SMART TAX USA – Utility Tax Exemptions

States listed all have exemption/refund opportunities for manufacturers and processors.

 

ALABAMA

• Electricity and natural gas used or consumed in the direct production, generation, processing, storage, delivery or transmission of electricity, natural gas or domestic water.

• Electricity sold to a manufacturer or compounder for use in electrolytic or electrothermal manufacturing.

• Natural gas which becomes a component of tangible personal property.

• Electricity or natural gas used or consumed as fuel or energy in and for heating of poultry houses.

ARKANSAS

• Beginning July 2007 through June 30, 2008 state tax will be 4.5% vs 5%

• Beginning July 1, 2008 and thereafter, rate will be 4% vs 6%

• Utility must be used directly in manufacturing

• Manufacturing area must be separately metered from taxable area

COLORADO

• Beginning March of 2010, the exemption for industrial processes has been suspended but remains for agricultural processes.

• Lighting does qualify

• Study required

CONNECTICUT

• Predominant use (76% or more of utility used in manufacturing allows for 100% exemption)

• If less than 75% used in manufacturing, partial exemption is possible

• Study required

FLORIDA

• Tiered exemption system used for electricity exemptions

• Under 50% used in manufacturing does not qualify for exemption

• 50% through 75% used in manufacturing receives 75% exemption

• 76% and above used in manufacturing receives 100% exemption

• Only specific industries qualify. Check SIC code in classification manual

• Study required.

GEORGIA

• Effective January 1, 2013, there will be a four year phase-in period for the exemption for sales and use tax on the sale, use, storage, or consumption of energy that is necessary and integral to the manufacture of tangible personal property at a manufacturing plant in Georgia.

• The schedule is as follows: (1) From January 1, 2013— December 31, 2013, a 25% exemption from the 4% state sales and use tax rate and any 1% local sales and use tax (other than any 1% educational local option sales and use tax); (2) from January 1, 2014— December 31, 2014, the 25% exemption will increase to 50%; (3) from January 1, 2015— December 31, 2015, the exemption will increase to 75%; and (4) on January 1, 2016 the exemption increases to 100%.

IDAHO

• Exemption on all utilities delivered by pipes, wires or mains

INDIANA

• Predominant use (51% or more of utility used in manufacturing allows for 100% exemption)

• If less that 50%, then a refund is available but no future exemption is granted. Annual refunds must be applied for from State

• Refunds and exemptions for water used in all or part of manufacturing and / or processing does qualify

• Study required

IOWA

• Actual percentage of utility used in manufacturing

• Updates required every 3 years

• Research & Development does qualify

• Refunds and exemptions for water used in all or part of manufacturing and / or processing does qualify

• Study required

KANSAS

• Actual percentage of utility used in manufacturing

• Research & Development does qualify

• Refunds and exemptions for water used in all or part of manufacturing and / or processing does qualify

• Refund period is now limited to 12 months

• Study required

KENTUCKY

• 100% exemption if the cost of natural gas and electricity exceeds 3% of the overall cost of production

LOUISIANA

• Beginning July 1, 2008, sales and use tax rate reduced from 3.3% to 2.3%.

• After July 1, 2009, no tax applies to electricity and natural gas

MAINE

• 95% exemption if manufacturing occurs.

• No study required

MARYLAND

• Predominant use (51% or more of utility used in manufacturing allows for 100% exemption).

• Study required

MASSACHUSETTS

• Predominant use (75% or more of utility used in manufacturing allows for 100% exemption).

• Refunds and exemptions for water used in all or part of manufacturing and / or processing does qualify

• Research & Development does qualify

• Study required

MICHIGAN

• Actual percentage of utility used in manufacturing.

• Research & Development does qualify

• Study Required

MINNESOTA

• Limit of two(2) refund claims only per year (regardless of tax type)

• Actual percentage of utility used in manufacturing.

• Refunds and exemptions for water used in all or part of manufacturing and / or processing does qualify

• Research & Development does qualify

• Study Required

MISSISSIPPI

• Automatic reduction from the full tax rate down to 1.5% for utilities used in production.

• Taxpayer needs to obtain direct pay permit from state and remit the appropriate tax to state

• Water qualifies for exemptions.

• Study required

MISSOURI

There are two different ways to get exemption / refunds.

• Utility cost must be more than 10% of the total cost of production. To determine percentage take total production cost minus utilities cost then divide utility cost by production cost

• An application has to be submitted to the state (Form 1749E-10) for each calendar year you are claiming refund

OR

• Tiered system

• Actual percentage must be calculated. (Square footage may be used)

• 1% through 25% used in manufacturing receives 25% exemption

• 26% through 50% used in manufacturing receives 50% exemption

• 51% through 75% used in manufacturing receives 75% exemption

• 76% and above receives 100% exemption

• Special exemption for use of recycled materials

• Study required

NEBRASKA

• Predominant use (51% or more of utility used in manufacturing allows for 100% exemption).

• Refunds and exemptions for water used in all or part of manufacturing and / or processing does qualify

• Study required

NEW JERSEY

• Must be in Enterprise Zone.

• Must employ at least 250 people.

• Several other highly restrictive exemptions for qualifying companies available

NEW YORK

• Actual percentage of utility used in manufacturing.

• Research & Development does qualify

• Utility company applies 100% exemption on bill

• Taxpayer accrues and pays taxable portion to State using form ST100

• Study required

NORTH CAROLINA

• Reduced tax rate to 2.83%

• Can be reduced to .17% of megawatt volume of electricity received during the previous calendar year is more that 900,000 for the next fiscal year

OKLAHOMA

• Predominant use (51% or more of utility used in manufacturing allows for 100% exemption).

• Study required

PENNSYLVANIA

• Actual percentage of utility used in manufacturing

• Lighting in plant qualifies

• Study required

RHODE ISLAND

• Actual percentage of utility used in manufacturing

• Study required

SOUTH CAROLINA

• Actual percentage of utility used in manufacturing

• Study required

TENNESSEE

• Reduction from the full tax rate down to 1.5% if you are a manufacturer

• Water does qualify

• No Study required

TEXAS

• Predominant use (51% or more of utility used in manufacturing allows for 100% exemption).

• Predominant use study must have engineering statement on study. A licensed engineer must affix his or her stamp and sign attesting to the accuracy of the study OR the engineer must be a graduate from a accredited engineering school to sign off on the study

• Predominant use studies are required

UTAH

• Predominant use (51% or more of utility used in manufacturing allows for 100% exemption).

• Study with only taxable usage required

VIRGINIA

• All utilities are exempt

VERMONT

• Actual percentage of utility used in manufacturing

• Valid for three years only

• Study required

WEST VIRGINIA

• All utilities are exempt

WISCONSIN

• Actual percentage of utility used in manufacturing

• Study required

WYOMING

• Actual percentage of utility used in manufacturing

• Study required
.

SMART TAX USA