Small business energy exemption

Administered by the Massachusetts DOR, qualifying small businesses may be exempt from paying taxes on energy. Small businesses apply online for an exemption certificate rather than submitting a Form ST-13 to their energy provider.

Updated: March 7, 2022

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.

Request or renew a certificate

• Log in to MassTaxConnect;
• Select “More” tab. 
• Select “Request or Update Small Business Energy Exemption.”
• Follow the prompts. 

Exemption certificates are effective for up to two years.  Prior to the expiration date, DOR will send a reminder to all small businesses with a current exemption.  Renewals will be done through MassTaxConnect during November and December in the year of expiration.  Renewed certificates will then be valid for the upcoming two years.

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:

1. 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  
2. Have five or fewer qualifying employees       
3. Use the energy purchased solely for itself and not for the benefit of others 
4. Consider affiliated businesses as one business for purposes of the exemption
    

If I have ownership in two or more businesses, do the requirements for gross income and qualifying employees apply to all of my businesses to determine if I qualify as a small business? 

Yes, all members of an affiliated business are deemed to be a single taxpayer for purposes of the business exemption.  The combined gross income and combined number of qualifying employees for all of your businesses must be considered to determine if you qualify as a small business.  For more information and the definitions of “affiliated businesses” and “small business” see DOR’s Qualifying Small Business Energy Exemption Regulation.
 

How do I request a Small Business Energy Exemption Certificate?

Log in to your MassTaxConnect account. Select the More hyperlink next to I Want To. On the following page, select the Request/Update Small Business Energy Exemption hyperlink. If you don’t have a MassTaxConnect account, see information below for how to create one.

Where can I find more information about how to use MassTaxConnect?

Go to MassTaxConnect where you’ll be able to log in, or create a username and password, or register your business.  You’ll also find Frequently Asked Questions and a link to video tutorials. 

How do I obtain an exemption certificate as a business if I’m a Schedule C filer who does not pay other taxes, such as withholding or sales tax?

If you have previously filed a personal Massachusetts income tax return, you should create a MassTaxConnect username and password as an individual taxpayer and you will then be able to register for the small business energy exemption. If you prefer to have your Federal Employer Identification Number [FEIN] associated with the Small Business Energy Exemption, instead of the last four digits of your social security number, please call the DOR contact center at [phone]. 
 

How do I obtain an exemption certificate if my business is a partnership, corporation, non-profit organization or trust but I have never used MassTaxConnect to file any tax returns or make payments?    

If your business has previously filed a Massachusetts tax return of any type, go to MassTaxConnect and select create my username. Follow the prompts for creating an online account for your business and you will then be able to register for the small business energy exemption.
 

How do I obtain an exemption certificate if my business has never filed a Massachusetts tax return?

If your business has a federal tax ID but has never filed taxes in Massachusetts, go to MassTaxConnect and select “register a new taxpayer.”  Follow the prompts and when asked to choose a tax account, choose Use Tax. Once you set up your MassTaxConnect account and register your business with DOR, you will be able to register for the small business energy exemption.

Can a third party, like an accountant or tax practitioner, register for the Small Business Energy Exemption on behalf of a client?

Yes. A third party with access rights to a client’s MassTaxConnect account for at least one tax type, may register for the exemption, or renew the exemption, on behalf of the client.  The certificate will be mailed to the client. Only the client will be able to obtain a copy of the exemption certificate or view the certificate through MassTaxConnect.

• Log in to MassTaxConnect.
• Access the client under All.
• Select More… . 
• Select “Request/Update Small Business Energy Exemption.”
• Follow the prompts. 

Can a property manager register for the Small Business Energy Exemption on behalf of the properties that he or she manages?

If the property manager is not a trustee (in the case of properties owned by a trust) or an officer of the entity that owns the property, the property manager can register on MassTaxConnect as a third party and then request access rights from each small business in order to file for the exemption on their behalf.
 

When will my exemption certificate expire? (Updated 3/7/2022)

Exemption certificates are valid for up to two calendar years from the date of issuance or renewal, provided there are no changes in the business that would affect eligibility during that time. The Department of Revenue will send a reminder message to your MassTaxConnect account to renew your exemption certificate on or about November 1^st of the year in which the certificate is set to expire. During the renewal period, you can renew your exemption through MassTaxConnect by logging in and selecting the “More” tab and choosing “Request or Update Small Business Energy Exemption” under “Other Actions” and following the prompts.

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 DOR. 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-2, 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:

1. Retaining a copy of the DOR issued exemption certificate provided by the small business
    
2. Using a verification lookup feature through MassTaxConnect. Vendors can use the certificate number provided by a customer, or the customer’s Federal Employer Identification Number. Vendors will receive a response from DOR that includes the certificate number, effective and expiration dates, the certificate status, and the address(es) associated with the certificate number. 
    
3. Using a web service feature to upload a file and verify multiple exemptions. To use this option, vendors will be required to provide an IP address in advance and will then be allowed access to a secure site.  For more information visit
   Using a web service call to verify a small business energy exemption.  

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. DOR may also notify the vendor if it revokes a business’s exemption certificate.  
 

Recordkeeping

A utility vendor must retain a:

• Copy of the SBEE certificate provided by the customer OR
• Record of the certificate number and associated effective and expiration dates for audit purposes.

In addition, the vendor must comply with DOR’s Record Retention Regulation and maintain records to support any credits claimed for tax collected and paid over to DOR before the vendor was aware that a customer had been granted an exemption. 
 

Vendor Annual Report

Vendors are required to provide DOR with an annual report of exempt sales to small businesses that qualify. The due date for the filing of an annual report is February 28 for the previous calendar year.      

There are two options for submitting the annual report.

Vendors can submit the report through MassTaxConnect:

• Log in to your MassTaxConnect account (or, if you don’t have an account, register for one by choosing “Create my username” and then log in).
• Choose Submit a Bulk File under the More… tab. 
• Choose Bulk SBEE. 

Follow instructions for attaching/submitting the Annual Report. You can find more information on the Annual Report electronic filing instructions/file specifications by reviewing this linked PDF file.

Or, vendors can choose the bulk file portal option. Instructions for bulk filing are available under “Guides and Handbooks” by selecting Bulk File Portal User Guide Changes for September 2019 to review the PDF.