Sales Tax Exemptions on Utilities in Pennsylvania

Last Updated on December 6, 2023

In the Commonwealth of Pennsylvania, businesses may be exempt from sales tax on utilities used for business purposes. Under Title 61, Chapter 32, a company may claim sales tax exemptions after purchasing steam, natural gas, manufactured gas and electricity. 

Sales tax in Pennsylvania starts at 6%, but may be higher given local sales tax. If your business qualifies for the utility tax exemption, sales tax can be recovered from the prior three-year period. In addition, an exemption certificate can be implemented to keep from paying sales tax on a go-forward basis.  

What Is a Utility Exemption Study?

Pennsylvania requires that qualifying businesses have a utility exemption study performed to assess apportionment between taxable and exempt utility usage. Your business may use utilities for multiple purposes, such as administrative, so this pertains only to the exempt portion. Utility exemption studies determine the percentage of a business’s utility expenses that may be exempt. A licensed engineer is required to perform the study in Pennsylvania. We encourage you to learn more about our utility exemption study services and tax recovery.   

What PA Businesses Qualify for the Utility Tax Exemption? 

Businesses in various industries may qualify for the utility tax exemption with the submission of a REV-1220 Exemption Certificate. Qualified industries for tax exemption include: 

• Manufacturing and processing
• Farming 
• Mining
• Public utility companies that purchase energy for resale
• Dairying 
• Printing
• Photofinishing
• IT Service Providers 

How to Apply for the Utility Exemption in Pennsylvania

Your business must follow these steps to receive the utility tax exemption in Pennsylvania: 

• Review Chapter 32 of Title 61 to determine whether your business qualifies for the exemption
• Complete a required utility exemption study that lists all equipment and devices that use each utility
• Submit a REV-1220 Sales Tax Exemption Certificate claiming exempt percentages

Contact TaxMatrix

TaxMatrix is a nationwide sales and use tax recovery and audit defense firm. For manufacturers, and other businesses that qualify, TaxMatrix can perform the necessary studies in any state and file for hard-dollar relief. For more information on utility tax exemptions and utility studies, please contact us online today.