7-i 

### CHAPTER 7. MARKUPS ANALYSIS

TABLE OF CONTENTS

7.1 INTRODUCTION .............................................................................................................. 7-1

7.1.1 Baseline Markups

................................ ................................ ................................. 7-3

7.1.2 Incremental Markups ........................................................................................... 7-4

7.1.3 Overall Markups .................................................................................................. 7-5

7.2 ES TIMATION OF OEM, WHO LESALER, CONTRACTOR, AND SALES TAX

MARKUPS ......................................................................................................................... 7-5

7.2.1 Financial Information Sources ............................................................................. 7-5

7.2.2 Weighted Markups ............................................................................................. 7-10

7.2.3 Sales Tax ............................................................................................................ 7-11

REFERENCES .......................................................................................................................... 7-13

LIST OF TABLES

Table 7.2.1 Gross Profit Margins for Fixture OEMs * 

### .................................................................. 7-7 Table 7.2.2 Gross Profit Margins for Electrical Wholesalers * 

### ..................................................... 7-7 Table 7.2.3 Gross Profit Margins for Home Improvement Retailers * 

### ......................................... 7-8

Table 7.2.4 Calculated OEM Baseline Markups for Fluorescent Lamp Ballasts ........................ 7-8 Table 7.2.5 Calculated Electrical Wholesaler Baseline Markups for Fluoresc ent Lamp

Ballasts ............................................................................................................................. 7-8 Table 7.2.6 Calculated Home Improvement Retailer Baseline Markups for Fluorescent Lamp Ballasts

................................ ................................ ................................................... 7-8 Table 7.2.7 Calculated OEM Incremental Markups for Fluorescent Lamp Ballasts * 

### ................. 7-9 Table 7.2.8 Calculated Electrical Wholesaler Incremental Markups for Fluorescent Lamp

Ballasts *



### ................................ ................................ .......................................................... 7-10 Table 7.2.9 Calculated Home Improvement Retailer Incremental Markups for Fluorescent Lamp Ballasts * 

### ............................................................................................................... 7-10 Table 7.2.10 Weighted Total Baseline and Incremental Markups for Fluorescent Lamp

Ballasts ........................................................................................................................... 7-11

Table 7.2.11 State and Local Sales Tax Rates ........................................................................... 7-11

LIST OF FI GURES

Figure 7.1.1 Distribution Channels for Commercial and Industrial Ballasts ............................... 7-27-1 

### CHAPTER 7. MARKUPS ANALYSIS

7.1 INTRODUCTION

This chapter describes the methodology the U.S. Department of Energy (DOE) followed in developing end- user prices and sales tax in its analyses for the fluorescent lamp ballasts notice of proposed rulemaking (NOPR). In this rulemaking , DOE performed teardown analyses and a manufacturer markup analysis to develop manufacturer selling prices (MSPs) for representative ballast designs ( NOPR technical support document [ TSD ] c hapter 5). DOE then applied distribution channel markups and sales tax to derive end- user prices. By combining the engineering analysis results and the distribution channel markups analysis , DOE derived typical inputs for use in the life- cycle cost (LCC) analysis and the national impact analysis (NIA). In particular, DOE developed end

- user prices for ballast designs associated with evaluated efficiency level s.

The end

- user equipment price depends on how the end

- user purchases the equipment. For commercial and industrial ballast designs, two types of distribution channels describe how most ballasts pass from the manufacturer to the end user. The first distribution channel applies to

b allasts installed in fixtures . In this distribution channel, the manufacturer sells the ballast to an original equipment manufacturer (OEM)— in this case, the fixture manufacturer —who in turn

sells it to an electrical wholesaler ( i.e. , distributor)

, who sells it to a contractor, who passes it on

to the end user. The second distribution channel applies to ballasts not installed in fixture s ( e.g. , replacement ballasts). In this distribution channel, the manufacturer sells the ballast to an electrical wholesaler

, who sells it to a contractor, who passes it on to the end user. Figure 7.1.1

illustrates the two main distribution channels for commercial and industrial ballasts. For residential ballast designs, DOE assumed that the manufacturer sells the ballast to an OEM who in turn sells it in a fixture to a home improveme nt retailer, where it is purchased by the end user.7-2 

### Figure 7.1.1 Distribution Channels for Commercial and Industrial Ballasts

For commercial and industrial ballast designs, DOE assumed b all asts in fixtures represent

63 percent of the market and replacement ballasts represent 37 percent. These percentages are from the F luorescent B allasts E nergy Conservation Standards Final Rule published on September 19, 2000 (hereafter “ the 2000 Ballast Rule ”). 65 FR 56740. DOE could not obtain retailer sales data detailing the breakdown between residential fixture ballasts and replacement

ballasts , and therefore assumed that ballasts in fixtures represented 100 percent of the residential

market

.

