Most states offer some form of sales tax production exemption for manufacturing businesses. While most manufacturers regularly claim exemptions for machinery, equipment, tools and supplies used in production, we will occasionally find a business missing out on claiming this exemption for electricity, natural gas and other energy sources used or consumed in production. Considering that energy can be very costly and is often a large percentage of operating costs, this can result in a significant amount of sales tax dollars erroneously being paid to the state.
In order to claim the “utility exemption”, a manufacturer (or other qualifying business) typically needs to provide a utility study or other documentation indicating the exempt amount of utilities used in production. Determining how much energy production machinery or equipment uses can be very complicated and may vary depending on a number of factors. That is why our SALT team works with experienced engineers to determine energy consumption for our clients’ facilities and equipment. Our team focuses on the tax laws and determining what equipment is taxable or exempt, while the engineers focus on calculating how much energy is being consumed. We believe this results in a utility study that is comprehensive, detailed and accurate and can withstand scrutiny by state taxing authorities.
Recovered $117,000 of Iowa sales tax overpayments on electricity used in manufacturing
– Defense Contractor
Our team has experience performing utility studies for manufacturers and other businesses across the U.S. We also assist our clients with recovering sales tax refunds from prior periods and securing future exemptions based upon the findings of their utility study.
If you think your business is missing out on sales tax exemptions for utilities, download and complete the questionnaire below and email it to Andy Toth at firstname.lastname@example.org to discuss whether our team can assist you.
Download Utility Exemption Questionnaire (PDF)
This questionnaire will help us determine whether or not your Business is taking full advantage of sales tax exemptions for utilities used in production.