| As utilities auditors and consultants, one of the | | | | meter is exempt.Under the percentage of use |
| most common overcharges we encounter is in | | | | approach, sales tax is applied only to that portion |
| the area of sales tax. Our consultancy is in New | | | | of the organization's total electricity consumption |
| York State, where some commercial uses of | | | | being used for non-exempt activities. The |
| electricity are taxable and some are not. Yet we | | | | remaining portion, used to support exempt |
| find that many non-taxable uses of electricity are | | | | activities, is not taxed. |
| taxed, anyway. Evidently electric companies -- at | | | | In some states, certain kinds of organizations are |
| least some of them -- elect to play it safe: when | | | | exempted entirely.Because sales tax statutes |
| in doubt they collect the tax and turn it over to | | | | across the nation change often, check the latest |
| the taxing authority, whether it's owed or | | | | information in your state. Ask a qualified |
| not.Many business managers and financial people, | | | | representative of your electric company, or |
| who watch most costs like hawks, routinely | | | | better still, get a copy of the current sales and |
| approve electricity bills without knowing for certain | | | | use tax statute from the sales tax division of |
| whether the charges are correct. They don't | | | | your state's department of revenue and |
| understand electricity bills, so they assume electric | | | | taxation.To determine the amounts of electricity |
| companies do the correct thing, and that their bills | | | | being used on exempt and non-exempt activities, |
| are error-free.Not so. We encounter all kinds of | | | | you may be required to have a study done by a |
| errors and overcharges -- real whoppers, some | | | | licensed engineer. The engineer will measure the |
| of them -- even going back decades, with | | | | watts being used by each device that consumes |
| improper sales tax charges high on the list.Most | | | | electricity, and produce a usage study projecting |
| electric bills reflect charges for sales tax, or | | | | exempt and non-exempt usage. (Some states, |
| possibly a number of different sales taxes and | | | | including New York, allow you to make this study |
| surcharges. The patterns of taxes can vary | | | | yourself, without an engineer.) The electric |
| considerably from one taxing authority to another. | | | | company will collect sales tax from you based |
| In many areas, specific classes of users -- such | | | | upon the result.If you have been overtaxed in the |
| as certain manufacturers, restaurants, nonprofit | | | | past, apply to the taxing authority -- not the |
| organizations and others -- are exempt from | | | | electric company -- for a refund. They will advise |
| some or all sales taxes on electricity. In general, | | | | you what paperwork to submit, and how far |
| electricity used in the production of physical items | | | | back your refund may go.The point here is: if |
| is exempt from sales tax -- in those taxing | | | | your organization is being charged sales tax, don't |
| authorities that allow exemptions. At this writing, | | | | just assume you owe the tax. Check the law and |
| over half of our states have enacted exemption | | | | make certain the charge is legitimate.Author Bruce |
| legislation.Some exemptions are based on what is | | | | Bloom is an experienced utilities auditor and |
| called predominant use. Using this approach, if | | | | consultant, president of AuditCo Cost Reduction |
| more than half the usage a meter measures is | | | | Services. |
| for an exempt activity, then all the billing for that | | | | |