Massachusetts Utility Sales Tax Exemption
Massachusetts provides a sales tax exemption on utilities including electricity, steam, and fuel (such as natural gas and oil) when used directly and exclusively in industrial manufacturing. The exemption is outlined in 830 CMR 64H.6.8, and applies when at least 75% of the utility is consumed in the actual manufacturing process. If usage falls between 50% and 75%, a proportional exemption applies. Less than 50% usage does not qualify for any exemption.
Utility Study
To support the exemption, businesses must conduct a detailed utility study, which should:
- Identify all equipment and systems consuming the utility
- Measure or reasonably estimate utility usage by equipment or area
- Classify usage as exempt (direct manufacturing) or non-exempt (e.g., lighting, HVAC, admin areas)
- Calculate the percentage of total utility usage that qualifies
- Provide detailed support in case of audit or Department of Revenue review
Utility usage must be carefully categorized to meet the exclusive or predominant-use thresholds, and documentation should be updated periodically to reflect operational changes.
Filing Requirements
To claim the exemption, businesses must submit a Massachusetts Form ST-12 Exempt Use Certificate, to the utility provider. If sales tax was paid on qualifying utility usage before the exemption was claimed, businesses may apply for a refund with the Massachusetts Department of Revenue. Refunds can typically be claimed for up to 3 years prior to the request date.