To meet new or amen ded energy conservation standards, manufacturers often introduce design changes to their product lines that result in increased production costs and MSPs. DOE

assumed that some or all of the increased production costs can be passed through the distribution

channels and eventually to end users in the form of higher sales prices.

At each point in the distribution ch annel , companies apply “markup” to the MSP to cover their business costs and profit margin. DOE models this markup as a multiplier. In financial

statements, gross profit is the difference between the company revenue and the company cost of sales. It includes all corporate overhead costs (sales, general, and administration), materials and labor costs, research and development and interest expenses

, depreciation and taxes , and profits. For sales of a product to contribute positively to company cash flow, the product’s markup must be greater than the sum of cost of sales and business costs for that product. DOE calculated the

end

- user sales price b y mu ltiplying the MSP by the various markups and applying sales tax

.

The end -user prices and installation costs are key inputs to the LCC analysis, payback period ( PBP ) analysis, and the NIA. Using the distribution channel markups and installation costs, DOE calculated the initial costs that customers would face under the various efficiency

levels evaluated. DOE evaluate d the tradeoff between the increase in first cost and the resulting BALLAST MANUFACTURER

OEM FIXTURE

MANUFACTURER

ELECTRICAL WHOLESALER

CONTRACTOR

END-USER OF LIGHTING SYSTEM FIXTURE

BALLASTS REPLACEMENT

BALLASTS7-3 

### energy cost savings at each efficiency level in the LCC and PBP analyses ( NOPR TSD c hapter 8) and NIA analysis ( NOPR TSD c hapter 11 ).

The following equation describes how DOE determined the equipment prices for commercial and industrial ballast designs installed in fixtures :

) ( TAX CONT WHOLE OEM MFR END 

### MU MU MU MUPP ×× ××= 

### Eq. 7.1

W here:

END 

### P = equipment price to the end user ($)

,

MFR 

### P 

### = MSP of baseline or standard

- level equipment ($),

OEM 

### MU = OEM markup,

WHOLE 

### MU = wholesaler markup,

CONT 

### MU = contractor markup, and

TAX 

### MU = sales tax markup.

For replacement ballast s , the equation is the same as above except that the OEM markup ( OEM



### MU ) is omitted. For residential ball ast designs, DOE substituted a home improvement retailer markup ( RETAILER 

### MU ) for the wholesaler markup, and eliminated the contractor markup (to reflect the end user’s direct purchase).

For each party involved in the distribution of the equipment, the markups presented above are further differentiated between a “baseline markup ” and an “incremental markup

, ” as described below. A third type of markup, the “overall markup,” describes the product of all t he markups within a distribution channel.

7.1.1 Baseline Markups

Baseline markups are defined as coefficients that relate the manufacturer price of baseline ballast designs to the OEM, wholesaler, or contractor baseline sales price, as shown in the following equations:

) (

_ _ _ BASE OEM BASE MFR BASE OEM 

### MU P P × = 

### Eq. 7.2

) (

_ _ _ BASE WHOLE BASE OEM BASE WHOLE 

### MU P P × = 

### Eq. 7.3

) (

_ _ _ BASE CONT BASE WHOLE BASE CONT 

### MU P P × = 

### Eq. 7.4

) (

_ _ TAX BASE CONT BASE END 

### MU P P × = 

### Eq. 7.5

W here:

