Manufacturers Shouldn’t Leave This Much Money on the Table!
Whether your an automobile maker, refinery, factory, restaurant, newspaper, television station, printer, or photographer making tangible personal property there is one thing for certain – you are spending a lot of money on your utilities (electric, natural gas). There are many prudent ways to reduce these costs using good pricing strategies and energy reducing initiatives. But neither of these ways will eliminate this expense on your utility bill which is costing you 6.25% of your bill every month. That could be thousands and thousands of dollars every month…every year…without end! This is the Texas Sales Tax!
What it could be costing your company?
- Monthly Utility Bill $10,000
- Sales Tax $625
- Annual Expense $7,500
If you are not paying the Texas Sales Tax then good for you. You either have a dedicated meter for your manufacturing processes or you have performed a predominate usage study that is on file showing that more than 50% of your utility usage is for making tangible personal property. The detail of this are found in the Texas Administrative Code Rule 3.295.
Steps you need to take if you ARE PAYING sales tax.
- If you have an electric or gas meter that is 100% dedicated to process manufacturing then let your utility know that you need to change your tax status to TAX-EXEMPT. They will send a form to you to fill out and sign. This will make you legally liable for the any sales and use taxes in the future that are deemed due because of non-compliance with the Tax Code.
- If your electric or gas meter isn’t 100% dedicated to the manufacturing process then you’ll need a Predominant Usage Study showing that more than 50% of the usage is from manufacturing processes. You will need the study certified by a registered engineer or a person with an engineering degree from an accredited engineering college. Once this is completed it must be put on file at the plant site. The utility will send you a Tax Exempt Certificate Form for you to indicate what percent of your load is for processing.
Though it’s a wonderful thing to alleviate your company from these taxes going forward there is an added BONUS – getting up to 48 MONTHS of taxes refunded to you that you’ve already paid. In the example above that would be around $30,000. The utility will generally refund these taxes as credits on your bill or will file with the Texas Comptrollers Office for your refund.
What Do I DO If I Have An Old Usage Study?
If it’s been a while since you’ve had a predominant usage study performed but nothing materially has changed in your operation’s square footage, loads, or hours then the old study is still valid. If the facility’s square footage, loads, and hours have changed materially then it would be prudent to get an updated study completed so that you are prepared for a state tax audit.
Paying Taxes? Need a New Usage Study?
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