish who the legal purchaser is before you put a tax line in the comparison.
Why this belongs in the worksheet and not in a footnote
Because an all-in comparison that carries an unverified tax assumption is not a comparison. It is a forecast with a hidden variable, and the variable is large enough to reverse the ranking.
Think about what the tax line is doing structurally. Supplier A and Supplier B are quoting the same commodity into the same ESI ID under the same delivery tariff. The differentiators you can actually see are energy price, contract terms, and pass-through treatment. If you then apply an exemption to both quotes equally, the exemption doesn’t change the ranking — it changes the client’s expected total, which is the number the client remembers and the number that gets you fired when it’s wrong.
This is also where the broker’s legal position gets uncomfortable in a way worth stating plainly. Under 16 TAC §25.486, all broker communications — advertising, websites, direct marketing materials, billing statements — must be clear and not misleading, fraudulent, unfair, deceptive, or anticompetitive. A quote worksheet with an unsupported tax assumption in the all-in total is a communication. Nobody is suggesting a sloppy tax cell is a §25.486 violation on its own. But the standard the rule sets is the standard your work product gets read against, and “the client told me they were exempt” is a weaker position than “here is the certificate on file, dated.”
The worksheet fields that close this
Add these to the quote template and require them before the comparison goes out.
Legal purchaser. The entity name on the account, matched to the entity that holds the exemption. Not the dba, not the parent, not the building.
Lease structure. Who buys the power at this ESI ID — the occupant or the landlord? If the landlord, the client’s status is irrelevant to this account.
Exemption basis. Predominant use for manufacturing or processing; religious or nonprofit organization exemption approved by the Comptroller; something else; or none. Name it.
Study status and period. For predominant use: is there a completed study, over which 12 consecutive months, mapped to which meter? A study for one meter is a study for one meter.
Certificate on file. Has a completed certificate been given to the provider, and is there evidence of submission and acceptance or refusal?
Refund posture. If the account has been charged in error, the Comptroller’s route is to ask the utility provider first, with an Assignment of Right to Refund as the fallback; the general limitations period runs four years from when the tax was due and payable. That’s a documented workflow, not a savings estimate.
Who verified, and on what date. A name and a date turn an assumption into a record.
Then, in the comparison itself, show the supply and delivery components separately from the tax line, and label the tax line with its evidentiary status: verified, pending study, or assumed at client direction. If it’s the third one, say so in the document that goes to the client.
What a broker should not do here
Do not sell the tax study as a savings product. The Comptroller’s framework establishes a qualification process with a documentary standard; it does not establish that any particular account qualifies, and it certainly does not establish a refund amount before the study exists. A tax study is diligence with an uncertain result. Presenting it as a no-risk refund is the kind of claim that turns a fee conversation into a complaint.
Do not compute a refund in the pitch. Compute the eligible period after the study, if the study supports it.
Do not let the client’s accountant and your worksheet be the same source. If the client’s CPA has already taken a position, get it in writing and cite it as the client’s position rather than your conclusion. Brokers are not tax advisers, and 16 TAC §25.486’s disclosure regime is about the brokerage relationship — it does not make you competent to opine on Tax Code exemptions, and pretending otherwise creates exposure the registration does not cover.
The strongest objection
Here is the fair pushback, and I’ve heard it from good brokers: this is scope creep. A broker’s job is to get comparable supply offers in front of a customer. Tax status is between the client and the Comptroller. Loading a procurement worksheet with utility-study fields slows the deal, invites questions the broker can’t answer, and pushes the broker toward advice it isn’t licensed to give. Quote the supply, note that tax treatment is the client’s responsibility, and move on.
That objection has real force, and the boundary it’s protecting is correct. A broker should not be issuing tax opinions, and a worksheet that implies otherwise is worse than one that stays silent.
But the objection answers a question nobody asked. Nothing above asks the broker to determine the client’s tax status. It asks the broker to record whether anyone has, and to stop presenting an all-in number that silently assumes an answer. Those are different jobs. The first is tax practice. The second is telling the truth about your own comparison’s inputs — which is squarely inside the broker’s lane, and arguably the whole point of it.
The scope-creep worry also has the economics backwards. The fields above take a few minutes at intake. The alternative is a controller discovering a material variance after enrollment, at which point you are not having a tax conversation, you are having a credibility conversation, and the term you just placed is the one you’re defending.
So: verify what you can, label what you can’t, name the party responsible, and let the comparison show supply against supply. That is a smaller claim than most quote worksheets currently make, and it is one you can hold up in a deal file.
Amerigy Energy is a PUCT-registered broker in Lufkin, registration #BR190721, and Lee leads the commercial side. If you’re building a quote template and want a second set of eyes on the intake fields, call.
References
1. Texas Comptroller of Public Accounts, Natural Gas and Electricity, Part Two: Nonresidential and/or Commercial Use, Tax Policy News, April 2021. https://comptroller.texas.gov/taxes/tax-policy-news/2021-april.php
2. Texas Comptroller of Public Accounts, Manufacturing Exemptions, March 2021. https://comptroller.texas.gov/taxes/publications/94-124.php
3. Texas Comptroller of Public Accounts, 34 Tex. Admin. Code §3.295 — Natural Gas and Electricity, last amendment stated March 7, 2017, reproduced by Cornell Legal Information Institute. https://www.law.cornell.edu/regulations/texas/34-Tex-Admin-Code-SS-3-295
4. Texas Comptroller of Public Accounts, Religious, accessed September 12, 2026. https://comptroller.texas.gov/taxes/exempt/religious.php
5. Texas Comptroller of Public Accounts, Frequently Asked Questions About Exemptions, accessed September 12, 2026. https://comptroller.texas.gov/taxes/exempt/faq.php
6. Texas Comptroller of Public Accounts, Nonprofit and Exempt Organizations — Purchases and Sales, accessed September 12, 2026. https://comptroller.texas.gov/taxes/publications/96-122.php
7. Internal Revenue Service, Churches, Integrated Auxiliaries and Conventions or Associations of Churches, June 28, 2026. https://www.irs.gov/charities-non-profits/churches-integrated-auxiliaries-and-conventions-or-associations-of-churches
8. Public Utility Commission of Texas, 16 Tex. Admin. Code §25.486, Customer Protections for Brokerage Services, effective July 19, 2023. https://ftp.puc.texas.gov/public/puct-info/agency/rulesnlaws/subrules/electric/25.486/25.486.pdf