Exemption for Fuel and Electricity
Consumed in Manufacturing

  1. Our company consumes fuel and electricity in our manufacturing processes. What do we need to do in order to purchase our fuel and electricity without sales or use tax?
  2. Our company holds a direct pay permit issued by the Wisconsin Department of Revenue. Are we still required to furnish an exemption certificate to the seller in order to purchase fuel and electricity without tax?
  3. When did the sales and use tax exemption for fuel and electricity consumed in manufacturing tangible personal property go into effect?
  4. I am a manufacturer of tangible personal property in Wisconsin and some of my purchases of fuel and electricity qualify for the exemption from sales tax. I do not hold a direct pay permit. What happens if I do not furnish an exemption certificate to the seller?
  5. I paid sales tax in error to the seller on purchases of fuel and electricity consumed in manufacturing tangible personal property in Wisconsin. What should I do?
  6. How do I request a refund from the seller?
  7. How do I file a Buyers Claim for Refund?
  8. If I pay sales or use tax on fuel and electricity consumed in manufacturing tangible personal property in Wisconsin after January 1, 2006, even though I qualify for the exemption, can I still claim the sales tax paid as part of a claim for the manufacturer's sales tax credit for the tax year beginning in 2005 or 2006?
  9. On the exemption certificate we previously furnished the electric utility, we claimed that 75% of the electricity billed for a specified meter is exempt as it is consumed in manufacturing tangible personal property in Wisconsin. Since that time, we have modified our manufacturing process and purchased new equipment. We now estimate that 65% of the total electricity billed for that meter is exempt. Do we need to do anything?
  10. Our company issued an exemption certificate to our supplier claiming that 85% of natural gas we purchased was consumed in manufacturing tangible personal property in Wisconsin. Later, we determined that 78% of the natural gas we purchased was actually used for the exempt purpose. The balance was used for taxable purposes. Do we need to do anything?
  11. Our company issued an exemption certificate to our supplier claiming that 80% of natural gas we purchase is consumed in manufacturing tangible personal property in Wisconsin. Later, we determined that 86% of the natural gas we purchased was actually used for exempt purposes. Can we obtain a refund of the sales and use taxes we paid on the additional 6% of natural gas purchases we determined to be exempt?
  12. We hold a direct pay permit and remitted use tax based on 65% of fuel purchased being consumed in the manufacture of tangible personal property in Wisconsin. Later, we determined that our exempt use of fuel purchased was 76%. Can we obtain a refund of the use tax we paid on the 11% of the fuel purchases we subsequently determined was used in an exempt manner?
  13. We are a seller of fuel and electricity. Since January 2006, we have received fully completed exemption certificates from various customers claiming the exemption for fuel and electricity consumed in manufacturing tangible personal property in Wisconsin. These exemption certificates are marked "continuous." Based on the exemption percentages claimed on the exemption certificates, we do not charge tax to these customers. At a later date, it is determined that all or a portion of the fuel and electricity was used in taxable manner. Are we liable for any tax on these sales?
  14. We are a seller of fuel and electricity. A purchaser contacts us, requesting a refund for overpayment of sales taxes. We are going to file a claim for refund with the Department of Revenue, and refund the tax and interest we receive to the purchaser. Is there any documentation we should obtain from the purchaser?
  15. Does the state require manufacturers to purchase a third party "utility usage study" as documentation for the percentage claimed to be used in manufacturing? If not, what evidence is acceptable?
  16. Since the manufacturer's sales tax credit was replaced with a sales and use tax exemption beginning January 1, 2006, what happens to my unused manufacturer's sales tax credits from taxable years that began before January 1, 2006?

  1. Our company consumes fuel and electricity in our manufacturing processes. What do we need to do in order to purchase our fuel and electricity without sales or use tax?

    You must furnish a fully completed sales tax exemption certificate to each seller from whom you purchase fuel or electricity that is exempt from Wisconsin sales and use tax because it is consumed in manufacturing tangible personal property in Wisconsin.

