Vermont Utility Sales Tax Exemption
Vermont provides a sales and use tax exemption on electricity and fuels (such as natural gas, coal, oil, propane, and steam) that are directly used or consumed in manufacturing or processing tangible personal property for sale. The exemption applies only when the utility is used in direct and exclusive production activities. Utilities used for general facility operations, such as lighting, heating, or office use, remain taxable.
Utility Study Requirement
To substantiate the exemption, businesses must:
- Identify and document all equipment and processes consuming the utilities.
- Distinguish between exempt production usage and non-exempt general facility usage.
- Maintain calculations, engineering studies, or allocation percentages that support the exemption.
- Keep supporting documentation on file for audit by the Vermont Department of Taxes.
Filing Requirements
To claim the exemption, businesses must provide their utility provider with a Vermont Sales Tax Exemption Certificate (Form S-3M), certifying the qualifying use of the utilities. If sales tax has already been paid on qualifying utility usage, businesses may submit a refund claim to the Vermont Department of Taxes. Refund claims are generally permitted for up to three years from the date of payment. Businesses must retain all utility bills, exemption certificates, and supporting documentation when filing for refunds.