Professional Sales Tax Exemption Service
Companies who want to insure maximum savings from sales tax exemptions for utilities, and other expenses, used in production - utilize the tax knowledge and experience of On Your Mark.
On your Mark is a strong advocate for their clients in identifying, qualifying and obtaining exemption opportunities. When On Your Mark completes its work, companies not only maximize their savings, but they will have spent no time in getting it. We find the opportunities, file the required documents, and stay with the process until the tax is off the bills. On Your Mark’s fees are attractive to its customers : totally contingent on finding savings. Upon success On Your Mark charges the first two month’s savings and does not share in future company savings.
Sales Tax Exemption - Utilities used in production
Exemption Opportunity : In 27 states, for those manufacturers who qualify, an exemption from sales tax is available on “utilities used in direct production”. Each state has its own variation of the exemption and definition of direct production. But in general layman’s terms electric, gas, and water used to power equipment can be exempt from sales tax. Utilities used for lights, office, heating, and air conditioning are typically not exempt (however certain circumstances allow for exceptions). It’s the exceptions that professionals can take advantage of on behalf of a manufacturer.
In order to qualify, a manufacturer must provide an engineering study which documents in detail the annual consumption of every production and non-production equipment use for each meter of that utility. Proper preparation of this study is one of a few reasons that most states recommend having the exemption application submitted by experienced professionals in order to (1) qualify, and (2) comply with the regulations so that they can obtain an approved exemption certificate. Upon completion and approval, typically granted by the State, the exemption is worth a 5 – 9% savings on that utility – depending on the state. QUESTIONS MOST OFTEN ASKED : Why is sales tax on the utility bill ? • it is the responsibility of the taxpayer to provide evidence and documentation of exemption before an account or meter is exempt • the exemption is not the responsibility of the utility company rather they are only a conduit to collect tax and remit to the state • the utility company typically does not promote, publicize, or assist in obtaining exemptions Will the utility company perform the engineering study ? • since the utility company has no stake in the exemption, they do not provide manpower to perform the study • the study involves many interpretations of the tax law as to what equipment is production versus non-production, and the utility co. is not prepared nor knowledgeable in tax classifications Can a regular sales tax exemption certificate be filed with the utility company ? • In Indiana, form ST200, the exemption application, must be filed with the Dept. of Revenue for approval • The proper documentation and the detailed engineering study meeting Dept. of Revenue requirements must accompany the ST200 • Each state has a different procedure for filing the exemption and classifying production equipment versus non-production When does the exemption expire ? • In Indiana, it does not expire and only needs to be re-filed with a significant change in utility usage • In Texas – 5 yrs; Michigan – 4 yrs; Iowa – 3 yrs; PA – 5 yrs, so you can see each state varies. What is the advantage of a manufacturer using a professional utility sales tax exemption ? • Exemption is approved sooner. Typically filed in 30 days and 30 days approval.
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No time spent by the manufacturer for : 1. Engineering study – no one has to learn the State’s requirements, no one has to do the study, no time spent in correcting study errors. 2. Learning the process, equipment classification. 3. Answering Dept. of Revenue or utility co. questions 4. Follow up to expedite and process the exemption application Advocacy to maximize the savings
Can you describe On Your Mark’s experience ? • On Your Mark is one of the oldest professional services in the US, obtaining exemptions since 1975. • Has obtained exemptions for 1200 manufacturers over the past 34 years. See references. • Experienced in representing manufacturers in the appeal process in order to defend the qualification for exemption. In the past 34 years, On Your Mark has had 38 applications denied, for which a protest was filed in every case. 37 of these denied exemptions were subsequently overturned, and approved. • Strength : very familiar and experienced with tax regulations, court cases, appeal procedures, and engineering methods to maximize savings What is the attitude of the Dept. of Revenue on sales tax exemptions for utilities ? • In some states the exemption regulations are interpreted very narrowly. In some cases, the State can deny an exemption when in fact the manufacturer actually qualifies. • A professional KNOWS what qualifies and should take an aggressive position to defend the manufacturer’s position for exemption
Why is advocacy important ? • There are many areas in the engineering study in which the State can and will argue that certain utility usage is not production and therefore does not qualify for exemption. For example : 1. Electric used for a lift truck that performs work outside the production process, e.g. loading, unloading trucks or warehouse storage; and also moving material during the production process. 2. Heating and air conditioning provides comfort for employees when the utility usage also controls the environment which is necessary for production.
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In these cases, and cases like them, the advocate is responsible for providing evidence and arguing the case that the utility is in fact production usage, and qualifies for the exemption.
What happens if the State denies the exemption application when in fact the manufacturer does qualify ? • Each state has an appeal process in which the denial can be protested. • Typically a qualified professional can represent the manufacturer at no extra charge rather than hiring an outside attorney
Do states require professionals file the exemption application and engineering study ? • No. Any manufacturer can complete and file the work. Because of the extra time that is usually spent reviewing the documents by the State, most states prefer it be done with an experienced professional however no states have that as a requirement. What are On Your Mark’s fees ? • Contingent on savings. If there’s no savings, no fees paid to On Your Mark • Upon obtaining the exemption, the fee is two times (twice) the 1st month savings. • If there is any refund, it is shared equally between the manufacturer and On Your Mark • No additional charge for On Your Mark representing its clients in the appeal process When are the fees paid to On Your Mark ? • When the manufacturer sees the tax removed from the bill, the exemption fee is due. receipt of the refund by the manufacturer, the share for On Your Mark is due.
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When is the best time to file the exemption application ? • As soon as you want to get the tax removed