BASE OEM 

### P

_ 

### = OEM selling price of baseline equipment ($),

BASE MFR 

### P

_ 

### = MSP of baseline equipment ($),

BASE OEM 

### MU

_ 

### = OEM markup for baseline equipment,7-4 BASE WHOLE 

### P

_ 

### = wholesaler selling price of baseline equipment ($),

BASE WHOLE 

### MU

_ 

### = wholesaler markup for baseline equipment,

BASE CONT 

### P

_ 

### = contractor selling price of baseline equipment ($),

BASE CONT 

### MU

_ 

### = contractor markup for baseline equipment,

BASE END 

### P

_ 

### = end -user purchase price for baseline equipment ($), and

TAX 

### MU = sales tax markup.

For residential fixture ballast designs, the equations ar e same as above except that the wholesaler is replaced with a home improvement retailer and the retailer baseline selling price is determined by applying the retailer baseline markup to the MSP for the OEM fixture. Because the contractor is omitted, the en d- user baseline price is determined by applying sales tax to the retailer baseline selling price:

) (

_ _ _ BASE RETAILER BASE OEM BASE RETAILER 

### MU P P × = 

### Eq. 7.6

) (

_ _ TAX BASE RETAILER BASE END 

### MU P P × = 

### Eq. 7.7

For replacement ballast s (commercial and industrial only) , the equations are the same as above except that the OEM ( ) (

_ _ _ BASE OEM BASE MFR BASE OEM 

### MU P P × = 

### ) is omitted and the
wholesaler baseline selling price is determined by applying the wholesaler baseline markup to

the MSP for baseline products:

) (

_ _ _ BASE WHOLE BASE MFR BASE WHOLE 

### MU P P × = 

### Eq. 7.8

7.1.2 Incremental Markups

Incremental markups are defined as coefficients that relate changes in the manufacturer price of higher efficiency equipment to change the OEM, wholesale

, or contractor sales price, as shown in the following equations:

) (

_ _ _ INCR OEM INCR MFR INCR OEM 

### MU P P × = 

### Eq. 7.9

) (

_ _ _ INCR WHOLE INCR OEM INCR WHOLE 

### MU P P × = 

### Eq. 7.10

) (

_ _ _ INCR CONT INCR WHOLE INCR CONT 

### MU P P × = 

### Eq. 7.11

) (

_ _ TAX INCR WHOLE INCR END 

### MU P P × = 

### Eq. 7.12

W here:

INCR OEM 

### P

_ 

### = incremental OEM price for equipment with increased efficiency ($),

INCR MFR 

### P

_ 

### = incremental manufacturer price for equipment with increased efficiency ($)

,

INCR OEM 

### MU

_ 

### = incremental OEM markup for equipment with increased efficiency,

INCR WHOLE 

### P

_ 

### = incremental wholesaler price for equipment with increased efficiency ($),7-5 INCR WHOLE 

### MU

_ 

### = incremental wholesaler markup for equipment with increased

effic iency,

INCR CONT 

### P

_ 

### = incremental contractor price for equipment with increased efficiency ($),

INCR CONT 

### MU

_ 

### = incremental contractor markup for equipment with increased efficiency,

INCR END 

### P

_ 

### = incremental end

- user price for baseline equipment ($), and

TAX 

### MU = sales tax markup.

For residential fixture ballast designs, the equations are same as above except that the wholesaler is replaced with a home improvement retailer and the incremental retailer selli ng price is determined by applying the retailer incremental markup to the incremental MSP for the OEM fixture. Because the contractor is omitted, the end- user baseline price is determined by applying sales tax to the incremental retailer selling price:

) (

_ _ _ INCR RETAILER INCR OEM INCR RETAILER 

### MU P P × = 

### Eq. 7.13

) (

_ _ TAX INCR RETAILER INCR END 

### MU P P × = 

### Eq. 7.14

For replacement ballast s , the equations are the same as above except that incremental

OEM ( ) (

_ _ _ INCR OEM INCR MFR INCR OEM 

### MU P P × = 

### ) is omitted and the incremental wholesaler price is
determined by applying the incremental wholesaler markup to the incremental manufacturer price for equipment with increased efficiency :

) (

_ _ _ INCR WHOLE INCR MFR INCR WHOLE 

### MU P P × = 

### Eq. 7.15

7.1.3 Overall Markups

Overall markups, including both overall baseline and overall incremental markups, relate the manufacturer price to the final customer price ( END 

### P ) as indicated by the following equation:

) (

_ _ INCR END BASE END END 

### P PP + = 

### Eq. 7.16

7.2 ESTIMATION OF OEM, WHOLESALE R, CONTRACTOR

, AND SALES TAX

MARKUPS

7.2.1 Financial Information Sources

Publicly owned companies are required by law to disclose financial information on a regular basis by filing different forms with the U.S. Securities and Exchange Commission (SEC).

