The cannabis industry has been a trailblazer in many ways, from pioneering innovative cultivation techniques to pushing forward societal change.
Now, there's an opportunity for Cannabis licensees (cultivators and manufacturers along with future micro wholesale licensees) to potentially achieve substantial savings on their energy and utility bills in Missouri
It's important for cannabis companies to be aware of the opportunity for exemption from state and local tax on their utility bills, especially if they operate large-scale grow facilities.
How Can You Save?
To determine if your business is eligible for these savings:
- Review your utility bills. Does it include a charge for state and local sales tax? If yes, there's an opportunity waiting for you.
- Fill Out the Necessary Form. You'll need to fill out the Missouri Department of Revenue Form 149, specifically referencing Section 144.054, RSMo.
- Purchaser’s Manufacturing Percentage: This is typically 100%, representing the energy used in production for cultivation facilities.
- Purchaser’s Square Footage: Calculate the total facility square footage used for cultivation and/or manufacturing.
- Consult with Professionals. While the process may sound straightforward, it's always advisable to get input from an accountant or expert to ensure accuracy and maximize your savings.
Potential Savings: A Quick Glimpse
What can a Missouri cannabis cultivation or processing facility save with the utility exemption?
According to Jeff Kelley, an energy efficiency expert at Kelley Energy Management LLC, it can be a significant savings.
If sales or use tax is currently added to your utility bill, then the savings could be between 4.221% and 10%, depending on the local tax rate.
For example, a company spending around $100,000 a month on energy for growing, the exemption translates to approximately a savings of $4,221 per month at the state sales tax rate of 4.221%. Additionally, if local sales tax is also currently withheld, the monthly savings could be even more substantial. Over a year, this can amount to a savings upwards of $40,000 to $50,000+.
Can Missouri cannabis cultivation facilities get a refund on taxes already paid?
According to Sarah Bantz, Senior Accountant in Smith Patrick CPAs’ Cannabis Division, cannabis licensees can request a refund on taxes paid (effective January 2, 2023). She advises that cannabis operators get in touch with their local utility provider, which would then request the refund from the State of Missouri and then pass that refund to you.
“When you call the utility to understand where to send Form 149, ask the utility about a retroactive claim process,” Bantz said.
What Cannabis Facilities Qualify for the Utility Exemption?
This energy exemption applies to cultivation and processing facilities, but NOT for dispensary operators.
This utility tax exemption ties into the larger issue of how manufacturer’s sales and use tax exemptions apply to the cannabis industry in Missouri. In 2020, MoCannTrade, the Missouri Cannabis Trade Association, met with Missouri Department of Revenue (DOR) leadership to gain clarification on this issue.
At that time, the Missouri Department of Revenue clarified the industry’s eligibility. “There is no prohibition to a marijuana facility to qualify as a manufacturer due to their specific industry or category of product produced. Cannabis manufacturing facilities will have to follow the same procedures as any other business claiming a manufacturing exemption and it will be determined on a case-by-case basis, as it would be for any other business,” said DOR Senior Counsel Thom Houdek.
David Smith, president of Smith Patrick CPA, participated in the MoCannTrade discussions with the Missouri DOR. He points out that it’s beneficial for the industry that marijuana facilities are considered for the same tax benefits as any other manufacturer in Missouri.
For additional Missouri exemptions info, please refer to Section 144.030 RSMo which also highlights exemptions for electrical energy used in the actual primary manufacture, processing, compounding, mining or producing of a product, or electrical energy used in the actual secondary processing or fabricating of the product, or a material recovery processing plant as defined in subdivision (4) of this subsection, in facilities owned or leased by the taxpayer. Keep in mind, it is the facility or taxpayer’s responsibility to ensure it qualifies for these benefits.
Untapped Potential: Reducing Utility Bills in Cannabis Cultivation
Cannabis cultivation is an energy-intensive process. With the substantial amounts that companies are shelling out monthly on utility bills, even a small percentage of savings can translate to hefty annual figures. With a little effort and vigilance, companies can redirect these funds to other vital areas of their business.
The cannabis industry is burgeoning, and as businesses invest significant amounts into their operations, we want you to know that there are mechanisms available to optimize your overheads.
When it comes to energy and utility costs, there's an overlooked opportunity that can significantly impact the bottom line.
Lowering utility bills—especially energy exemptions—is a win-win for MoCannTrade members; it’s good for businesses and good for the community.
Want to Know More?
While his company primarily focuses on energy incentives, Jeff Kelley is willing to provide guidance on this specific opportunity. Likewise, David Smith has been involved in this issue from a tax perspective and helps cannabis companies with their accounting and financial health.
Supporting Documentation and Forms on Manufacturer’s Sales and Use Tax Exemptions
- Link to: Missouri Form 149 – Sales and Use Tax Exemption Certificate Form
- Link to: Section 144.030 RSMo – highlights exemptions for electrical energy used in manufacturing
- Link to: Mo Department of Revenue FAQs page
Missouri DOR also provided a direct contact number for their General Counsel's office should any facility or reseller have questions about the process or program eligibility: 573-751-0961.
Where to send Form 149 at Local Utilities
Contact the company who bills you to start the process.
Municipal utility directory: https://mpua.org/page/mec and click on "map of members".
Electric Co-op directory: https://www.amec.org/our-co-ops
Ameren (St. Louis area) – Email utility exemptions to the Ameren Tax Department at firstname.lastname@example.org.
Liberty Utilities (Missouri counties of Barry, Barton, Cedar, Christian, Dade, Dallas, Greene, Hickory, Jasper, Lawrence, McDonald, Newton, Polk, St. Clair, Stone and Taney)
Cuivre River Electric Cooperative, Inc. (Lincoln, Montgomery, Pike, St. Charles, and Warren counties)
Note: Always consult with your financial team or accountant before making significant changes to your business model or expenses.
About the Authors
Jeff Kelley aids businesses in optimizing energy consumption and securing significant rebates as the owner of Kelley Energy Management (KEM). Rooted in the utility sector, his expertise has uniquely positioned KEM to serve the indoor agriculture cultivation market. With prior roles in Ameren Missouri BizSavers and Laclede Gas Company (now Spire), Jeff has been instrumental in redefining energy efficiency and management across multiple states. In Missouri about half of cultivation licenses are in areas with rebate eligibility. KEM has Missouri customers with rebates paid and secured waiting for installation for 22 entities totaling about $15.5 million. KEM has expanded and now works in over 10 states with a holistic energy modeling approach to determine savings. KEM does not sell equipment or lighting and their detailed process differentiates them from manufacturers reps.
David Smith helps businesses and individuals develop smart business practices for tax and accounting advantages as the president of Smith Patrick CPAs. He is involved in the cannabis industry in Missouri through MoCannTrade and other organizations, helping cannabis operators with their tax and accounting needs. Smith Patrick CPAs is a boutique, St. Louis-based, CPA firm dedicated to providing personal guidance on taxes, investment advice and financial service to forward-thinking businesses and financially active individuals. For over 30 years, our firm has focused on providing excellent service to business owners and high-net worth families across the country. Investment Advisory Services are offered through Wealth Management, LLC, a Registered Investment Advisor.