How Your Energy Usage Can Cut Your State Taxes

12 March 2017
 Categories: Business, Blog

There are various tax exemptions that are offered by states to businesses that engage in certain energy usage practices. These exemptions are designed to encourage businesses to use less electricity or natural gas and to also encourage businesses to use alternative energy. 

Natural Gas Tax Exemptions

If natural gas is predominantly used over a certain period of time in some states, this can affect taxes that are generated over that period. For example, if your business uses natural gas for an industrial process throughout the summer, but not throughout the rest of the year, the tax exemptions may only apply to taxes generated during the summer.

When natural gas is purchased from a utility and the gas is then provided through a gas line, the business is subject to sales taxes in most states. However, some states will exempt certain types of organizations. This includes schools, churches, non-profit organizations, farming and manufacturing. It is a good idea to have a consultant inspect your business to determine if you will be qualified for a sales tax exemption.

Solar Tax Exemptions

One type of tax exemption that is common is a solar tax exemption. The added value of the solar system can be excluded for both homeowners and businesses. The purpose of the tax exemption is to make it more feasible for a business to install solar panels by making it more affordable. Given that the majority of the states offer an exemption for those who install solar panels, there is a good chance that your state is one of them. It is important to determine whether there are property and sales tax exemptions in your state. There are fewer states that offer sales tax exemptions. 

Determining Whether Your Equipment Will Save You On Taxes

In order to determine if you are qualified for a tax exemption, it is necessary to have a predominant use study conducted for your business. Equipment is inspected and is then placed in exempt and non-exempt categories. The location of each piece of equipment is studied. The hours of operation of each piece of equipment is noted. The real "oh" hours are recorded. Also, relevant stats about the equipment are recorded, such as:

  • Horsepower
  • Cubic foot consumption
  • Amperage
  • Voltage

In order to have this study conducted, contact a utility tax consultant, like Utility Consultants Inc. Not only will they be able to schedule an appointment for a study, but will provide advice on other ways that you can save on your taxes.