Texas Utility Sales Tax Exemption
Texas provides a sales and use tax exemption on electricity and natural gas when used directly in manufacturing, processing, or fabrication. To qualify, at least 50% of the utility usage at a location must be consumed in exempt production activities. If less than 100% qualifies, only the exempt percentage may be claimed.
Utility Study strong
A formal predominant use study is required to establish eligibility. The study must:
- Identify all utility-consuming equipment and processes.
- Calculate exempt vs. non-exempt usage based on measured or estimated consumption.
- Demonstrate that more than 50% of the usage is directly tied to qualifying production activities.
- Prepared and signed by a registered professional engineer or licensed CPA in Texas.
Filing Requirements
To claim the exemption, businesses must provide their utility supplier with a completed Texas Sales and Use Tax Exemption Certificate (Form 01-339) along with the predominant use study. If sales tax has already been paid on qualifying usage, businesses may file a refund claim with the Texas Comptroller of Public Accounts. Refunds may generally be requested for up to four years from the date of payment. Supporting documentation, including the predominant use study, exemption certificates, and utility bills, is required.