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Texas Engineering Services has refocused our lines of business on Utility and Energy Management. In addition to our primary line of business, Predominant Use Studies, we have partnered with an experienced Utility Bill Auditing firm, Lumen Utility Consult, and now offer Utility Bill Auditing to our clients. We now have a Certified Energy Manager on staff and also offer Energy Efficiency Projects. We are laser-focusing on these three lines of business in the Energy and Utility Management area to help our clients save on energy and utilities.

In about 30 states across the U.S., including Texas, certain 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 48 months in Texas. A non-exhaustive list of businesses that may qualify are companies engaged in manufacturing, oil and gas, mining, printing, textiles, radio and television production, and off-wing overhaul of aviation engines and components. The specific rules vary from state to state but, in general, obtaining an exemption requires a Predominant Use Study (in Texas, see the Texas Administrative Code, Title 34, Rule §3.295). A Predominant Use Study is a special kind of engineering study used to establish whether the predominant (over 50%) consumption of natural gas or electricity is for sales tax-exempt purposes. Basically, if the predominant use of natural gas or electricity consumed through a particular meter is used for sales-tax-exempt purposes, then all consumption through that meter is sales-tax-exempt. The applicable sales-tax rate varies depending on where your company is located but, the savings and refund can be significant and amount to several percent of your natural gas or electric utility bills. Some states give you the option of performing your own Predominant Use Study. In Texas, Rule §3.295 allows “a registered engineer or a person with an engineering degree from an accredited engineering college” to perform the study. However, most companies opt to have these studies performed by an outside firm since staff engineers are often not skilled in this area and more appropriately and efficiently engaged in supporting their core business. Also, state comptrollers perform audits from time to time, so it is important for Predominant Use Studies to be thorough and accurate. Completing a thorough and accurate study is a detailed and painstaking process. Some firms base their fees for performing Predominant Use Studies on a percentage of the potential sales-tax refund for which their clients may be eligible. While this generally reduces or eliminates up-front fees, companies normally pay a lot more for a study under this type of agreement. As always, beware of anyone who promises to do something for “free.” A more transparent approach is a fixed-price fee based on the cost estimate for completing the study. This type of agreement maximizes your refund and minimizes your costs. The bottom line is, that if your company qualifies for a sales-tax exemption on natural gas and electricity and you are not taking advantage of the savings, you are leaving money on the table.

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 that 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 Step-By-Step Guide to obtaining your exemptions and refunds for more information. #predominantusestudies