Pennsylvania Utility Sales Tax Exemption
Pennsylvania provides a sales tax exemption on electricity, steam, natural gas, and manufactured gas when used directly in the manufacturing, processing, farming, dairying, horticulture, floriculture, or public utility service operations. The exemption applies when these utilities are used predominantly (more than 50%) in qualifying activities.
Utility Study Requirement
A utility usage study is generally required to verify that the utilities are used predominantly in exempt activities. The study should:
- Identify all utility-consuming equipment.
- Document usage amounts for each item.
- Separate exempt from non-exempt usage based on function.
- Support the predominant use threshold determination.
Filing Requirements
To claim the exemption, businesses must provide their utility supplier with a completed Pennsylvania Sales Tax Exemption Certificate (Form REV-1220) indicating the basis for exemption. If sales tax has been paid on qualifying usage, businesses may request a refund from the Pennsylvania Department of Revenue or through the utility provider. Refund claims can generally be made for up to three years of overpaid tax and must be supported by records such as utility bills, usage studies, and exemption certificates.