F iled annually, the SEC form 10- K provides a comprehensive overview of the company’s

business and financial conditions. Relevant information in the 10-K reports includes the company’s revenues and direct and indirect costs. To generate markups for this rulemaking, DOE used 10-K reports from publicly owned lighting fixture manufacturers, electrical

wholesalers , and home improvement retailers.

Because SEC financial data represents overall company conditions and is not productspecific, DOE investigated how markups derived from 10-K reports compared to actual product7-6 

### markups. With assistance from the National Electrical Manufacturers Association ( NEMA ),

DOE attempted to contact several representative fixture OEMs regarding markups for fixture

ballasts , but did not receive feedback in time for publication of the proposed rule. DOE

coordinated with the National Association of Electrical Distributors (NAED) in contacting two representative electrical wholesalers, who confirmed that DOE’s calculated markups were consistent with their actual ballast markups. 1



### , 2 

### To validate its retail markups for residential ballasts, DOE contacted The Home Depot and Lo we’s, 3

, 4 

### but both organizations declined to comment, citing competition concerns. Based on this research and absent other data sources, DOE used SEC form 10-K data in developing markups for the proposed rule.

The financial figures necessary for calculatin g the company markup are net sales, costs of sales, and gross profit. The income statement section of the 10- K reports often lists these figures. DOE used averages of the financial figures spanning 2005 to 2009 to calculate the markups.

DOE used the follo wing equations to calculate the gross profit and gross profit margins:

Gross Profit ($) = Net Sales

– Cost of Sales Eq. 7.17

Gross Prof it Margin Gross Prof it

Net Sales = 

### Eq. 7.18

To calculate the time

- average gross profit margin for each company , DOE first summed the gross profit for all the years and then divided the result by the sum of the net sales for the

same years. DOE then used the gross p rofit margins to calculate baseline markups on existing equipment ( i.e. , prior to efficiency changes resulting from enactment of proposed efficiency standards). Each company ’s baseline markup was calculated as:

Sales ofCost

SalesNet

) Margin Profit Gross1( 1 Markup Baseline
=

− = Eq. 7.19

Table 7.2.1

, Table 7.2.2 , and Table 7.2.3 contain the calculated gross profit margins for a sample of fixture OEMs, electrical wholesalers , and home improvement retailers , respectively

.7-7 

### Table 7.2.1 Gross Profit Margin s for F ixture OEM s *

Company Financial Figure
$ Year

200 9 2008 2007 2006 2005

A Net Sales 1,657,404 2,026,644 1,964,781 1,841,039 2,172,854

Cost of Sales 1,022,308 1,210,849 1,220,466 1,188,202 1,324,311

Gross Profit 635,096 815,795 744,315 652,837 848,543

Gross Profit Margin ( % ) 38.3 40.3 37.9 35.5 39.1

Average Gross Profit Margin: 3 8.2 %

B Net Sales 5,069,600 6,521,300 5,903,100 5,184,600 4,730,400

Cost of Sales 3,483,800 4,396,700 3,970,000 3,521,500 3,243,800

Gross Profit 1,585,800 2,124,600 1,933,100 1,663,100 1,486,600

Gross Profit Margin ( % ) 31.3 32.6 32.7 32.1 31.4

Average Gross Profit Margin: 3 2 .0 %

C Net Sales 2,355,600 2,704,400 2,533,900 2,414,300 2,104,900

Cost of Sales 1,629,700 1,901,000 1,798,100 1,757,500 1,509,900

Gross Profit 725,900 803,400 735,800 656,800 595,000

Gross Profit Margin ( % ) 30.8 29.7 29.0 27.2 28.3

A verage Gross Profit Margin: 2 9.0 %

* Unless noted, all numbers are in thousands of dollars. This table includes 200 5 , 200 6

, 200 7 , 200 8 , and 200 9 SEC 10

- K reports.



