New York State Sales Tax Exemptions For Utilities

Aaron Giles - New York State Sales Tax Exemptions

Utilities consumed in the state of New York are generally subject to sales and use tax. However, there are several utility uses that qualify for New York sales tax exemptions. In New York, utilities include purchases of gas, electricity, refrigeration and steam. Below are discussions of some of the more common exemptions for utilities in the state of New York.

Fuel and Utilities Used in Manufacturing or Processing
Utilities, including fuel, gas, and electricity, sold to manufacturers within the state of New York are completely exempt from sales tax if they are directly and exclusively used in production. The state of New York determines that a utility is used directly in production if it is either used to operate tax exempt equipment or machinery, used to create conditions necessary or required for production, or perform an actual step or part of the manufacturing or production process. A utility is used exclusively in production if it is 100% used in the production process.

Utilities used for lighting, heating or cooling of buildings, the storage of items of tangible personal property, and the preparation of food or drink do not qualify for New York sales tax exemptions for manufacturing or processing. If the utility is not used 100% of the time in production, a manufacturer may allocate the use between exempt and non-exempt purposes. In cases requiring allocation, the taxpayer must keep adequate records, such as a survey conducted by an engineer or the formula used in computing exempt usage. More detailed information about how to compute the percentage of utilities used for exempt purposes can be found in New York Sales Tax Bulletin #TB-ST-917. When requesting a refund of sales tax paid on qualifying exempt utilities, the exact percentage of the exempt usage must be known and reported in order to receive any New York sales tax exemptions on utilities. A manufacturer must submit a complete and properly executed Exempt Use Certificate (NY Form ST-121) to their utility provider.

Fuel and Utilities used in Farming, Agriculture or Horse Boarding
The New York sales tax exemptions for utilities used in farming, agriculture or commercial horse boarding are broader than those offered to the manufacturing industry. Utilities including gas, electricity, refrigeration and steam are exempt for this industry. In addition, purchases of non-highway diesel motor fuel will also qualify for the exemption. New York Sales Tax Bulletin #TB-ST-244 discusses the New York sales tax exemptions for this industry, which include utilities as well as several other categories of purchases including machinery, equipment and supplies; vehicles; building materials; and some services. To secure refunds for qualifying utilities, farmers and horse boarding entities should use NY Form ST-125.

Residential Utilities
Utilities sold for residential purposes are exempt from the 4% New York state sales tax. As long as 75% of the energy being purchased is used for residential purposes, all of the energy is tax exempt. Residential customers must present their utility provider with a certification of residential use of energy (NY Form TP-385) that shows that at least 75% of the utility being purchased is used for residential purposes. This will exempt residential utility customers from the 4% state tax rate. Common areas of multi-family housing should be excluded from the calculations when determining the percentage of qualifying exempt residential usage. Common areas are excluded from the calculation because they are areas which are used for both residential and non-residential purposes. While utilities used for residential purposes are exempt from the state portion of the sales tax rate, local taxes, including those for the city and county, are only exempt in certain locations. The state of New York allows localities to determine if residential utilities are exempt or not. The complete list for local jurisdictions that tax residential utilities can be found in New York Publication #718-R.

Have questions on New York State Sales Tax Exemptions?

Contact Aaron Giles.

 

 

Aaron C. Giles is the Founder and President of Agile Consulting Group. Aaron spent five years working within the specialty niche of Sales & Use Tax at Brown & Associates before forming his own firm in 2005. He has worked hundreds of audits in states all across the U.S. during that time and has delivered savings of over $75M in the form of refunds and credits to his clients. Today, he leads a group of talented, detail-oriented colleagues who focus exclusively on Sales & Use Tax.

Some of our firms’ greatest achievements have come in successfully arguing new and unique perspectives to existing tax law in various states enabling our clients to claim exemptions on categories of purchases previously held to be taxable. Included in these victories are: communication services taxes for religious nonprofit hospitals in FL, bulk purchases of drugs in VA, specific surgical tools and instruments for healthcare providers in TX, printing plates in GA, railroad utilities in KY, and most recently software in AL.

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