  2. Our company holds a direct pay permit issued by the Wisconsin Department of Revenue. Are we still required to furnish an exemption certificate to the seller in order to purchase fuel and electricity without tax?

    A direct pay permit holder has the option of either providing (a) a fully completed exemption certificate which includes the name and address of the direct pay permit holder, a statement that the purchases are being made without tax using the direct pay permit, the direct pay permit number, and the effective date of the permit; or (b) a copy of the direct pay permit and a written statement indicating whether the direct pay permit is for a single purchase or continuous.

  3. When did the sales and use tax exemption for fuel and electricity consumed in manufacturing tangible personal property go into effect?

    January 1, 2006. For purchases of natural gas or electricity consumed in manufacturing tangible personal property, the exemption applies beginning with the first billing you received with a billing date on or after January 1, 2006, regardless of when the natural gas or electricity was actually delivered to you. If the billing is mailed to you, the billing date is the date it is mailed. If the billing is sent by means other than mail, the invoice date is the billing date.

    For purchases of fuel other than natural gas, the exemption applies to purchases where you take possession of the fuel from the seller or the seller's agent on or after January 1, 2006. A common carrier or the U.S. Postal Service is deemed to be an agent of the seller, regardless of any f.o.b. point and regardless of the method by which the freight or postage is paid.

  4. I am a manufacturer of tangible personal property in Wisconsin and some of my purchases of fuel and electricity qualify for the exemption from sales tax. I do not hold a direct pay permit. What happens if I do not furnish an exemption certificate to the seller?

    The seller of the fuel and electricity is required to charge you the appropriate sales or use tax unless you furnish the seller with a properly completed exemption certificate prior to or at the time of sale.

  5. I paid sales tax in error to the seller on purchases of fuel and electricity consumed in manufacturing tangible personal property in Wisconsin. What should I do?

    Furnish the seller with a fully completed exemption certificate as soon as possible to avoid paying tax on future purchases. In addition, you may seek a refund of the taxes paid in error using one of the two options below:

    • Request a refund from the seller, or
    • File a Buyer's Claim for Refund directly to the Department of Revenue (see question #7).
  6. How do I request a refund from the seller?
    • Furnish the seller a fully completed exemption certificate (Form S-211) claiming the correct exemption percentage.

    If the request is made within 90 days of the date of the sale, the purchaser may instead provide the seller with information sufficient to prove the exemption, such as:

    • Purchaser name and address.
    • Purchaser's state tax number and state of issue. If the purchaser has no state tax number, then the purchaser's federal identification number (FEIN) is needed. If the purchaser has no FEIN then the purchaser's personal driver's license number and state of issue is needed.
    • Purchaser's type of business.
    • The reason for the claimed exemption.

    If the purchaser provides the exemption certificate to the seller more than 90 days after the date of the sale, the seller must be able to accept the exemption certificate in good faith.

  7. How do I file a Buyers Claim for Refund?

    Generally, your refund must be a least $50, and must be filed within 4 years of the due date of your income or franchise return. See Publication 216, Filing Claims for Refund of Sales or Use Tax, for more information.

    For a refund of tax paid to a seller, do one of the following:

    • File electronically –Select File a buyer's claim for refund
    • Filed a buyer's claim for refund in the past? – Use My Tax Account
    • File claim on paper –must use both Forms S-220 and S-220a
      The department will immediately acknowledge receipt of a refund claim filed electronically.
  8. If I pay sales or use tax on fuel and electricity consumed in manufacturing tangible personal property in Wisconsin after January 1, 2006, even though I qualify for the exemption, can I still claim the sales tax paid as part of a claim for the manufacturer's sales tax credit for the tax year beginning in 2005 or 2006?

    No. The manufacturer's sales tax credit is repealed for tax years beginning on or after January 1, 2006. In addition, no credit may be claimed for sales or use tax paid in error on fuel or electricity consumed in manufacturing tangible personal property in Wisconsin on or after January 1, 2006.

  9. On the exemption certificate we previously furnished the electric utility, we claimed that 75% of the electricity billed for a specified meter is exempt as it is consumed in manufacturing tangible personal property in Wisconsin. Since that time, we have modified our manufacturing process and purchased new equipment. We now estimate that 65% of the total electricity billed for that meter is exempt. Do we need to do anything?

