Just wrapped my first tax exemption finding. Client is a metal stamping shop in Cleveland on the FirstEnergy system. They've been paying Ohio sales tax on their entire electric bill for 6 years. Ohio Revised Code 5739.02(B)(42) exempts electricity used directly in the manufacturing process from sales tax. This client's entire facility is production — no office space to speak of. Filed Form STEC-MFG with the Ohio Department of Taxation and FirstEnergy will stop collecting the tax going forward. Refund claim for 3 years back is about $18,000. This was sitting right there on the bill.
Ohio manufacturer paying sales tax on electricity used in production — easy win
I see this constantly in Ohio. The exemption applies to electricity used predominantly in manufacturing but a lot of manufacturers don't know about it or assume their accountant handles it. The accountant assumes the utility handles it. Nobody files the exemption certificate. FirstEnergy and AEP Ohio will both honor the STEC-MFG once it's filed but they won't proactively tell the customer they qualify. The lookback for refunds in Ohio is generally 3 years from the date of overpayment.
Same in Indiana. Manufacturers can file Form ST-109 for the utility tax exemption. I found a plastics facility in Indianapolis paying full sales tax on their Duke Energy bill for over 4 years. Indiana allows a 3-year lookback. Refund was $32,000 and the go-forward exemption saves them about $900/month. The form takes 15 minutes to fill out. That's one of the best hourly rates you'll ever earn as an auditor.
Tax exemption findings are some of the most straightforward and highest-value discoveries in utility bill auditing. Frank and Greg highlight the key pattern: a qualifying business that never filed the exemption paperwork. Every state with a sales tax on utilities has some form of manufacturing exemption. The specific statute, form, and lookback period vary by state but the principle is universal. Make checking for unfiled tax exemptions a standard part of every commercial audit regardless of the client's industry — manufacturing, agriculture, government entities, nonprofits, and certain service businesses all have potential exemptions depending on the state.