(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
  (1) Crime control and prevention district--A district organized under Local Government Code, Chapter 363 (Crime Control and Prevention Districts), located within the boundaries of a municipality that imposes a sales and use tax on the residential use of natural gas and electricity.
  (2) Electric utility--Any entity owning or operating for compensation in this state equipment or facilities for producing, generating, transmitting, distributing, selling, or furnishing electricity whose rates for the sale of electric power are set by the Public Utilities Commission under the Public Utility Regulatory Act. The term does not include:
    (A) a qualifying small power producer or qualifying co-generator, as defined in the Federal Power Act, §3(17)(D) and §3(18)(C), as amended (16 United States Code §796(17)(D) and §796(18)(C)); or
    (B) any person not otherwise a public utility that owns or operates in this state equipment or facilities for producing, generating, transmitting, distributing, selling, or furnishing electric energy to an electric utility, if the equipment or facilities are used primarily for the production and generation of electric energy for the person's own consumption.
  (3) Fabrication--To make, build, create, produce, or assemble components of tangible personal property, or to make tangible personal property work in a new or different manner.
  (4) Fire control, prevention, and emergency services district--A district organized under Local Government Code, Chapter 344 (Fire Control, Prevention, and Emergency Medical Services Districts), located within the boundaries of a municipality that imposes a sales and use tax on the residential use of natural gas and electricity.
  (5) Manufacturing--Every operation commencing with the first stage of production of tangible personal property and ending with the completion of tangible personal property. The first production stage means the first act of production and it does not include acts in preparation for production. For example, a manufacturer gathering, arranging, or sorting raw material or inventory is preparing for production. When production is completed, maintaining the life of tangible personal property or preventing its deterioration is not a part of the manufacturing process. Tangible personal property is complete when it has the physical properties, including packaging, if any, that it has when transferred by the manufacturer to another. Also see §3.300 of this title (relating to Manufacturing; Custom Manufacturing; Fabricating; Processing).
  (6) Processing--The physical application of the materials and labor necessary to modify or to change the characteristics of tangible personal property. The property being processed may belong either to the processor or the customer, the only tests being whether the property is processed and whether it will ultimately be sold. Direct use of natural gas or electricity in processing will be referred to as exempt use. Processing does not include remodeling or any action taken to prolong the life of tangible personal property or to prevent a deterioration of the tangible personal property being held for sale. The repair of tangible personal property belonging to another by restoring it to its original condition is not considered processing of that property. The mere packing, unpacking, or shelving of a product to be sold will not be considered to be processing of that product.
  (7) Remodeling--To make tangible personal property belonging to another over again without causing a loss of its identity, or without causing the property to work in a new or different manner.
  (8) Residential use--Use of natural gas or electricity in a building or the portion of a building occupied as a residence and includes:
    (A) use by the owner of a home, apartment complex, housing complex, condominium, campground, recreational vehicle park, nursing home, or retirement home occupied by the owner as a residence;
    (B) use by a tenant in a home, apartment complex, housing complex, condominium, campground, recreational vehicle park, nursing home, or retirement home occupied by the tenant as a residence under a contract for an express initial term of more than 29 consecutive days. Absent a contract, only the period exceeding 29 consecutive days will be considered residential use, when supported by valid documentation (i.e., receipts, canceled checks, etc.); and
    (C) use for common areas of an apartment complex, housing complex, condominium, campground, recreational vehicle park, nursing home, retirement home, or homeowners' association, such as use for a recreation room, swimming pool, security gate, or for street lights and exterior lighting in a walkway or parking area.
    (D) Residential use does not include use in health care or detention facilities, including hospitals, rehabilitation centers, substance abuse treatment centers, psychiatric facilities, prisons, jails, or other detention centers, or use by the owner or operator of a health care or detention facility.
  (9) Tenant--A person who is authorized by a lease to occupy a dwelling to the exclusion of others and who is obligated under the lease to pay rent. The term does not include a patient or inmate of a health care or detention facility, including a hospital, rehabilitation center, substance abuse treatment center, psychiatric facility, prison, jail, or other detention center.
(b) State and local sales and use taxes applicable. The furnishing of natural gas or electricity is a sale of tangible personal property and presumed to be taxable. All the provisions in Tax Code, Chapters 151 (Limited Sales, Excise and Use Tax), 321 (Municipal Sales and Use Tax Act), 322 (Sales and Use Taxes for Special Purpose Taxing Authorities), and 323 (County Sales and Use Tax Act) applying to the sale of tangible personal property, apply to the sale of natural gas or electricity.
(c) Exempt uses of natural gas and electricity. Except as provided in subsection (d) of this section, an exemption for natural gas and electricity applies to state and local sales and use taxes imposed by Tax Code, Chapters 151, 321, 322, and 323. Natural gas and electricity are exempted from sales and use taxes when sold for:
  (1) residential use;
  (2) use in agriculture, including dairy or poultry operations and pumping for farm or ranch irrigation;
  (3) direct or indirect use or consumption, including electricity lost in the lines, by an electric utility engaged in the purchase of electricity for resale;
  (4) use in timber operations, including pumping for irrigation of timberland;
  (5) direct use in:
    (A) powering equipment that qualifies for exemption under Tax Code, §151.318 (Property Used in Manufacturing) or §151.3185 (Property Used in the Production of Motion Pictures or Video or Audio Recordings and Broadcasts), (including equipment that is permanently affixed to or incorporated into realty) to process tangible personal property for sale as tangible personal property, other than preparation of or the storage of prepared food, as defined in §3.293 of this title (relating to Food; Food Products; Meals; Food Service);
    (B) lighting, cooling, and heating in the manufacturing area during the actual manufacturing or processing of tangible personal property for sale as tangible personal property, other than preparation or storage of prepared food;
    (C) exploring for, producing, or transporting a material extracted from the earth;
    (D) electrical processes, such as electroplating, electrolysis, and cathodic protection;
    (E) the off-wing processing, overhaul, or repair of a jet turbine engine or its parts for a certificated or licensed carrier of persons or property;
    (F) providing, under contract with or on behalf of the United States government or foreign governments, defense or national security-related electronics, classified intelligence data processing and handling systems, or defense-related platform modifications or upgrades;
    (G) the repair, maintenance, or restoration of rolling stock;
    (H) a data center that is certified by the comptroller as a qualifying data center under Tax Code, §151.359 (Property Used in Certain Data Centers; Temporary Exemption) in the processing, storage, and distribution of data by a qualifying owner, qualifying operator, or qualifying occupant of the data center; or
    (I) a large data center project that is certified by the comptroller as a qualifying large data center under Tax Code, §151.3595 (Property Used in Certain Large Data Center Projects; Temporary Exemption) in the processing, storage, and distribution of data by a qualifying owner, qualifying operator, or qualifying occupant of the data center.
(d) Local sales and use taxes on natural gas and electricity.
Cont'd...