It’s that time of year again, the end tax season. With income tax being on everyone's mind, having to pay out seems like a cumbersome burden, but tax may not be as bad as you think. Not with income tax, but with the sales tax on your energy bill.
Many businesses are paying between 5% to 8% for sales tax on the their electricity bill. You may not know it, but depending on the type of organization you run, you may be exempt for all or part of the sales tax and you may also be able to reclaim some of the tax that you've previously paid.
While energy sales tax abatement and refunds has the potential for great cost-savings, the process isn't as complicated as it seems. Each state has a different process to it, but there are three main steps.
1. Figuring out if you're eligible.
First, you need to determine if your business or organization is elligble. The easiest way to do this is to check your state's’ government website or local utility to see if you're in a state that allows exemptions on energy bills. More than likely, they will have a list of who's sales tax-exempt such as manufacturers, assisted-living facilities, apartment complexes, bakeries, schools, hospitals, and churches.
Manufactures, proceed with caution! If you're a manufacturer, the process is a bit different and complex. Be sure to double check your state's exact exemption requirements. In most cases, the energy used for manufacturing is the only part that is sales tax exempt.
2. Determine how much of the energy your business uses is actually tax-exempt.
This step mainly applies to manufacturing businesses so if your business has tax-exempt status (such as a church, school, or non-profit is) you can skip this step.
Though the option to do this manually can seem like an easy solution, most businesses work with a consultant. This not only eases the stress of having to go at the process alone, but consultants can help you with tips and tricks to get the most out of your tax refund.
3. Fill out the form and submit it!
If you find that you are tax-exempt in your state, take action as soon as possible. Start by submitting the tax-exempt form for the state the facility is located in. For manufacturing, once you've calculated your energy usage, you'll submit that with your refund form. Once this process goes into action, you’ll start to see a reduction in your energy costs.
The bottom line
Though it may be a bit of an involved process to recalim your energy sales tax, the benefits outweigh the cons. Once you've sent the necessary forms out and they've been processed, your energy supplier or utility should reimburse any sales tax you've paid and stop charging you tax on energy that's exempt.
Overall, the money you saves through tax rebate and exemption is the best thing to do for your bottom line. With this process, you get to funnel your money saved back into your business.