Maryland Utility Sales Tax Exemption
Maryland provides a full sales and use tax exemption on electricity, fuel (including natural gas), and steam when used directly in a production activity at an industrial facility. The exemption is authorized under Md. Code Ann., Tax-Gen. § 11-210. To qualify, more than 50% of the utility usage at the facility must be devoted to manufacturing, assembling, processing, or refining tangible personal property for resale.
Utility Study
A utility usage study is recommended to document and support the exemption. The study should:
- Identify all machinery, equipment, and systems using the utility
- Measure or estimate the annual utility consumption for each device or area
- Classify utility usage as exempt (directly tied to production) or non-exempt (administrative, HVAC, lighting, etc.)
- Allocate utility usage across functions and calculate the overall exempt percentage
- Support the exemption with accurate records in the event of audit
Proper documentation ensures that the utility provider can apply the exemption correctly and that the business remains in compliance with Maryland tax laws.
Filing Requirements
To claim the exemption, businesses must provide a completed Maryland Sales and Use Tax Resale Certificate (typically a blanket certificate indicating exemption eligibility) to the utility provider. The exemption will apply to future billing cycles once the certificate is on file. If sales tax was previously paid on eligible utility usage, businesses may file a refund claim with the Maryland Comptroller’s Office for taxes paid within the past four years. Detailed records—such as utility bills, equipment lists, exemption certificates, and utility studies—should be maintained to support refund requests and validate the exempt use.