Arizona Utility Sales Tax Exemption
Arizona offers a Transaction Privilege Tax (TPT) exemption for electricity and natural gas used in qualified manufacturing or smelting operations. This exemption is authorized under A.R.S. § 42-5063(C)(6) and §42-5159(G).
Eligibility Criteria
To qualify, a business must be “principally engaged” in manufacturing or smelting and meet at least one of the following conditions:
- Manufactures or smelts tangible products in Arizona, with at least 51% of the products exported out-of-state for incorporation into another product or sold out-of-state for final sale.
- Derives at least 51% of its gross income from the sale of manufactured or smelted products made in Arizona.
- Uses at least 51% of its square footage in Arizona for manufacturing or smelting and activities directly related to manufacturing or smelting.
- Employs at least 51% of its workforce in Arizona in manufacturing or smelting and activities directly related to manufacturing or smelting.
- Uses at least 51% of the value of its capitalized assets in Arizona for manufacturing or smelting and activities directly related to manufacturing or smelting.
Utility Usage Requirement
Additionally, at least 51% of the electricity or natural gas purchased must be used directly in manufacturing or smelting operations. This does not include gas transportation services.
Filing Requirements
To claim the exemption, businesses must submit a completed Arizona Form 5000 (Transaction Privilege Tax Exemption Certificate) to their utility provider. This form documents the basis for the tax exemption and must be fully completed by the purchaser and provided to the vendor at the time of the sale. If sales tax was previously paid on qualifying utility usage, businesses may request a refund for up to 48 months (4 years). Refunds can be claimed either through the utility provider or directly from the Arizona Department of Revenue.