predominant use studies
In Texas, predominant use studies are conducted to demonstrate that more than 50% of the power used in a meter—gas or electric—contributes to an actual manufacturing process. In such cases, 100% of the power through that meter qualifies for sales tax exemption, unlocking an 8.25% discount on energy spend and, in many cases, a refund for up to 4 years’ worth of previously paid tax.
(34 TAC §3.295)
How it’s done
An engineer logs all of the power loads associated with a meter, classifying each load as “exempt” or “taxable”
Interviews, measurements, and supporting research are used to quantify the power consumed by each load in the course of a year
Estimates are compared to data from utility bills
Under a limited power of attorney agreement, the engineer can pursue exemptions and refunds from the utility companies or the state comptroller on behalf of the client
Other states offer similar programs
While the exact proportions of power usage and tax discounts vary by state, the in-house experience at Choquette Consulting, LLC can be applied to operations anywhere. Reach out today to discuss your next step.
Immediate ROI
Refunds for previously paid sales tax on utilities can often cover the cost of having a predominant use study conducted, unlocking a highly predictable savings at essentially no out-of-pocket cost. In fact, many manufacturing operations finish the tax exemption process with excess cash or utility credit in-hand even after the engineer is compensated. Please reach out for an estimated cost savings and refund amount based on your current utility usage.
Not just heavy industry
Under the Texas Administrative Code, many processes are considered to be “manufacturing”—not just factory-scale operations. Paint booths, printers, and embroidery machines are just a few examples of exempt power loads. HVAC and lighting used in manufacturing areas also qualify. Let’s talk about whether the power used in your operation could be tax-exempt.