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Predominant Use Study

FAQ

What is a Predominant Use Study?
A Predominant Use Study determines what percent of a utility (electricity and or natural gas) is used in a non-taxable manner. If 51% of a utility is used in a non-taxable manner the utility bill will be exempt from Texas Sales and Use Tax of 6.25%.  


What is taxable and non-taxable consumption?
This is critical! It's important to work with an experienced firm with in-depth knowledge of the tax codes. There are many lines of tax code and Administrative Judge rulings that define taxable and non-taxable. The original definitions are outlined in Texas Tax Code 151.317 and 151.318 and Texas Tax Rule 3.295.

In a nutshell, the use of tangible personal property where a physical or chemical change takes place is non-taxable usage. For example, a CNC, band saw, router, air compressor and oven are examples of electricity used in production.  An  example of a chemical change is cathodic coating. Tax Rule 3.295 also states, HVAC and lighting when used in the production area is non-taxable usage. Examples of taxable usage are intra-plant transportation such a crane or lift, or a PC that tracks a job progress.  Call us, we'll talk about your operation and share more information. 
 

Who qualifies for a predominant use study?

Manufacturers, processors such as cathodic coating and multi-family are eligible for the tax exemption under Tax Rule 3.295. Additionally, RV parks, HOAs,  extended stay hotels and Senior Living Centers qualify for tax exempt on gas and electricity meters if  they meet the 51% threshold.  Not sure if you do? Give us a call.


What does a Predominant Use  Study Cost? 
We are different from our competitors. . We base our fee on the scope of work.  In our initial conversation we perform an analysis to evaluate  the scope of work  and propose a fee. You do not pay until you receive your refund check or a credit on your bill, except where you are already tax exempt and a new study is required.


Can I do my study?

Tax Rule 3.295 states that a predominant use study must be performed by an individual with an,"engineering degree from an accredited college". Our staff of Electrical Engineers are degreed and have combined over 70 years of electrical engineering experience. 


Will the exemption generate an Audit by the State of Texas Comptroller's office. 

No, the exemption does not result in an audit. However, if the refund exceeds $20,000 the exemption will be referred to a field office for validation.  


Why should I hire Utility Consultants to do my study
Since 1987 we've been producing Predominant Use Studies. With 29 years of experience with the tax code and administrative rulings we know what we are doing. Hire us for our experience, fair pricing and our trusted name. We've done over 10,000 studies, saved Texas businesses  millions of dollars in taxes  and represented our clients before state auditors.  


What involvement is required of me? 
Very little time is needed from your staff. Typically, 30 minutes without interruption to you roperations. We perform our work independently to conduct our field work.We produce a study, file the exemption form with your utility provider and file for your refund with the Comptroller's office. 


How long does the process take?
Many variables determine the timeline. Typically, the work to perfrom the study takes about 2 to 3 weeks. If the utility issues a credit it will take 
about two billing cycles. If  we're required to  file for the refund with the Comptroller's office, the refund check will be issued in 4 to 6 months.


Why haven't I heard of this before?

Like other state or federal tax exemptions it's the responsibility of the business to know the tax codes that are advantageous to their business. The utility companies are not in the business of giving out tax advice and the Comptroller's office is responsible for maximizing the tax revenue. Since 1987 we pride ourselves in educating our target industries to take advantage of the exemption,saving them money and getting them a refund. 


My electric broker just had me sign an exemption form and the electric company isn't billing me tax. Why do I need a study?

The utility company has no liability. YOU DO! Your broker has no liability. YOU DO!  When the utility company is audited, and they will be, you'll get a letter telling you to get a Predominant Use Study or be put back on the tax rolls and be  billed for back taxes, plus interest.  Tax Rule 3.295 states that the exemption form must reflect the % of electricity that is exempt, the reason for the exemption with the engineer's signature and stamp.  Additionally, if you are ever audited you will have to provide a copy of your Predominant Use Study. If you don't have one, you'll have to get one. We send both a hard copy and an electronic copy for your permanent record.


How do I get started?

Call us at 888-444-8055! We'll send an Energy Tax Consultant to your facility to conduct a scope of work and quote you a fee to perform your study.