Utility Tax and Exemption Opportunities for Power & Utilities

Why utility tax is tricky

Utilities deal with multiple layers of tax and regulation:

• Sales & use tax on materials, equipment, and some services.​

• Utility‑specific exemptions and incentives that vary by state and sometimes by use.​

Large volumes of invoices, frequent projects, and many vendors mean that even small error rates can add up to meaningful overpayments.​

Common overpayment areas

Some of the most frequent opportunities include:

• Grid and substation projects – materials and equipment that may qualify for construction or utility‑specific exemptions but were fully taxed.​

• Generation assets – components and equipment used directly in power generation that fall under specific exemption provisions in some states.​

• Own‑use utilities – electricity, gas, and related services consumed in operations that may qualify for preferential treatment depending on use and jurisdiction.​

In many cases, tax is charged by vendors on a “safety first” basis, and internal teams do not have capacity to challenge or reclassify every transaction.​

What a utility‑focused tax review looks like

A focused tax and exemption review for power & utilities usually includes:​

• Mapping major capital and maintenance projects for the last several years.

• Sampling invoices from high‑spend vendors and categories to assess tax treatment.

• Comparing tax paid against state rules and utility‑specific exemptions.

• Quantifying potential refunds and preparing supporting documentation.

For some utilities, detailed “utility studies” or engineering‑supported analyses are used to substantiate positions.​

Why CFOs and regulatory teams should care

Tax and exemption optimization directly affects customer rates, regulatory filings, and return on capital.

• Reducing overpaid tax can improve financial performance and support more efficient rate structures.​

• Clear documentation strengthens positions in audits and rate proceedings, lowering controversy risk.​

• The review often highlights process changes that make future projects and vendor relationships more tax‑efficient.

For power and utilities companies, combining a structured tax and exemption review with broader contract and AP recovery work can unlock significant value and improve control over long‑term spend