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How Does a Predominant Use Study Work?
Many manufacturers unknowingly pay sales tax on utilities that may qualify for exemption under state manufacturing rules. A predominant use study determines how much electricity, natural gas, steam, or other utility consumption supports qualifying production activities, potentially reducing future sales tax, identifying refund opportunities, and strengthening audit documentation.
Manufacturers, processors, fabricators, food and beverage companies, data centers, and other energy-intensive businesses may benefit. Because each state administers manufacturing utility exemptions differently, qualification standards, engineering methods, refund procedures, documentation requirements, and exemption certificates must be evaluated by jurisdiction.
KBKG Insight
A utility exemption should reflect how a facility operates today. Older studies may no longer account for equipment additions, production changes, expansions, acquisitions, relocations, meter reconfigurations, or revised operating hours. Businesses with an existing study should reassess it whenever operations or utility usage materially change.
Key Takeaways
- Each state has its own terminology, eligibility rules, calculations, and documentation requirements.
- The study evaluates equipment and activities connected to each utility meter.
- A documented, expert-led KBKG study may support exemptions, refunds, and audit responses.
What Is a Predominant Use Study?
A predominant use study analyzes utility consumption by production and nonproduction activities. It typically reviews utility invoices, meter locations, equipment specifications, production schedules, operating hours, and equipment energy demand.
Each item connected to a meter is classified by function, load, and annual usage. The analysis calculates the percentage of utility consumption attributable to qualifying production activities.
Depending on state law, the results may:
- Exempt an entire meter
- Establish an exempt percentage
- Support an exemption certificate
- Document a refund claim
- Provide audit support
Likely candidates include manufacturers, processors, fabricators, assemblers, food and beverage producers, chemical companies, metalworking businesses, packaging operations, and facilities using refrigeration, ovens, boilers, compressors, or production machinery.
How Much Can a Predominant Use Study Save a Business?
The potential savings from a predominant use study depend on the facility’s annual utility costs, applicable sales tax rate, qualifying production-use percentage, and the state’s refund period. Businesses with high electricity or natural gas consumption may realize meaningful savings when a study establishes that an entire meter, or a portion of its usage, qualifies for exemption.
Savings may include reduced sales tax on future utility bills and refunds for eligible taxes paid in prior periods. A meter-by-meter analysis can also identify overlooked opportunities where production equipment, refrigeration, ovens, boilers, compressors, or other energy-intensive systems account for a substantial share of total utility consumption.
What Do Different States Call the Study?
No two states administer manufacturing utility exemptions the same way. The name of the study is only one difference. Qualification standards, refund procedures, documentation requirements, engineering methodologies, and exemption certificates can vary significantly by state.
States commonly use the following terms and approaches:
- Texas: Utility Study or Predominant Use Study. A study generally analyzes 12 consecutive months of usage and determines whether more than 50% of the utility measured through a meter is consumed in qualifying manufacturing activities.
- Wisconsin: Utility Usage Study. Wisconsin recognizes a reasonable third-party study as supporting evidence and recommends updates after machinery or facility changes.
- New York: Engineering Survey or Allocation Formula. Businesses may use an engineering survey or another reasonable method when qualifying and nonqualifying usage is not separately metered.
- Georgia: Metered Energy Documentation. Georgia uses the ST-5M Certificate and Addendum for qualifying metered energy sold to manufacturers.
- Florida: Exemption Certificate and Usage Analysis. Florida provides manufacturing utility exemptions for qualifying electricity and certain fuels used directly in manufacturing. Businesses must maintain documentation supporting exempt usage, and engineering analyses are commonly used to substantiate exempt percentages.
- Ohio: Quantified Primary Use. Ohio evaluates whether utilities primarily support exempt manufacturing activities using a quantified primary-use methodology.
These differences make a state-specific approach essential, such as KBKG’s approach.
KBKG’s Predominant Use experts align the engineering analysis, supporting documentation, exemption certificates, and refund strategy with the requirements of each jurisdiction. A study prepared for one state may require different calculations, forms, and substantiation before it can support an exemption in another.
Why a 2026 Review Matters
State exemptions, qualifying-use thresholds, refund periods, certificates, and filing procedures continue to vary and evolve. New York updated its manufacturing utility guidance in June 2026, while Ohio continues to apply quantified primary-use standards. Businesses should confirm current requirements in every state where they operate before applying study results.
A previous study should be revisited after equipment changes, expansions, relocations, acquisitions, production changes, meter reconfigurations, or significant shifts in operating hours. Wisconsin also advises businesses to update supporting studies periodically after machinery changes and facility expansions or downsizing.
Conclusion
A current, meter-level predominant use study can translate facility operating data into lower future sales tax, potential refunds, and defensible audit documentation. Businesses should review both their utility consumption and applicable state rules rather than assuming an older exemption percentage remains accurate.
Action Steps
Book a free consultation with KBKG’s Predominant Use experts to review your utility accounts, evaluate state-specific eligibility, identify potential refund opportunities, or update an existing study.
To prepare, gather approximately 12 months of utility bills, a list of meters and major equipment, facility or production layouts, and typical operating schedules. KBKG can use this information to assess the scope of the study and potential savings.
Official State Resources
- Texas Comptroller: Utility Study and Predominant Use
- Wisconsin Department of Revenue: Fuel and Electricity Consumed in Manufacturing
- New York Department of Taxation and Finance: Utilities Used in Production
- Georgia Department of Revenue: ST-5M Addendum for Metered Energy
- Florida Department of Revenue: Sales Tax Incentives Related to Energy
- Ohio Administrative Code: Manufacturing Sales and Use Tax
See if You Qualify Today
Frequently Asked Questions
A study commonly evaluates electricity and natural gas. Depending on state law, it may also address steam, refrigeration, water, boiler fuels, or other energy sources used in production.
There is no universal update schedule. Businesses should revisit the study periodically and whenever equipment, meters, production processes, facility size, ownership, or operating hours materially change.
Yes. A study may document the exempt portion of utilities for prior periods. The available refund period, required forms, certification standards, and filing process depend on the state.