Alabama Utility Sales Tax Exemption
The state of Alabama provides a utility gross receipts tax exemption for manufacturers and industrial processors, allowing them to exclude certain utility purchases from taxation when used in qualifying production activities. The exemption is authorized under Alabama Code §§ 40-21-83 and 40-21-103.
Qualifications
The exemption applies to the utility gross receipts tax and the utility service use tax when used in specific processes:
- Electricity: Used in electrolytic or electrothermal manufacturing or compounding processes.
- Natural Gas: Used as a chemical raw material in manufacturing or compounding tangible personal property (not as fuel or energy), or used to chemically convert raw materials prior to their use in electrolytic or electrothermal processes.
- Water: When 50% or more is used in industrial processing within manufacturing operations.
Qualified industries include:
- Manufacturing or producing tangible personal property.
- Chemical manufacturing or compounding processes.
- Isotopic enrichment of uranium or similar
Alabama tax information
- Alabama statute of limitations on tax refund: 3 years
- Alabama sales tax rate: 4%
- Alabama local sales tax rate: 5.22%
To obtain a utility sales tax exemption in Alabama, ICS can perform an energy study to determine the percentage of utility usage that qualifies for the exemption by analyzing the consumption of each device involved in production.