Iowa Utility Sales Tax Exemption
Iowa allows a sales tax exemption on electricity, natural gas, propane, and water used directly in qualified production activities such as manufacturing, processing, or agriculture. This exemption is governed by Iowa Administrative Code 701‑17.2 and Iowa Code Chapter 423.
Qualifying Uses
Utilities must be consumed directly in processing or producing tangible personal property.
- Fuel used to generate steam, heat, or electricity in processing
- Energy used for grain drying, greenhouse operations, or other agricultural production
- Utilities powering exempt machinery or equipment in manufacturing
General uses such as lighting, HVAC for offices, or administrative areas do not qualify.
Utility Study
A utility usage study is required to establish the exempt percentage if utilities are not separately metered. The study should list all equipment consuming utilities, separate production from non-production use, and document annual consumption. This supports exemption certification and refund claims.
Filing Requirements
Businesses must complete and submit Iowa Form 31-113, the Sales Tax Exemption Certificate: Energy Used in Processing or Agriculture, to their utility provider. This certificate must include the exempt percentage of utility usage, typically determined through a utility usage study. The certificate remains valid for up to three years and must be updated if usage patterns change.
If sales tax was previously paid on qualifying utility usage, businesses may request a refund by filing Iowa Form IA 843, “Claim for Refund – Sales, Use, Excise & Local Option Tax.” Refunds can be claimed for taxes paid within the past three years and must be supported by documentation, including utility bills, usage calculations, and a utility study when applicable.