Businesses generally pay their utility bills without any second thoughts, but utility providers may be charging you more taxes and fees than you actually owe. If they are, you should be entitled to a refund. There are two main areas where businesses should focus their attention to determine if they are entitled to such a refund.
Manufacturing Exemption from Sales Tax
Texas provides an exemption from sales tax for manufacturing equipment, including electricity used directly in the manufacturing process. To take advantage of the exemption, you must have a “predominant use study” performed to see whether most (>50%) of the electricity running through a meter is used in the manufacturing process; it is an all-or-nothing exemption per meter. The study is based on the previous 12 months’ usage or a projected usage as attested by an electrical engineer certified to do this kind of study. The exemption can be applied retrospectively for a refund, as long as the study asserts the facts that would support such a claim for the relevant periods.
Miscellaneous Gross Receipts Tax
Texas imposes a miscellaneous gross receipts tax (MGRT) on utility providers within an incorporated city or town, which the utilities pass on to their customers. The tax rate is based on the population of the city, with rates approaching 2%. Because this tax is only imposed on utilities used within an incorporated city, any business locations outside of an incorporated city should not be liable for the MGRT. Because customers often use a billing address different from the location of their operations and because utility providers do not pay close attention to customer addresses, you may have paid MGRT in error.
If you are using electricity in the manufacturing process or you have operations outside of any incorporated city’s borders, you should review your utility bills to ensure that you have not paid any taxes or fees in error. LGT would be happy to assist you in determining whether either of these (or any other) opportunities are available to you, and if so, help you obtain any available refunds or savings.
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