Utility Sales Tax Exemption:
Predominant Use Study
Are you paying sales tax on utilities used for tax exempt purposes?
What Are Predominant Use Studies?
At Walker Reid Strategies, predominant use studies—also known as utility studies or use analysis—are a powerful tool that can save your company thousands of dollars in taxes annually. Most states require a predominant use, or utility study to obtain sales tax exemption by demonstrating that the majority (50% or more) of the energy consumed was used for qualified purposes.
Our process begins with a detailed inspection, where we take inventory of all equipment and appliances connected to the relevant utility meter. Each item’s location, function, and hours of operation are carefully documented. For utilities like natural gas and electricity, we measure consumption in cubic feet and kilowatt-hours, respectively. In certain states, these findings must be certified by a registered engineer to ensure compliance with local regulations.
Next, we categorize the equipment as either tax-exempt or non-exempt based on state-specific guidelines. For equipment used in both exempt and non-exempt functions, we accurately calculate the energy consumption for each purpose. If the majority of energy consumption through a meter qualifies for exempt use, some states offer a full waiver of the sales tax on the energy consumed. In others, only the exempt portion of energy usage qualifies for the sales tax exemption.
With our expertise and detail-oriented approach, Walker Reid Strategies helps your business maximize savings by ensuring compliance with state tax exemption guidelines.
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Speak with a professional and receive a free utility tax exemption consultation today!
Experience & Approach
Walker Reid Strategies conducts predominant use studies with a focus on providing clients with utility sales tax exemptions. With extensive experience and a deep commitment to excellence, we take a meticulous and detail-oriented approach to collecting and analyzing data, ensuring that every opportunity to maximize refund amounts is explored. Our team’s expertise enables us to deliver accurate studies that help maintain our clients’ tax-exempt status moving forward, relieving them of the burden of administrative duties. We handle the entire process, from initial analysis to ongoing compliance, ensuring long-term savings and peace of mind.
Utility Sales Tax Exempt States
Industries that Qualify For Utility Sales Tax Exemption:
- Manufacturing (Automotive, Pharma, Textiles, Electronics, etc.)
- Agriculture (Crop, Dairy, Poultry, Greenhouses)
- Industrial (Food Processing, Paper, Plastic, Oil Refinery, etc.)
- Housing Complexes
- Assisted Living Facilities
- Data Centers
- Hotels
- Mining
- Recycling
- Data Centers
Our Process:
GATHER DATA
To provide a qualified manufacturing company with a utility tax exemption, the data gathering process involves compiling a comprehensive Request for Information (RFI) to collect the following key details:
- Utility Consumption Records & Invoices
- Facility Floor Plans
- Equipment Purchase & Maintenance Details
- Employee Records & Interviews
- Operational Hours
- Production & Process Data
This data is collected and submitted through the RFI form to ensure accurate assessment and verification for utility tax exemption qualification.
Step 1
Step 2
Predominant Use Study
Following the collection of required data, an initial review will be conducted to determine the completeness and quality of information collected. If all data requirements are met, an energy study will be initiated:
- Perform a comprehensive analysis of energy consumption by major equipment and operational processes.
- Correlate utility consumption with production schedules to determine tax-exempt and non-exempt use percentages.
- Identify areas of high energy consumption related to production, research, and any other qualified processes.
- Determine Predominant Use as a percentage of total energy consumption, meeting either the 50%, or 100% refund criteria.
Facility Site Visit
A site visit will be conducted to obtain photo documentation of the facility, including exterior, interior, machinery, and operating schedules to ensure sufficient data is obtained to conduct the predominant use analysis. The specific data required is:
Electricity Consumption:
- Types of Machinery/Equipment:
- Production Equipment:
- Industrial Motors and Drives:
- Lighting Systems
- HVAC Systems
- Specialized Machinery
- Other Considerations:
- Electrical meters or sub-meters, if available, for detailed tracking.
- Power factor correction equipment (if the facility uses it).
Natural Gas Consumption:
- Types of Machinery/Equipment:
- Industrial Boilers and Furnaces
- Kilns
- Steam Generation
- Dryers
- Other Considerations:
- Track gas lines connected to exempt vs. non-exempt machinery.
- Any other ancillary use of gas directly involved in the manufacturing process.
Water Usage (if applicable):
- Types of Machinery/Equipment:
- Cooling Towers
- Process Water Systems
- Industrial Washers
- Other Considerations:
- Water heating systems tied to production processes.
- Segregate water consumption for administrative use (e.g., restrooms, break rooms).
Compressed Air Consumption:
- Types of Machinery/Equipment:
- Air Compressors
- Air Dryers and Filters
Fuel Consumption (Diesel, Propane, etc.):
- Types of Machinery/Equipment:
- Generators
- Forklifts or Material Handling Equipment
- Propane-Powered Equipment
Steam and Other Process Heating:
- Types of Machinery/Equipment:
- Industrial Steam Systems
- Heat Exchangers
Ventilation and Exhaust Systems:
- Types of Machinery/Equipment:
- Industrial Exhaust Fans
- Dust Collection Systems
Renewable Energy Systems (if applicable):
- Types of Machinery/Equipment:
- Solar Panels
- Wind Turbines
- Battery Storage
Step 3
Step 4
Request For Refund
After the energy study is complete, and predominant use is established, administrative processes will be initiated to complete the refund through the following steps:
- File Required Exemption Forms
- Submit Forms to Department of Revenue
- Provide any Additional Documentation Requested
- Approval & Refund
Audit Support
In the rare case that a client gets audited by the State Department, Walker Reid Strategies will provide on demand, complete audit defense throughout the processes. With 100% success rate, rest assured that we can protect our clients and stand by our work.
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