The WET applies to the sale of water service by water utilities.
Water service means the delivery of water by a piped distribution system. A water utility means any person, partnership, business association, or corporation, including municipally owned corporations, domestic or foreign, who owns or operates any facilities for making sales of water service to the public for compensation.
For purposes of WET, a facility is any storage tanks, water towers, wells, plants, reservoirs, aqueducts, hydrants, pumps, pipes, or any other similar devices, mechanisms, equipment, or amenities designed to hold, treat, sanitize, or deliver water.
When Water Service is Furnished for Compensation
Water service is furnished for compensation when water service is 1) sold for a separately itemized price, or 2) when the price of the water service is identifiable from an invoice, bill, catalog, price list, rate card, receipt, agreement, or other similar document, including where the total sales price increases when water service is included in the sale. Water service is not furnished for compensation when the provision of water service is incidental to the rental of real property.
Itemized Sale of Water Service
1) A Homeowners Association (HOA) owns or operates a well located in a small community. Homes in the community are connected to the well via pipes, and every home pays $20 to the HOA for access to the water and associated maintenance on the water distribution system. Only homes who pay the $20 are provided water service. The HOA is a water utility because it owns or operates a facility (the well) and provides water service for compensation. The HOA must therefore collect and remit WET on the $20 monthly fee paid by each member.
2) An apartment owner purchases water from a city water utility and distributes the water to each unit through a system of pipes. The city meters the apartment owner’s use of water each month and charges the apartment owner for the water service. The apartment owner separately bills each of the tenants $40 per month for water service, including the cost of water and maintenance on the water distribution system. The apartment owner is a water utility and must collect and remit water service excise tax on the $40 monthly charge for water service. The apartment owner may purchase the water from the city tax exempt as a sale for resale.
Identifiable Sale of Water Service
3) A campground provides three campsite packages to its customers:
Package A includes only campsite access for $10 per night.
Package B includes campsite access and an electrical hookup for $20 per night.
Package C includes campsite access, an electrical hookup, and water service for $30 per night.
Sales of Package C by the campground include sales of water service. The campground must collect and remit water service excise tax on $10—the identifiable sales price of water service.
Water Service Incidental to Rental of Real Property
4) Water service sold with real estate rental for one non-itemized price. A Manufactured Housing Community (MHC) owner owns a well and pipes water to the lots. The MHC owner charges tenants $500 per month for each unit. Water from the well is included in the $500 rental charge. The MHC owner does not charge a flat water fee, does not charge tenants based on their actual water used, and does not offer comparable lots at a lower price that do not have access to water service. The MHC owner is not required to collect or remit water service excise tax because water is not being furnished for compensation; it is incidental to the rental of real property.
5) Water service purchased sold with real estate rental for one non-itemized price. A manufactured housing community (MHC) purchases water from a city water utility, and distributes the water to each lot in the community through a system of pipes. The city meters the MHC’s use of water each month and charges the MHC for the water service and the applicable water service excise tax. The MHC charges its tenants $500 for lot rental. As in the previous example, the MHC owner does not charge a flat water fee, does not charge tenants based on their actual water used, and does not offer comparable lots at a lower price that do not have access to water service. The MHC owner is not required to collect or remit water service excise tax because water is not being furnished for compensation; it is incidental to the rental of real property.