Sales Tax Exemption on Energy
The Georgia Chamber of Commerce supports exempting energy used in the manufacturing process from the state sales tax. Eliminating this burdensome tax will help existing manufacturing businesses survive, flourish and compete with other facilities around the nation by reducing the cost of goods manufactured in Georgia.
Introduction
- Georgia is the only state in the Southeast and one of only 10 states in the nation that imposes a sales tax on energy used by manufacturers. Tennessee, South Carolina, North Carolina and Alabama have all passed legislation to phase out this tax – giving our neighboring states a clear competitive advantage in attracting new manufacturing business while making Georgia vulnerable to losing manufacturers.
Background/Need
- Manufacturers are among the largest users of electricity and natural gas. High energy costs are repeatedly cited as significant obstacles to the manufacturing sector because they are often the single largest expense in the manufacturing process.
- Georgia is home to approximately 10,000 manufacturers that provide nearly 480,000 jobs and account for 11 % of the gross state product. Unfortunately, Georgia lost 21,757 manufacturing jobs between April 2009 and April 2010, roughly half the number of industrial jobs reported lost over the 2008-2009 survey period.
- Energy prices have skyrocketed in recent years, significantly impacting manufacturing costs and the ability of Georgia’s manufacturers to compete with other facilities in the Southeast and around the world. Exempting the sales tax on energy used in manufacturing will reduce operating costs and allow manufacturers to remain competitive by investing, expanding or improving their operations.
Legislative History
- The Special Council on Tax Reform and Fairness for Georgians recognized the importance of avoiding taxation of business inputs that result in the production of a product subject to sales tax.
- Energy used in manufacturing is a significant business input and that is why the Council recommended eliminating the state sales tax on this input.
