North Carolina expanded its manufacturing exemption under Article 5F of the Revenue Act. Electricity and natural gas used at manufacturing facilities are now exempt from the combined general rate. I have a furniture manufacturer in Charlotte on Duke Energy Carolinas paying full tax. The exemption could save them over $2,000/month. The client's controller said they looked into it years ago and were told they didn't qualify because their facility includes a showroom. Is the showroom a disqualifier?
North Carolina manufacturing exemption — Article 5F changes the game
The showroom doesn't disqualify the entire facility. North Carolina allows a partial exemption — the manufacturing portion of electricity usage qualifies even if the facility has non-manufacturing areas. You need to calculate the percentage of electricity used in manufacturing vs non-manufacturing activities. The showroom, offices, and break areas don't qualify but the production floor, finishing area, and warehouse used for storing manufactured goods typically do. File Form E-595E with the exemption percentage.
Karen is correct. A mixed-use facility with both manufacturing and non-manufacturing activities qualifies for a partial exemption in North Carolina and most other states with manufacturing exemptions. The key is calculating a defensible allocation percentage. Common methods include connected load analysis, square footage ratio, or sub-metered usage. The showroom was not a disqualifier — it simply means the exemption is partial rather than 100%. This is a common misconception that causes qualifying businesses to not apply.
Used connected load analysis — manufacturing represented 78% of total connected load. Filed Form E-595E with Duke Energy Carolinas at 78% exemption. Approved. Retroactive refund from the NC DOR for 3 years came to $62,000. Go-forward savings of $1,560/month. The controller couldn't believe the showroom wasn't a disqualifier. That one misconception cost the company over $60K.