Building A Better Tomorrow
Building A Better Tomorrow
PREDOMINANT USE STUDY
Understanding Sales Tax Exemptions for Utility Bills in Texas
Many businesses in Texas can potentially save money on their utility bills through sales tax exemptions. However, knowing if your business qualifies and how to claim these exemptions can be complex.
What is a Sales Tax Exemption?
A sales tax exemption allows businesses to avoid paying sales tax on certain purchases. In Texas, many manufacturing companies and residential properties can qualify for exemptions on their utility bills.
Eligible Businesses
Manufacturing Companies: A wide range of manufacturing industries can qualify, including oil and gas, mining, agriculture, food processing, pharmaceuticals, and more.
Residential Buildings: Nursing homes, assisted living facilities, mobile home parks, and apartment or condominium buildings with master meters may be eligible.
How to Claim an Exemption?
To qualify for a sales tax exemption on utility bills, businesses must typically conduct a predominant usage study. This study determines if at least 50% of the electricity or gas used is for production purposes.
Benefits of Qualifying
Potential Refunds: Businesses that qualify can receive refunds for up to four years of past utility bills.
Ongoing Savings: Once approved, the exemption provides ongoing savings on future utility bills.
The Predominant Usage Study
A qualified engineer conducts this study, which involves:
- Analyzing the types and usage of electrical appliances.
- Determining the operating hours of the business.
- Gathering previous energy bills and company ownership information.
Exceptions and Considerations
Manufacturing Exceptions: Certain activities, like preparing for production or maintaining finished products, may not qualify for exemptions.
Residential Exceptions: Specific requirements, such as length of tenancy or property type, may apply.
Need Assistance?
If you believe your business may qualify for a sales tax exemption on utility bills, contact us to help you navigate the process and maximize your potential savings.