Who can qualify in Kansas for a sales tax exemption on utilities?
A manufacturer, industrial processor or restaurant can file Form ST-28B. the specialized exemption certificate in Kansas for utilities used in production. Therefore once an exemption certificate is provided and approved, a company’s purchases of electricity, gas, and water for production use become exempt from sales tax. The reduction is reflected on the bill. A utility study is required in Kansas (as described below).
How can one obtain the sales tax exemption on utilities in KS?
A valid Form ST-28B exemption certificate must be filed with the respective utility company. For approval, a utility study is required which determines the percentage of consumption used for direct production. The certificate does not expire nor need to be renewed. When the exemption is approved, the exempt percentage is reflected on the bill, and the related sales tax is reduced according to the exempt percentage.
Does the State require that an ST-28B be completed by a professional utility engineer?
In Kansas it is not required to use a professional. However the state recommends that the application and study be completed by an experienced professional knowledgeable in the requirements of the KS tax code. The State gives limited guidance on completion of the forms yet requires high degree of accuracy. At risk is approval and future savings.
What is the ‘predominate usage’ requirement?
Many states require a predominate usage study but it is not required in Kansas. Basically the predominate usage requires that over 50% of any meter’s consumption, be it KWH, ccf’s, or gallons be used for direct production vs. non-production.
However in Kansas a utility study is required. A utility study determines the percentage of exemption on any meter that is used for production. The study includes a list of each piece of equipment used in production and its annual KWH, ccf, or gallon consumption. Production is defined in the tax statute as any equipment that physically makes a change to tangible personal property. The utility study must also list every item, appliance, and equipment that is not used in production such as lighting, HVAC and office consumption; along with the annual consumption of each item.
What is the scope of a Professional performing the utility exemption work in KS?
- Entire Process handled from start to finish: On Your Mark performs the entire exemption service from beginning to end. There is little or no effort needed from the company. On Your Mark expects to have the utility study completed and exemption filed in 30 days.
- Accurate completion of the utility study: The utility study defined above is laborious and time consuming. On Your Mark has 35 years experience and specializes in timely, accurate utility studies. On Your Mark certifies the study.
- Claim for refund: Exempt utility meters can qualify for a refund for the full period of the statute of limitations, which in Kansas is 36 months. This is within the scope of work for On Your Mark, and any refund potential is pursued vigorously.
- Does filing of the utility exemption and/or refund claim raise any red flags? No. This exemption is similar to every exempt purchase for which an exemption certificate is filed with the supplier. The only difference with the utility exemption is that a utility study is required to provide documentation of the production percentage.
- Benefits of the sales tax exemption on utilities: In KS, a company can expect a 5-7% reduction in utilities once the application(s) have been approved, and the savings is reflected on the bill.
- Risk-free Method to Obtain the Utility Sales Tax Exemption: The utility study is in On Your Mark’s scope and it is performed at no charge. If after evaluation there is no savings to the company, there is no charge by On Your Mark. The only On Your Mark fee occurs after the company receives savings.
Start the process now; spend no time and have it completed in 30 days. Contact Mark Winski today!