### Table 7.2.2 Gross Profit Margin s for Electrical Wholesalers *

Company Financial Figure
$ Year

20 09 2008 2007 2006 2005

A Net Sales 4,377,882 5,400,154 5,258,301 5,009,143 4,288,043

Cost of Sales 3,522,932 4,354,935 4,225,983 4,047,692 3,477,009

Gross Profit 854,950 1,045,219 1,032,318 961,451 811,034

Gross Profit Margin ( % ) 19.5 19.4 19.6 19.2 18.9

Average Gross Profit Margin: 1 9 .3 %

B Net Sales 4,263,954 6,110,840 6,003,452 5,320,603 4,421,103

Cost of Sales 3,724,061 4,904,164 4,781,336 4,234,079 3,580,398

Gross Profit 539,893 1,206,676 1,222,116 1,086,524 840,705

Gross Profit Margin ( % ) 12.7 19.7 20.4 20.4 19.0

Average Gross Profit Margin: 1 8.4 %

* Unless noted, all numbers are in thousands of dollars. This table includes 200 5 , 200 6

, 200 7 , 200 8 , and 200 9 SEC 10

- K reports.7-8 

### Table 7.2.3 Gross Profit Margin s for Home Improvement Retailers *

Company Financial Figure
$ Year

20 09 2008 2007 2006 2005

A Net Sales 71,288,000 77,349,000 79,022,000 77,019,000 73,094,000

Cost of Sales 47,298,000 51,352,000 52,476,000 51,081,000 48,664,000

Gross Profit 23,990,000 25,997,000 26,546,000 25,938,000 24,430,000 Gross Profit Margin ( % ) 33.7 33.6 33.6 33.7 33.4 Average Gross Profit Margin: 33.6 %

B Net Sales 48,230,000 48,283,000 46,927,000 43,243,000 36,464,000

Cost of Sales 31,729,000 31,556,000 30,729,000 28,453,000 24,224,000

Gross Profit 16,501,000 16,727,000 16,198,000 14,790,000 12,240,000 Gross Profit Margin ( % ) 34.2 34.6 34.5 34.2 33.6 Average Gross Profit Margin: 34.2 %

* Unless noted, all numbers are in thousands of dollars. This table includes 200 5 , 200 6 , 200 7 , 200 8 , and 200 9

SEC 10

- K reports.



### The baseline markup covers non-production costs and profit. Table 7.2.4

, Table 7.2.5

, and Table 7.2.6 show the baseline markups using this method for OEM s, electrical wholesaler s, and home improvement retailers , respectively

.

Table 7.2.4 Calculated OEM Baseline Markups for Fluorescent Lamp Ballasts

Company Baseline Markup

OEM

– A 1.62

OEM

– B 1. 4 7

OEM

– C 1. 41 Average 1.5 0



### Table 7.2.5 Calculated Electrical Wholesaler Baseline Markups for Fluorescent Lamp

Ballasts

Company Baseline Markup

Wholesaler A 1.24

Wholesaler B 1.2 3 Average 1. 23



### T able 7.2.6 Calculated Home Improvement Retailer Baseline Markups for Fluorescent
Lamp Ballasts

Company Baseline Markup

Wholesaler A 1. 51

Wholesaler B 1. 52 Average 1. 51



### The incremental markup applied to higher- efficiency equipment is lower than the baseline markup because DOE assumes that expenses like labor and occupancy costs remain

fixed and need not be recovered in the markup. Profits and other operating costs are assumed to

be variable an d to scale with the MSP

.

The surveyed SEC 10

- K reports d id not typically separate labor and occupancy costs

from overall expenses, so DOE assume d that these fixed costs are encompassed by “Selling, Distribution, and Administrative Expenses ” ( the most common terminology observed in the surveyed reports). DOE assume d that “Operating Profit” (operating income) covers other7-9 

### operating costs and profit ( i.e.

, variable costs ). Each company ’s incremental markup was

calculated as:

     

+= Sales ofCost Profit Operating 1 Markup lIncrementa 

### Eq. 7.20

Table 7.2.7

, Table 7.2.8 , and Table 7.2.9 contain the calculated incremental markups for

the sample d fixture OEMs

, electrical wholesalers, and home improvement retailers, respectively

.

