A Predominant Use Study determines what percent of a utility (electricity and or natural gas) is used in a non-taxable manner. If 51% of a utility is used in a non-taxable manner the utility bill will be exempt from Texas Sales and Use Tax of 6.25%.
When a utility company is audited, you will receive a letter informing you to obtain a Predominant Use Study... or be placed back on the tax roll and you will be billed for back taxes, plus interest. An exemption form must reflect the percent of electricity that is exempt, the reason for the exemption, and carry an engineer’s signature and stamp. If your business is audited, you will be required to provide a copy of your Predominant Use Study... and, if you do not have one, you will be required to obtain one.
This study can also have additional benefits by quantifying the energy use (in kilowatt hours or cubic feet of gas, and the associated annual cost of each) for each piece of equipment or process in the facility, thereby aiding management in understanding exactly where the major energy costs are being incurred. The study data can form the basis of an “energy audit” to identify targets of opportunity for cost-effective implementation of energy efficiency improvements with a high return on investment.
We can advise you as to whether your business qualifies for a sales tax exemption, by conducting a Predominant Use Study. We manage and file all the proper forms with the state and with utility companies in order to claim the utility sales tax exemption and save your business money. Call us today.