    Yes. Based on your current knowledge, the 75% exemption amount indicated on the exemption certificate is no longer valid. You should furnish your electric utility with a new exemption certificate claiming the revised estimate of 65% exempt usage for electricity consumed in manufacturing tangible personal property in Wisconsin. In addition, if for a period of time the utility exempted 75% of the electricity when the exempt percentage was only 65%, you would be required to report Wisconsin use tax to the Wisconsin Department of Revenue on the 10% difference between what was claimed as being exempt and what was actually exempt.

  10. Our company issued an exemption certificate to our supplier claiming that 85% of natural gas we purchased was consumed in manufacturing tangible personal property in Wisconsin. Later, we determined that 78% of the natural gas we purchased was actually used for the exempt purpose. The balance was used for taxable purposes. Do we need to do anything?

    Yes. You are required to self-assess and pay Wisconsin use tax on the portion of the fuel purchased without tax, but used in a taxable manner. In the above example, since 7% of the natural gas was purchased without tax but was actually used in a taxable manner, use tax applies to 7% of the purchase price of the natural gas purchased.

  11. Our company issued an exemption certificate to our supplier claiming that 80% of natural gas we purchase is consumed in manufacturing tangible personal property in Wisconsin. Later, we determined that 86% of the natural gas we purchased was actually used for exempt purposes. Can we obtain a refund of the sales and use taxes we paid on the additional 6% of natural gas purchases we determined to be exempt?

    Yes. You may request a refund from the seller or if your claim for refund is at least $50, you may file a Buyer's Claim for Refund directly with Department of Revenue. See questions #5-7 for refund options.

  12. We hold a direct pay permit and remitted use tax based on 65% of fuel purchased being consumed in the manufacture of tangible personal property in Wisconsin. Later, we determined that our exempt use of fuel purchased was 76%. Can we obtain a refund of the use tax we paid on the 11% of the fuel purchases we subsequently determined was used in an exempt manner?

    Yes. To file a claim for refund for use taxes paid directly to the Department of Revenue, you need to file amended returns for the periods in which you overpaid the use tax. The amended returns must be filed within four years of the due date for filing your income or franchise tax return for the year that includes the year of the purchases for which you overpaid the tax. See Wisconsin Publication 216, Filing Claims for Refunds of Sales or Use Tax, for more information.

  13. We are a seller of fuel and electricity. Since January 2006, we have received fully completed exemption certificates from various customers claiming the exemption for fuel and electricity consumed in manufacturing tangible personal property in Wisconsin. These exemption certificates are marked "continuous." Based on the exemption percentages claimed on the exemption certificates, we do not charge tax to these customers. At a later date, it is determined that all or a portion of the fuel and electricity was used in taxable manner. Are we liable for any tax on these sales?

    For your sales of fuel and electricity to these customers on and after October 1, 2009, you are not liable for sales or use tax. This assumes that for each sale of fuel and electricity, you either had the exemption certificate on file before the sale, or obtained the certificate within 90 days after the date of the sale.

    Exception: A seller is not relieved of its liability to collect and remit the applicable Wisconsin sales or use tax on a sale to a purchaser if any of the following apply:

    1. The seller fraudulently fails to collect the sales or use tax.
    2. The seller solicits the purchaser to claim an unlawful exemption.
    3. The seller accepts an exemption certificate from a purchaser claiming to be an entity that is not subject to sales and use taxes, if both of the following apply:
      1. The subject of the transaction covered by the exemption certificate is received by the purchaser at the seller's Wisconsin location; and
      2. The exemption certificate clearly and affirmatively indicates that the claimed exemption is not available in Wisconsin.

