Wisconsin Fuel and Electricity Exemption Replaces Manufacturers' Income Tax Credit

Effective January 1, 2006, Wisconsin Statute § 77.54 (30)(a)(6) provides that "fuel and electricity consumed in manufacturing tangible personal property" shall be exempt from sales and use tax. This exemption, enacted by 2003 legislation, replaces the existing manufacturers' income tax credit for sales and use tax paid on fuel and electricity.

The exemption is based on the actual percentage consumed in manufacturing, as determined by a reasonable method, such as a utility usage study. Documentation to support the method and evidence to prove that the method is reasonable is subject to review upon audit.

Often times the exempt percentage is underestimated and the manufacturer may benefit from an updated utility study to determine the highest percentage possible. All exemptions will require periodic updates to reflect operational changes such as increased or decreased equipment, shifts in energy consumption, expansions, changes in operating hours, etc.