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Don't Pay Sales Tax on Utilities

In Connecticut, manufacturers who use at least 75% of their utility consumption for manufacturing or fabrication can purchase their utilities tax free. Similar exemptions exist in other states with varying qualification thresholds. More specific information for Connecticut can be found here.

ARC Code(s): 2.8121

Savings Calculation

Qualification requirements vary by state:

  • Connecticut: Manufacturers who use at least 75% of electric, gas, or heat fuel for manufacturing purposes can claim tax exemption.
  • Massachusetts: Manufacturers who use at least 75% of electric, gas, or heat fuel for manufacturing purposes can claim tax exemption.
  • New York: Manufacturers who use 100% of electric, gas, or heat fuel for manufacturing purposes can claim tax exemption.
  • Rhode Island: Manufacturers who use 100% of electric, gas, or heat fuel for manufacturing purposes can claim tax exemption.
  • Vermont: An energy study is performed at the manufacturer to determine what percent of the utility usage is used for manufacturing, and that percent of the utility charges are tax free.
  • Maine: Manufacturers can claim a 95% sales tax exemption on their utility usage.
  • New Hampshire: New Hampshire does not charge sales tax, so this recommendation is not applicable.

To calculate the savings from this recommendation, sum the sales tax that the client has paid on their utilities for the 12-month billing period used in the report. This total represents the anticipated future yearly savings.

To identify these tax payments, use the Utility Analysis sheet outlining all of the client's monthly utility bills. The sales tax paid on utility accounts is usually one of the last few lines of the bill before the total.

Warning

It is important that sales tax payments on all utility accounts are accounted for. Clients often have multiple electricity or gas accounts, and sometimes they will have a separate account for an office area which is not tax exempt. Verify that all accounts that qualify are included in the calculation.

Anticipated Costs

Because there are no required equipment purchases or additional labor, the anticipated costs for this recommendation are $0. The payback period is therefore immediate.

Report Requirements

In addition to the typical report requirements and the recommendation-specific savings and costs, the recommendation should include a table of the utility taxes paid for each month of the year. The table should follow this structure:

  • Column 1: Month (formatted as three-letter abbreviation, hyphen, year; e.g., Mar-2024)
  • Column 2+: Sales tax paid on each type of account (electricity, natural gas, water, etc.)
  • Final Column: Total sales tax for that month

Include a total row at the bottom summing each column. If the client does not have accounts for a particular utility type, that column may be omitted.

The report should also explicitly state the applicable tax law in the summary section. For Connecticut, use the following language: "According to CERT-115, manufacturers who use at least 75% of gas, electricity, or heating fuel for manufacturing purposes can file for tax exemption on these utility purchases."

\begin{table}[H]
\centering
\caption{Monthly Utility Sales Tax Charges}
\label{tab-sales-tax-charges}
\begin{tabular}{lcccc}
\toprule
Month & Natural Gas (\$) & Electricity (\$) & Water (\$) & Total (\$) \\
\midrule
Jul-24  &  &  &  &  \\
Aug-24  &  &  &  &  \\
Sep-24  &  &  &  &  \\
Oct-24  &  &  &  &  \\
Nov-24  &  &  &  &  \\
Dec-24  &  &  &  &  \\
Jan-25  &  &  &  &  \\
Feb-25  &  &  &  &  \\
Mar-25  &  &  &  &  \\
Apr-25  &  &  &  &  \\
May-25  &  &  &  &  \\
Jun-25  &  &  &  &  \\
\midrule
\textbf{Total} & \textbf{} & \textbf{} & \textbf{} & \textbf{} \\
\bottomrule
\end{tabular}
\end{table}

Examples