1. (a) Tax imposed. Every gas utility as described in Texas Utilities Code, §122.001(1), shall report and pay a gas utility tax as required by Texas Utilities Code, Chapter 122. The gas utility tax is imposed on the gross income received from all activity performed by the gas utility in Texas pursuant to Texas Utilities Code, §121.001. The rate of the tax is one-half of 1.0% of the gross income subject to the tax.
2. (b) Tax payment. Each gas utility subject to this tax shall report and pay the tax imposed to the Commission by February 20, May 20, August 20, and November 20 of a year for the preceding calendar quarter. The gas utility tax report shall be of a form and content as established by the Commission and shall be properly completed. The payment shall be made payable as directed by the Director. The Commission shall consider a gas utility tax report and payment timely filed if it is received by the Gas Services Division on or before the applicable date or is sent to the Division by first-class United States mail in an envelope or wrapper properly addressed and stamped and postmarked before the deadline and received not more than 10 days later. A legible postmark affixed by the United States Postal Service shall be prima facie evidence of the date of mailing.

3. (c) Gross income and gross receipts.

   1. (1) Gross income shall be equal to the total gross receipts from any activity described in Texas Utilities Code, §122.001(2), less a deduction of the costs paid to another person for purchasing, treating, or storing natural gas or for gathering or transporting natural gas to the facilities of the gas utility. Treating shall be any process designed to make gas of pipeline quality.
   2. (2) Gross receipts shall be equal to the total revenue received from the sale and/or transportation of gas. Revenue from residential sales, commercial and industrial sales, other sales to public authorities, sales for resale, interdepartmental sales, and revenues from transportation of gas of others (corresponding to Account Numbers 480, 481, 482, 483, 484, and 489 of the National Association of Regulatory Utility Commissioners (NARUC) uniform system of accounts as they existed on January 16, 1991), as well as any other applicable revenue items determined by the Commission, shall be subject to the gas utility tax. If a gas utility that engages in both transmission and distribution of natural gas makes an allocation of costs to the transmission function which is approved by the Commission, then no additional gas utility tax shall be paid on costs allocated to the distribution function. If no such allocation is made, then such gas utility shall be required to pay gas utility tax on sales to end-use customers. A properly authorized gate rate shall be deemed to constitute a sufficient allocation of transmission costs.

4. (d) Nontaxable receipts. The following revenues shall not be included in the computation of gross receipts:

   1. (1) revenues received from first sales of gas by a producer thereof exclusively. If the sale by a producer of gas includes both produced and purchased gas, then the total revenues from the sale of produced gas shall be exempt from the gas utility tax. However, the total revenues from the sale of purchased gas shall be subject to the tax;
   2. (2) revenues received from burnertip sales by a gas utility engaged solely in retail gas distribution;
   3. (3) revenues derived from transporting, delivering, selling, or otherwise making available natural gas for fuel, either directly or indirectly, to irrigation wells or from the sale, transportation, or delivery of natural gas for any other direct use in agricultural activities;
   4. (4) revenues received from interstate transactions or sales of gas which are subject to the jurisdiction of the Federal Energy Regulatory Commission under the provisions of the Natural Gas Act, 15 United State Code §717 et seq., and the Natural Gas Policy Act, 15 United States Code §3301 et seq.; or
   5. (5) revenues received from brokerage or off-system sales.
5. (e) Deductions. To determine taxable gross income, deductions from gross receipts for certain costs incurred are allowed. Deductions may be used to reduce current tax liability to zero. Current deductions may not be carried forward and deducted from gross receipts in the next quarter. Allowable deductions shall be those costs associated with gas processed by others, natural gas wellhead purchases, natural gas field line purchases, natural gas gasoline plant outlet purchases, natural gas city gate purchases, exchange gas, purchased gas expenses, the transmission and compression of gas by others (corresponding to NARUC Account Numbers 777, 800, 801, 802, 803, 804, 806, 807, 824, and 858 as they existed on January 16, 1991), and any other applicable expenses as determined by the Commission. A deduction shall also be allowed for the cost of labor, materials used and expenses incurred in operating underground storage plant, and other underground storage operating expenses, including research and development expenses. The balances of gas withdrawn from storage (corresponding to NARUC Account Number 808 as it existed on January 16, 1991) (debit), and gas delivered to storage (corresponding to NARUC Account Number 809 as it existed on January 16, 1991) (credit) shall be netted. If the net is a debit balance, that balance shall also be deducted from the gross receipts. If the net is a credit balance, that balance shall reduce the allowable deductions.
6. (f) Enforcement and penalties. Each gas utility liable for the gas utility tax shall be subject to the enforcement and penalty provisions set forth in Texas Utilities Code, Chapter 122. A penalty in the amount of 5.0% of the tax due shall be imposed on any person who fails to make a report or pay a tax as required under law. An additional penalty of 5.0% of the tax due shall be imposed on any person who fails to make a report or pay a tax as required before the 30th day after the date the report or tax payment is due. If a person fails to both make the report and pay the tax for a reporting period, only the penalty and additional penalty, as applicable, for failure to make the report is imposed. If the amount of a penalty or additional penalty computed as otherwise provided by this subsection is less than $5.00, the amount of the penalty or additional penalty is $5.00. Any gas utility tax delinquent during the period commencing on or after January 1, 1994, shall draw simple interest, at the rate of 12% per year beginning on the 60th day after the date the tax becomes delinquent until the tax is paid. Any gas utility tax delinquent during the period commencing on September 1, 1991, and ending December 31, 1993, shall draw interest at the rate of 12% per year, compounded monthly, beginning on the 60th day after the date the tax became delinquent until December 31, 1993, or until the tax is paid, whichever is first. Any gas utility tax delinquent during any period before September 1, 1991, shall draw interest at the rate of 10% per year, beginning on the 60th day after the date the tax became delinquent until August 31, 1991, or until the tax is paid, whichever is first. The tax is considered paid when received by the Commission in accordance with subsection (b) of this section.

Source Note:The provisions of this §7.351 adopted to be effective July 29, 2002, 27 TexReg 6687.