Table 7.2.7 Calculated OEM Incremental Markups for Fluorescent Lamp Ballasts *

Company Financial Figure
$ Year

200 9 2008 2007 2006 2005

A Cost of Sales 1,022,308 1,210,849 1,220,466 1,188,202 1,324,311 Operating Profit 153,753 261,060 222,423 152,119 106,745

Calculated

Incremental

Markup 1.15 1.22 1.18 1.13 1.08

Average Incremental Markup: 1.1 5

B Cost of Sales 3,483,800 4,396,700 3,970,000 3,521,500 3,243,800 Operating Profit 544,100 877,600 844,100 694,100 559,800

Calculated

Incremental

Markup 1.16 1.20 1.21 1.20 1.17

Average Incremental Markup: 1.1 9

C Cost of Sales 1,629,700 1,901,000 1,798,100 1,757,500 1,509,900 Operating Profit 294,700 346,000 299,400 233,900 226,800

Calculated

Incremental

Markup 1.18 1.18 1.17 1.13 1.15

Average Incremental Markup: 1.1 6

ALL Average Incremental Markup (All OEMs): 1.1 7

* Except for calculated incremental markup, all numbers are in thousands of dollars. This table includes 2005, 2006, 2007, 2008

, and 200 9 SEC 10

- K reports.7- 10 

### Table 7.2.8 Calculated Electrical Wholesaler Incremental Markups for Fluorescent Lamp

Ballasts *

Company Financial Figure
$ Year

2009 2008 2007 2006 2005

A Cost of Sales 3,522,932 4,354,935 4,225,983 4,047,692 3,477,009 Operating Profit 72,498 151,863 161,787 122,022 64,789

Calculated

Incremental

Markup 1.02 1.03 1.04 1.03 1.02

Average Incremental Markup: 1. 0 3

B Cost of Sales 3,724,061 4,904,164 4,781,336 4,234,079 3,580,398 Operating Profit 179,952 345,667 394,224 364,983 209,286

Calculated

Incremental

Markup 1.05 1.07 1.08 1.09 1.06

Average Incremental Markup: 1.0 7

ALL Average Incrementa l Markup (All Wholesalers): 1.05

* Except for calculated incremental markup, all numbers are in thousands of dollars. This

table includes 2005, 2006, 2007, 2008

, and 200 9 SEC 10

- K reports.



### Table 7.2.9 Calculated Home Improvement Retailer Incremental Markups for Fluorescent Lamp Ballasts *

Company Financial Figure
$ Year

2009 2008 2007 2006 2005

A Cost of Sales 47,298,000 51,352,000 52,476,000 51,081,000 48,664,000 Operating Profit 4,359,000 7,242,000 8,866,000 9,047,000 7,926,000

Calculated

Incremental

Markup 1.09 1.14 1.17 1.18 1.16

Average Incremental Markup: 1. 15

B Cost of Sales 31,729,000 31,556,000 30,729,000 28,453,000 24,224,000 Operating Profit 3,506,000 4,511,000 4,998,000 4,496,000 3,520,000

Calculated

Incremental

Markup 1.11 1.14 1.16 1.16 1.15

Average Incremental Markup: 1. 14

ALL Average Incrementa l Markup (All Wholesalers): 1. 15

* Except for calculated incremental markup, all numbers are in thousands of dollars. This

table includes 2005, 2006, 2007, 2008

, and 200 9 SEC 10

- K reports.



### 7.2.2 Weighted Markups

For commercial and industrial ballast designs, DOE adjusted the calculated average

b aseline and incremental markups to reflect estimated proportions of ballasts sold through the

OEM and wholesaler distribution channels. DOE used information from the 2000 Ballast Rule,

which estimates that ballasts sold to OEM fixture manufacturer s represent 63 percent of the

market while ballasts sold to electrical wholesaler s represent 37 percent of the market. DOE then multiplied by a contractor markup of 1.13 (obtained from the 2000 Ballast Rule) to the resulting weighted average baseline and incremental markups to develop total weighted markups. For residential ballast designs, DOE could not obtain retailer sales data detailing the breakdown7- 11 

### between residential fixture ballasts and replacement ballasts, and therefore assumed that ballasts

in fixt ures represented 100 percent of the residential market.The weighted total baseline and incremental markups are provided in Table 7.2.10

.

