Requirements for claiming the credit
A qualifying small business must have had gross income of less than $1,000,000 in the prior year and anticipate less than $1,000,000 in the current year. The business must also have 5 or fewer full-time employees and the energy product must be used only by the qualifying business.
As of January 1, 2019, the process for claiming a small business energy exemption will be changing. For 2019 and later years, small businesses will apply online for an exemption certificate rather than submitting Form ST-13 to their energy provider. See below for additional information.
The exemption process will now be automated and effective for 2 years
Instead of filling out Form ST-13 for each utility company, the business will complete the information for the exemption online through the Department of Revenue’s MassTaxConnect application to receive the Small Business Energy Exemption Certificate. The Certificate will be effective for two years, rather than one year as it had been.
Current exemptions are extended through March 31, 2019
All current exemptions have been automatically extended beyond December 31, 2018 to March 31, 2019. No action is necessary by the small business to extend the exemption. The new process will be available on MassTaxConnect beginning January 1, 2019. Filing on paper will not be possible.
Questions and answers for small businesses
The questions and answers below will be helpful as a quick reference for businesses. We also recommend reviewing the regulation for details on how to qualify for, request and revoke a small business energy exemption certificate.
Have the requirements for being considered a small business changed?
No. The requirements for being considered a small business remain the same, but the process for qualifying for an exemption is changing and, will now be automated through MassTaxConnect.
What is a qualifying small business for purposes of the energy exemption?
A qualifying small business must:
- Have had gross income of less than $1,000,000 in the prior year and anticipate less than $1,000,000 in current year
- Have five or fewer qualifying employees
- Use the energy purchased solely for itself and not for the benefit of others
- Consider affiliated businesses as one business for purposes of the exemption
Should I file a paper Form ST-13 for 2019 now?
No. Form ST-13 will not be used for purchases made in 2019 and later years. If you have a current exemption for 2018, your exemption certificate has automatically been extended through March 31, 2019. Be sure to register for your 2019/2020 exemption before your current exemption expires on March 31, 2019.
What if I do not request a small business energy exemption certificate by March 31, 2019?
If you have a current exemption for 2018, but you do not register with the Department and obtain an exemption certificate by or before March 31, 2019, you will not qualify for the exemption until you register with the Department. You may register with the Department and obtain an exemption certificate at any time after March 31, 2019; however, you will only qualify for the exemption on purchases made on or after your date of registration with the Department.
How do I request a Small business Energy Exemption Certificate for 2019?
Beginning January 1, 2019, all eligible small businesses must register for the exemption online through MassTaxConnect. More information about setting up a new MassTaxConnect account will be added soon.
How do I obtain an exemption certificate if I’m a Schedule C filer who does not pay other taxes, such as withholding or sales, as a business?
If you have previously filed a Massachusetts income tax return, you should create a MassTaxConnect username and password as an individual and you will then be able to register for the small business energy exemption.
How long will the 2019 exemption certificate last?
If you register for an exemption in 2019, it will be good through December 31, 2020, provided there are no changes in the business that would affect eligibility during that time. The Department of Revenue will send a reminder to renew your exemption certificate before the end of 2020.
Will I need a separate certificate for each utility?
No. You will only need to register once for an exemption certificate regardless of the number of utilities you use. You will provide a copy of the exemption certificate, or the certificate number, to each of the utility companies you use for your business.
Will we receive separate certificates for each service address for our business?
Yes, although only one certificate number will be issued per business, if you provide multiple addresses, you will receive a separate certificate for each business service address to be shared with the utility vendor for that address.
What if my business no longer meets the qualifications for the exemption?
If you registered for the exemption but no longer qualify for it, you must revoke your registration through MassTaxConnect and notify all of your vendors to begin collecting sales tax. You are liable for any unpaid tax on purchases made during the time you did not qualify for the exemption.
Can the energy exemption certificate be transferred to or used for the benefit of another business?
No. Each small business energy exemption certificate is for a specific business. Each small business must request its own energy exemption certificate through the Department of Revenue. The energy product purchased with an energy exemption certificate must be used only by the qualifying small business.
Are there penalties for the misuse of the energy exemption certificate?
If a business presents an improper certificate, it will be responsible for the full liability of use tax on the purchase, along with applicable penalties and interest. Anyone who aids or assists in fraudulent activities related to obtaining a certificate for exemption will be subject to fines, imprisonment or both.
Are there any changes planned to other sales tax forms such as the ST-5, ST-11 or ST-12?
There are no plans to make any changes to any forms other than the ST-13 at this time.
Information for utility vendors
Verifying the validity of an exemption
A vendor must verify that a small business has a current energy exemption before granting the exemption.
A vendor may verify the exemption by:
- Retaining a copy of the DOR issued exemption certificate provided by the small business
- Using a lookup feature on MassTaxConnect to verify the validity of an exemption
- Using a web service feature to upload a file and verify multiple exemptions
More information about how to verify the validity of an exemption will be added soon.
Renewal of an exemption certificate
Before the expiration date of a small business energy exemption certificate, DOR will send a reminder notice to the qualifying small businesses. As with an original exemption certificate, the small business is required to notify the vendor of the renewal and the vendor must verify the validity of the exemption. If a certificate is renewed in a timely manner, the certificate number will remain the same. A vendor must begin collecting sales tax from any small business that fails to renew its exemption certificate.
Refund or credit if sales tax is collected during a period when the small business had a valid exemption certificate
The vendor may claim a credit on its next monthly sales tax return provided the vendor refunded the taxes collected to the business. Alternatively, the vendor may file an amended return and seek a refund from DOR. The credit/refund must be claimed within the statute of limitations.
Revocation of an exemption certificate
A business that no longer qualifies for an exemption certificate must revoke its registration and notify all of its vendors. Once notified, the vendor must begin collecting sales tax. The Department of Revenue may also notify the vendor if it revokes a business’s exemption certificate.
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