Taxing energy used in manufacturing

by Chuck Eaton

Georgians have made it clear that attracting and retaining jobs should be the No. 1 priority of every elected official. Late last fall, my colleagues on the Georgia Public Service Commission and I sent a letter asking the Georgia General Assembly to consider removing the sales tax manufacturers pay on energy, including electricity, used in the manufacturing process. Governor Nathan Deal supports this idea, as do Lt. Gov. Casey Cagle and Speaker David Ralston.

Manufacturing employs hundreds of thousands of skilled workers in Georgia. Like virtually every other state, Georgia does not tax raw materials used in manufacturing. Instead, one sales tax is applied to the finished product to avoid a pyramiding scenario where sales tax is paid on top of embedded sales tax. Georgia is one of only 10 states, and the only state in the Southeast, to charge full sales tax on energy.

This places Georgia at a competitive disadvantage when it comes to attracting new jobs and investment. The hidden cost of Georgia’s tax on energy also puts existing manufacturing jobs at risk by increasing production costs.

A large industrial plant’s electrical cost can rival payroll as its biggest expense, so the competitive effect of the sales tax is significant. While Georgia’s electric rates are competitive with other states, the added sales tax can change that dynamic.

As I travel the state and speak with manufacturers about how to help them grow their businesses and create and retain jobs, managers constantly mention our energy sales tax as a cost that makes them less competitive. The cost of energy, especially in manufacturing processes that require massive amounts, is a major factor as to whether Georgia retains our manufacturing plants.

We cannot continue to put good manufacturing jobs at risk over an outdated tax policy. Repealing the sales tax on energy used by manufacturers should be at the top of any list of economic growth and job creation measures considered by the General Assembly.

Commissioner Chuck Eaton of the Georgia Public Service Commission District 3 may be reached for comment at

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