Tax Exemption

5 Methods of Understanding Utility Tax Exemptions for Manufacturers

Methods of Understanding Utility Tax

There are many ways businesses in Indiana can reap benefits from the tax process. Businesses don’t realize that many U.S. states offer sales tax utility exemptions. Manufacturers and businesses can potentially benefit from big sales tax savings based on these exemptions.

Of course qualification of these utility tax exemptions depend on a number of factors, with requirements varying state by state.

Utility Tax Exemption – What Is This Process?

Your business might be one of the many in the dark regarding this procedure. What does it mean to be exempt from utility taxes especially for manufacturers?

Many U.S. states exempt manufacturers from utility sales tax if energy (gas, water, and fuel) is used during manufacturing process. Partial exemption from sales tax is also granted in some cases.

It is difficult to determine the exact amount of a facility’s utility usage in manufacturing especially since different states require different percentages.  

Exemptions Are Determined By:

Indiana utilizes 5 specific approaches when deciding if (and in how much percentage) utilities are used in the manufacturing process.  

  • Some states require a utility study
  • Utility study must be performed by an engineer
  • Certain criteria range must be met to receive exemption percentages—any reasonable method can be used to determine utility study, square footage, or percentage
  • Some states allow 100% exemption, subtracting only taxable usage. Other states require identification of every taxable and exempt usage
  • All utilities used at a manufacturing plant site are exempt completely or liable for tax rate reduction whether used directly in manufacturing or not

Understanding Utility Tax Exemptions in Indiana

The Office of Foreign Missions administers the utility tax exemption program. Find out requirements of eligibility in your state before applying. Utility tax exemption is based on reciprocity and is given after due request and submission of an Exemption from Utility Taxes form.

The listed production processes begin at the point of the first operation of an integrated production process. It ends at the point of production process alteration of item to its completed form. Packaging used during the manufacturing process will also be counted.

Still don’t know whether to apply for utility sales tax exemption or not? Our advice is to research properly regarding Indiana’s qualifying criteria.

You can also take help from Enguard’s specialized consultation services that will help determine how much your company can save from the exemption. Contact us today.

Leave a Reply

Your email address will not be published. Required fields are marked *