Table 7.2.10 Weighted Total Baseline and Incremental Markups for Fluorescent Lamp

Ballasts

Weighted Total Markups Ballast Design Baseline Incremental

Commercial/Industrial 1.83 1.30

Residential 2.27 1.3 4



### 7.2.3 Sales Tax

The sales tax represents s tate and local sales taxes applied to end

- user cost and is a multiplicative factor that increases the end

- user cost . DOE obtained information on s tate and local sales tax from the Sales Tax Clearinghouse ( Table 7.2.11 ). 5 

### These data represent weighted averages that include county and city rates. DOE then calculated population- weighted average

tax values for each census division and four larg e s tates. These values allowed DOE to correlate the sales tax distribution with the electricity price distribution ( NOPR TSD chapter 8) and the operating hour distribution ( NOPR TSD c hapter 6) that DOE uses in the LCC spreadsheet. DOE

also calculated a nat ional population- weighted average sales tax for use as a single -value input to the LCC, should users want single-average results. DOE also used this result in the NIA, where DOE did not use a distribution of inputs. 6



### Table 7.2.11 State and Local Sales Tax Rates

State Co mbined State

and Local Tax Rate

% State Co mbined State

and Local Tax Rate

% State Co mbined State

and Local Tax Rate

%

Alabama

Alaska

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

D .C.

Florida Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas 8.20

1. 40

8 .15

8.20

9. 15

6.40

6.00

0.00

6.00

6.70

6.9 0

4.40

6.0 5

8. 20

7.00

6. 85

8.05 Kentucky

Louisiana

Maine Maryland

Massachusetts Michigan

Minnesota Mississippi

Missouri

Montana

Nebraska

Nevada New Hampshire New Jersey

New Mexico

New York

North Carolina 6.00

8.7 5

5.00

6.00

6.25

6.00

7.20

7.00

7.35

0.00

6.00

7.85

0.00

6.95

6.55

8. 45

7.80 North Dakota

Ohio

Oklahoma Oregon Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont Virginia Washington West Virginia

Wisconsin Wyoming 5. 80

6. 80

8. 15

0.00

6.40

7.00

7.05

5.50

9.40

8.0 5

6. 70

6.05

5.00

8. 75

6.00

5.4 5

5.15



### Table 7.2.12 shows the distribution of sales tax rates that DOE developed for the LCC and PBP analyses. The distribution ranges from a minimum of 5.21 percent in the Pacific census

division to a maximum o f 9.15 percent in California with a weighted average value of

7.25 percent nationwide.7- 12 

### Table 7.2.12 Regional Average Tax Rates

Region or Large State Weighted

Sales Tax

% New England 5.55

Mid Atlantic 6. 62

East North Central 6. 88

West North Central 7.09

South Atlantic 6. 43

East South Central 7. 90

West South Central 8.4 1

Mountain 6. 81

Pacific 5.2 1

New York 8. 45

California 9. 15

Texas 8.05

Florida 6.70 U.S. Average 7. 257- 13 

### REFERENCES

1. Clark, J. 2010. Personal communication . International Electrical Supply Co., Dallas, TX. Telephone conversation with Robert Lingard, Pacific Northwest National Laboratory. August 4, 2010.

2. Brnik, M. 2010. Personal communication . Schaedler/YESCO, Harrisburg, PA. Telephone

conversation with Robert Lingard, Pacific Northwest National Laboratory. August 10, 2010.

3. Kleinhenz, M. 2010. Personal communication . Lowe’s Companies, Inc., Mooresville, NC.

Email to Robert Lingard, Pacific Northwest National Laboratory. August 30, 2010.

4. Fernandez, J. 2010. Personal communication . The Home Depot, Atlanta, GA. Email to Robert Lingard, Pacific Northwest National Laboratory. September 1, 2010.

5. The Sales Tax Clearinghouse. State A ggregate T ax R at es. 2010. (Last accessed July 20, 2010.) < http://thestc.com/STrates.stm >

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