Section 24 Permit Exempting Energy Purchases

• Library: Tax Law 2009

Under § 144.030.2(12), RSMo Supp. 2007, and 12 C.S.R. § 10-110.600, electrical energy used in the primary manufacture, processing, compounding, mining, or producing of a product; secondary processing or fabricating of the product; or a material recovery processing plant, is exempt from tax if:

• the energy is used in facilities owned or leased by the taxpayer

• the total cost of electrical energy used exceeds 10% of the total cost of production, either primary or secondary, exclusive of the cost of the electrical energy; or

• the raw materials used in the processing contain at least 25% recovered materials

Purchases of electrical energy that meet these requirements are covered by an Electrical Energy Direct Pay permit.

To claim that a stage of production exists, a possible or potential marketable product must exist. Section 144.030.2(12) includes maintaining or preserving materials by the producer at the production facility. Therefore, someone who only provides cold storage does not qualify for the electrical energy exemption. See NF Props. Ltd. P’ship v. Dir. of Revenue, No. 96-001335 RV, 1997 WL 687385 (Mo. Admin. Hearing Comm’n, Oct. 29, 1997) (company leased cold storage space to manufacturers and manufactured the ammonia used in the refrigeration; an exemption was denied because refrigeration was not a marketable product).

When the § 144.030.2(12) exemption for electrical energy applies and how a taxpayer may claim it at the time the energy is purchased is explained in 12 C.S.R § 10-110.600. To implement this exemption, the purchaser must apply for and obtain a “direct pay permit.” This allows the purchaser to buy all of its electrical energy...