A predominant use study, also known as a utility study, is an engineer report which analyzes the cubic foot consumption of each individual natural gas meter or kilowatt-hour consumption of each electric meter. When high enough percentages of the electricity and/or natural gas are used in qualified processes, companies receive additional cost containment benefits by having the utility sales tax exemption instated and getting refunds back from taxes paid previously. The electricity, natural gas, or water sales tax exemption may include a full or a partial removal and refunding of State, City, County, MTA, and Special sales taxes. The utility sales tax exemption allowed will vary from State to State.
The predominant use study must analyze the use of electricity, natural gas, or water of each piece of equipment and will include:
- A description of each piece of equipment separated into exempt vs. non-exempt categories as determined by the associated State agencies.
- Processing and non-processing functions for equipment having dual usage.
- Location of each piece of equipment.
- Hours of operation for each piece of equipment.
- Cubic foot consumption, amperage, voltage, horsepower, etc… for each piece of equipment.
- Actual hours for cycling equipment.
- Utilization, duty, and time Factors.
- For some States, the natural gas, electricity, or water computations must be certified by a registered engineer or a graduate of an accredited engineering college and balanced with a 12 month history. For this reason, all National Utility Solutions’ predominant use studies are certified by our P.E. (professional engineer) and balanced with a 12 month history.
Each meter will have it’s own predominant use study since the exemptions are allowed on a per-meter basis; not a per-location or company basis.
As an added benefit, Predominant Use Studies may also help identify where the bulk of your energy is being consumed for cost containment measures in the future. (For example: It may help determine whether switching to LED lighting is cost effective.)
Most States require a predominant use study as the only acceptable proof of entitlement for the electricity and natural gas sales tax exemptions and refunds of sales taxes paid in error. Our experts ensure the predominant use studies conform to the various format and content requirements of each State.
When the exemption is put in place without a valid predominant use study, it can create a sales tax liability with the taxing authority of the State the facility is located. The statute of limitations is typically 2 to 10 years; meaning the taxing authority could charge up to 120 months (if the facility is in Missouri) of sales taxes plus penalties and interest when no predominant use study is provided as proof of entitlement. In addition to paying back taxes, the tax savings going forward may be lost as well; except where 100% of the utility is used in qualifying processes (not for office, warehouse, break rooms, restrooms, retail space, or any other taxable use).
These industries will typically have a cost savings benefit from a predominant use study although the laws will vary from State to State regarding the specific industries.
National Utility Solutions have the experts needed to ensure our predominant use studies are accurate and valid in all States we service. We also have experienced processors handling the processing of the exemption certificates with the utility companies and the State agencies to recover the refunds when available. The relationships our associates have developed with the State agencies help to expedite the refund and ensure the refund amount is accurate.
Contact us to see if a predominant use study will provide a cost-savings benefit for your company or call us at 346-241-0100 or Toll Free at 844-767-0037 with any utility sales tax exemption questions.