Utility Sales Tax Exemptions

Roughly 30 states allow manufacturing and agricultural companies to reduce or entirely exempt sales tax on electricity and natural gas purchases. These states may also exempt residential use areas of nursing homes, retirement homes, hotels, senior living and assisted living facilities. A predominant use study, also known as a utility sales tax exemption, is an evaluation of an organization’s electric and natural gas consumption that can potentially lead to a partial or total state and local sales tax exemption. We can advise customers if they qualify for such a sales tax exemption, conduct the state-mandated on-site study, compile the comprehensive report and file the proper forms with the state and with the utility companies, as required. In many cases, after completion of the study we can even recoup past years’ overpaid sales tax, as far back as three to ten years depending on the state.

The following industries may qualify:

• Manufacturing and fabricating
• Agricultural and horticultural
• Nursing homes, senior living and assisted living facilities, hotels and retirement homes (residential use exemption)

A utility sales tax exemption - predominant use study analyzes the use of electricity, natural gas and water for each piece of equipment and includes:

• A description of each piece of equipment separated into exempt vs non-exempt categories as determined by the state
• Processing and non-processing function for equipment having dual usage
• Location of each piece of equipment
• Hours of operation for each piece of equipment
• Cubic foot consumption, amperage, voltage, horsepower, etc. for each piece of equipment
• Actual equipment runtime hours
• Utilization and time factors
• For some states, the natural gas, electric or water computations must be certified by a registered engineer or a graduate of an accredited engineering college and balanced with a 12-month history.