Eliminating electricity sales tax floated for consumer relief

By EPN Staff

In response to increasing costs of residential energy bills, the Wyoming legislature recently considered a first-of-its kind proposal to repeal sales tax on electricity sales.

Currently, 21 states offer utility sales tax exemptions for select industries and businesses, although no state with a sales tax currently exempts electricity sales from the levy.

Why it matters      

The proposal in Wyoming, which ultimately failed, would have made Wyoming the first to repeal the sales tax on electricity and represents a new front in the effort to provide consumers with relief from surging energy costs.

Eliminating energy taxes would have benefited individual households and commercial enterprises but would have cost municipalities and other local governments.

According to the bill’s fiscal note, the proposal would have:

• Saved Wyoming residents $43.4 million a year
• Cost the state’s general fund $22.1 million a year
• Reduced local government revenue by $21.3 million

Opponents testified the bill would devastate municipal budgets and services, including fire and police, while advocates pointed to a companion bill that sought to tax utilities and out-of-state customers to offset those financial losses.

The bigger picture

Wyoming sends more than half of the electricity it generates to other states, putting it among the top three states – behind Texas and Pennsylvania – for net energy supplies, according to the U.S. Energy Information Administration.

A separate proposal, House Bill 300, sought to offset the sales tax losses by levying taxes on electricity producers and their out-of-state users. While the arrangement raised legal concerns, and the proposal likewise failed, the bill sponsor said lawyers hired by the Electric Tax Subcommittee advised it could be done legally. 

Additional details

With abundant energy resources and a low population, Wyoming residents pay less per kilowatt hour than the national average. But residents are still grappling with a recent rate hike, which requires Wyoming Rocky Mountain Power customers to pay about $11.95 more each month. 

Rocky Mountain Power, the state’s largest electricity company, raised rates to make up for a deficit between the utility’s anticipated costs and its real costs. The agency had asked for a larger increase but backed down after public outcry.