Little-Known Tax Exemption Saves Qualifying Clients Thousands Each Year

by | Dec 29, 2022

There is a potential State tax savings available to manufacturers, with substantial savings, that many companies do not know about.  I am talking about the utility sales tax exemption.  Energy Impact’s main area of expertise is in obtaining utility sales tax exemptions and refunds for companies’ consumption of energy used in the manufacturing and production process. In 30 states, when your utilities are “necessary and integral to production” you do not have to pay sales tax on those utilities. The utility sales tax exemption is State legislation that is used as an economic incentive to encourage manufacturing and production within that State. Manufacturers are entitled to this utility sales tax exemption, and it could save your company considerable tax dollars moving forward.

In order to obtain utility sales tax exemptions, our firm specializes in performing the required meter engineering study on applicable utility meters. This creates an immediate and permanent savings on utility bills each month. Additionally, retroactive studies can be performed to recover all utility sales tax paid on the meter. Depending on the size of the utility bills, this can be a considerable amount of savings for a manufacturer.

Four Things to Know About Utility Sales Tax

  1. In 30 States, when utilities are used in the manufacturing or food preparation process, the utility meter(s) should be exempt from paying sales tax. >> see which States
  2. Four States and Washington DC have this exemption in place for restaurants when utilities “are necessary and integral to food preparation.”  IN, IA, KS, OH, Wash DC
  3. We perform the State-required meter engineering studies to obtain these exemptions, which creates an immediate and permanent savings on utility bills each month.
  4. With the exemption, we also go back and recover all sales taxes paid to the State for the last 36-48 months, depending on the State.

Six Keys In Our Approach

  1. We qualify all production meters, machinery, and equipment by taking a detailed facility tour.
  2. Separate production vs non-production consumption on the utility meter to determine the percentage of the utility used in the production process. Perform a predominant use study in applicable States.
  3. Reduce or eliminate monthly utility sales tax payments. In many States, this is a permanent exemption.
  4. Prepare and submit all necessary exemption and refund forms and documentation.
  5. Apply for all available utility sales tax refunds.
  6. Provide documentation to the client to support the exemption percentages and refund calculations.

Nine Qualifying Industries

Depending on the State, the following industries can qualify for the utility sales tax exemption:

  1. Manufacturers
  2. Industrial Processors
  3. Recyclers
  4. Automated-Assembly Fabricators
  5. R&D Facilities
  6. Agriculture/Farming
  7. Mining Facilities
  8. Restaurants (select States)
  9. Non-profit Organizations (select States)

About the Author

As the founder of Energy Impact, Ryan Stephenson has been helping companies save on utility taxes since 2006. Stephenson focuses on conducting quality facility and meter engineering studies to separate production versus non-production energy usage. His in-depth finance expertise, along with his detailed understanding of electrical and civil engineering concepts, have created tangible value for Energy Impact’s customers, which translates into long-term savings.

Contact us to see if we can eliminate or reduce sales tax on electric, gas and water utility meters. Our discovery process is quick, easy, and done at no cost. Fill out the form below to get started today!

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Office Info

Phone: 317.536.0200

Indianapolis South

444 N. Madison Ave.
Greenwood, IN 46142



571 Monon Blvd., Suite 200
Carmel, IN 46032