How the Manufacturing Sales Tax Exemption and Predominant Use Study Works
Many states allow manufacturing companies to avoid paying sales tax on electricity, natural gas, and other utility purchases. We can advise customers if they qualify for a sales tax exemption, conduct the state-mandated on-site survey (Predominant Use Study), and file the proper forms with the state and with utility companies. In many cases we can even recoup past sales tax payments back to our customer, after completion of the study.
The process begins with a brief discussion with facility staff to identify which utility meters service facility areas where manufacturing or other exempt activities are conducted. We examine recent utility bills for those meters, which includes electricity and natural gas for most states. For meters that have been charged sales tax in error, we can determine the amount of sales tax refund that would be recouped, if the meter can be certified exempt.
An engineer will visit the facility to survey areas for the candidate meters. Each building load (such as lights, office equipment, air conditioning and heating, and process equipment) is visited and recorded in survey tables. Hours of operation and other descriptive information is gathered.
Report and Exemption Certificates
The billing information collected from the utility bills, along with the survey data describing each item of equipment, are formulated into a written report, which identifies how utility use is allocated at the facility. The report is completed by a degreed engineer. A sales tax exemption certificate is prepared for each utility meter. In some cases where more than one utility provider is involved for the meter, several certificates are created for each meter, to be mailed to each provider during the period when a sales tax refund is claimed (if applicable).
Processing the Exemption and Follow Up
The Sales Tax Study report and other forms are assembled and mailed in a packet to the customer, to be signed and dated. Two copies are sent, so that one copy is retained for the customer’s records. The second copy is returned to our office. Once received, we collect the proper forms together and file all paperwork with the utilities and state, as needed.
Utility Purchases That Can be Exempted
The utility purchases that can be exempted from sales tax includes electricity and natural gas in nearly all states, and additional utilities can be exempted in some states, such as water, steam, and fuel.
Types of Facilities that Qualify for Sales Tax Utility Exemptions
For the states that allow utility exemptions, manufacturing companies qualify in all the states. In addition, some other types of facilities are allowed, such as Residential (housing complex, nursing home), Agriculture, Material Extraction from the earth (including exploring for, producing, or transporting), Semiconductor fabrication, Pharmaceutical fabrication, Printing (or engraving) operations, and other types of facilities.
Performance Based Study Fee
If we find that your facility does not qualify for an exemption/reduction, there is absolutely no cost to your company. We assume all engineering and accounting workload.