    For your sales of fuel and electricity to these customers before October 1, 2009, you are not liable for sales or use tax, if the exemption certificates were valid and you had accepted them in good faith. An exemption certificate is valid and accepted in good faith if all of the following are true:

    • the certificate is dated,
    • it is signed by the purchaser,
    • it bears the name and address of the purchaser,
    • it includes the purchaser's sales and use tax account number (if applicable),
    • it indicates the general character of the tangible personal property or service sold,
    • it indicates a proper basis for exemption (in this case, fuel and electricity consumed in manufacturing tangible personal property in Wisconsin), and
    • the seller has no reason to believe, at the time the certificate is accepted from the purchaser, that the purchaser does not qualify for the exemption being claimed.

    However, if the certificate is not valid or is not accepted in good faith, the seller remains liable for any additional sales tax.

    Additional information regarding exemption certificates, for sales on and after October 1, 2009, is provided in sec. Tax 11.14(3) and (4), Wis. Adm. Code (November 2010 Register).

  1. We are a seller of fuel and electricity. A purchaser contacts us, requesting a refund for overpayment of sales taxes. We are going to file a claim for refund with the Department of Revenue, and refund the tax and interest we receive to the purchaser. Is there any documentation we should obtain from the purchaser?

    Yes. If you obtain a fully completed exemption certificate or the information necessary to prove the exemption within 90 days after the date of the sale, this documentation is sufficient.

    If you don't obtain a fully completed exemption certificate or the information necessary to prove the exemption within 90 days after the date of the sale, you may, within 120 days after you are requested by the Department of Revenue to substantiate the claimed exemption, either obtain, in good faith, a fully completed exemption certificate from the purchaser, or by some other means provide proof that your sale was not taxable.

    You are accepting an exemption certificate in good faith if the exemption certificate is fully completed and claims an exemption that:

    • was authorized by law on the date of the transaction in the jurisdiction to which the transaction was sourced,
    • could be applicable to the property, item, good, or service being purchased, and
    • is reasonable for the purchaser's type of business.

    However, even if you obtain an exemption certificate containing the above information, you will still be liable for the tax if it is discovered through the audit process that you had knowledge or reason to know at the time the information provided was materially false or if you knowingly participated in an activity intended to purposefully evade the tax due.

    Additional information on obtaining documentation from a purchaser is available in the following Common Question: Sales and Use Tax Exemptions, or in sec. Tax 11.14(3) and (4), Wis. Adm. Code (August 2012 Register).

  2. Does the state require manufacturers to purchase a third party "utility usage study" as documentation for the percentage claimed to be used in manufacturing? If not, what evidence is acceptable?

    No. However, the purchaser/manufacturer is responsible for providing documentation to support the exempt percentage claimed and a third party utility usage study is good supporting evidence to prove how they arrived at the amount of fuel and electricity consumed in manufacturing.

    Therefore, although the Department may prefer to see an independent third party utility usage study, there is nothing provided statutorily that would prevent you from doing a detailed analysis/study yourself of the fuel or electricity that is consumed in manufacturing. As long as the study is reasonable and you have documentation (e.g., list of exempt machines, how much energy each machine consumes, how many hours each machine operates a day) to support the study that proves it accurately reflects the fuel or electricity consumed in manufacturing, this would be acceptable to the Department. This study would also need to be updated periodically to account for additions and deletions of the machinery and equipment used, plant expansions or downsizing, etc.

    One thing to remember when claiming an exemption is that it is up to the taxpayer to prove that a sale or purchase qualifies for a particular exemption. Therefore, regardless of the method you choose to determine the amount of fuel or electricity that qualifies for exemption, you will need documentation to support the method chosen and evidence (such as a detailed analysis of your energy consumption) to prove that this method is reasonable in your particular situation. The method you choose is also subject to review in the event that you are audited.

  3. Since the manufacturer's sales tax credit was replaced with a sales and use tax exemption beginning January 1, 2006, what happens to my unused manufacturer's sales tax credits from taxable years that began before January 1, 2006?

    Unused manufacturer's sales tax credits from taxable years that began prior to January 1, 2006 may be claimed beginning with the first tax year beginning after January 1, 2006.

    Detailed information on claiming unused manufacturer's sales tax credits is available at revenue.wi.gov/faqs/ise/umfgcrdt.html.

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January 22, 2014