Yes, Businesses Do Pay Sales-Taxes on Energy Purchases—Both Electricity and Natural Gas!
Updated: May 19, 2020
There are so many daily concerns that consume most managers time that many are unaware of the fact that commercial businesses pay sales-taxes on both electricity and natural gas. Since there are no sales-taxes on residential electricity and natural gas, some assume the same is true for businesses. Electricity and natural gas represent large expense lines for most businesses and sales-taxes on these bills can be significant. They are often one of those charges on the bill few notice or understand, and they quietly chip away at the bottom line. But, in many cases, there’s an alternative. In Texas, manufacturing and some other types of businesses can qualify for sales-tax exemptions on natural gas and electricity. Your company could qualify for an exemption and refund of sales-taxes paid in the past—up to four years. As detailed in Texas state comptroller rule §3.295, a Predominant Use Study, certified by a qualified engineer, is required to obtain an exemption of sales-taxes on electricity and natural gas. A Predominant Use Study is an engineering study used to establish whether the predominant (or over 50%) consumption of natural gas and/or electricity is for sales tax-exempt purposes. Basically, if the predominant use of natural gas or electricity consumed through a meter is used for sales-tax-exempt purposes, then ALL consumption through that meter is exempt. The monthly savings and refunds can be significant for your business. And, since the maximum refund period is four years, if you have been paying sales-taxes on your electricity or natural gas for four years or more, every month you delay establishing sales-tax exemptions for your business is another month beyond the refund period and lost forever. Download our download our Step-By-Step Guide to obtaining your exemptions and refunds for more information.