Many businesses and organizations are sales tax exempt. Therefore, you shouldn’t be billed sales tax on your utility bills. Oftentimes companies are billed taxes in error by utility companies. Most people don’t think about sales tax being charged on their utility bill, but it is most of the time.
Who should be billed sales tax on their electric bill?
Tax laws vary from state to state. Sales tax exemptions vary from state to state too. In many states, electricity and gas consumed by residential customers is exempt from sales tax, while commercial consumers are not exempt from sales tax. Other exempt organizations include:
- non-profit organizations
- government entities
- schools and colleges
- residential nursing homes
- electricity and gas used for manufacturing processes
Check your state sales tax rules to see if you are exempt from sales tax.
How do I get sales tax removed from my electric bill?
To get sales tax removed from your future bills, you will have to contact the utility company directly and ask them to remove the taxes. Most of the time, they will require a sales tax exemption certificate, then they will remove it from the bill after they verify that you are exempt. Unsure how to go about contacting your utility company? Check out our hack # 3 – how to contact your utility company.
Can I get a refund for past taxes?
You are entitled to refunds for past sales tax billed in error on your utility bills. You should first ask the utility company to issue a refund for the past 4 years or however long the statute of limitations is in your state. If the utility company does not refund the past sales tax overcharges, in most states, you can request a refund for sales tax directly from the state. Check your states rules on sales tax refunds.
Other taxes and fees that might be billed in error on your utility bill
Besides sales tax, there are several other taxes and fees that could be billed in error.
- Gross Receipts Tax. In Texas, if you are located outside of city limits, you should not be billed gross receipts tax on your utility bills.
- Franchise Fees should also not be billed to any meter that is located outside of city limits.
- Late Fees – In some states, government entities have protection from excessive late fees billed. Check your state laws to see if you qualify
- Meter Move-In Fees – Sometimes utility companies will bill you for meter move-in fees when you are switching electric companies. They should only bill you this if you request a priority move-in date. If you choose a normal switch-over, you shouldn’t be billed the fee.
- Early Termination Fees (ETFs)- In deregulated areas, sometimes utility companies will bill you an early termination fee for switching to another Retail Electric Provider. If you are billed an early termination fee, make sure it correlates with the terms and conditions of your electric service agreement. Early Termination Fees can be billed in error. For example, if your contract is up and you switch providers at the end of your contract expiration date, you shouldn’t be billed an Early Termination Fee. Also, if you have many meters and have to disconnect a meter for some reason, such as non-use, in most cases you shouldn’t be billed an early termination fee.
Now that you know the basics of tax on your utility bills, take a look at your bill and see if you are being billed sales tax. If you are, make sure you aren’t exempt and take the steps to have your bill corrected. A simple effort to contact the utility company to fix the taxes billed in error on your bill can save you money and get you a nice refund if you have been paying it in error for a while.