The following frequently asked questions will help you understand the sales tax exemption process.
Twenty-one states offer exemptions from sales tax on electricity and natural gas if your business  falls into any one of several broad categories of use

What States?

Tell me about these categories of use that will make my electricity or gas bill tax exempt.

The laws vary from state to state, but generally the following uses of energy are exempt from state sales tax:

• Manufacturing operations of all types, including processing or fabricating tangible personal property for sale qualify as exempt. Exempt activities include printing and even producing a broadcast for television or radio, but sales tax on utilities used in selling, warehousing, distributing a product, or selling a service is taxable. A Predominant Use Study is necessary to prove the proper energy use.

• Food and beverage processing is sales tax exempt if less than half the product is consumed the day it is produced.

• Agricultural and horticultural operations are sales tax exempt.

• Mineral extraction from the ground is exempt. Sand and gravel, and oil and gas companies that take materials out of the ground for processing are tax exempt.

• Residential use in single family or multi-family apartment units are exempt from state tax, however, some cities tax this use. Nursing homes and assisted living centers are also non-taxable.

• Educational, charitable, and religious facilities are also non-taxable. A 501(c)(3) Letter of Determination from the Department of the Treasury (IRS) may be required.

What is a Predominant Use Study?

This is a study of all the uses of electricity and natural gas at the facility by meter, in detail to confirm that more than 50%, (hence the name Predominant Use) is consumed in manufacturing or producing  a product. A registered Professional Engineer familiar with motor ratings and energy use is necessary to perform these studies and certify the results.

What is the benefit of having a Predominant Use Study?

A manufacturer who can become exempt from paying sales tax on his electric and/or gas bill can save 6% to 8.25%  in many states. Your savings will start immediately going forward once your current energy provider receives the Tax Exemption Certificate. Additionally, most states allow a refund of the sales tax paid for up to three or four years. That refund could benefit your company by tens of thousands of dollars.

What will it cost to have a Predominant Use Study preformed?

The cost depends on the size of your manufacturing or producing plant and the machinery that must be surveyed for energy use. Complete the form on the contact page and GNolin Services, Inc., will give you a firm quote—usually by the next business day. To speak with Hank, call 832-640-6284 for more information. GNolin Services, Inc. has low overhead rates and is reasonably priced for good value to our customers.

Who are candidates for a Predominant Use Study?

•  If your sales tax exceeds $50 per month, it will be cost effective

•  If you have changed locations and have a new meter, but no exemption certificate.

• If you have recently changed energy providers, but cannot find your exemption certificate

•  If you have recently discovered that you can now be tax exempt

• Some states, i.e., Wisconsin, have recently passed legislation making sales tax exemption now possible or amending their existing laws

How do I prepare for a Predominant Use Study?

Provide up to 36/48 months (depending on your state) of electric and/or gas bills for the meters you want studied for exemption.

How long will it take to get a refund?

This sounds like a simple question, but the time varies from state to state. The simplest and fastest  way to a refund is from your present energy supplier, and that may take only 4 to 6 weeks. Refunds given by your State Comptroller’s Office may take longer.