Frequently Asked Questions
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.