Sales Tax Credits and Deductions

Most state sales tax credits and exemptions are structured similarly, but may differ in scope. While some states allow the exemption only for solar equipment, others allow it for all solar, wind, and geothermal equipment. In addition, while some states exempt only the equipment itself, others, such as Iowa, also exempt the material used to construct or install such systems.

Arizona

Solar and Wind Equipment Sales Tax Exemption

This retail sales tax exemption applies to solar and wind energy equipment. Solar includes passive solar heating, active solar space heating, solar water heating, and photovoltaics. Qualifying wind systems include wind electric generators and wind-powered water pumps. This exemption is allowed on equipment up to $5,000.

See ARS 42-5061(N).

Massachusetts

State Sales Tax Exemption

State law exempts from the state sales tax (5%), the sale of equipment directly relating to any solar, wind, or heat pump system to be used as a primary or auxiliary power system for heating or otherwise supplying the energy needs of a person’s principal residence in the state. The exemption does not apply to commercial users.

See General Laws of Massachusetts c. 64H, sec. 6(dd).

Minnesota

Wind Sales Tax Exemption

Wind energy conversion systems used as an electric power source are exempt from sales tax, and the materials used to manufacture, install, construct, repair, or replace them are also exempt from sales tax.

See Minnesota Statutes § 297A.68, Subdivision 12.

Washington

Sales and Use Tax Exemption

This statute, which includes a sales and use tax exemption for solar, wind, and landfill gas electric generating facilities, was recently expanded to include fuel cells. In addition, the exemption now applies to smaller systems – those that have a generating capacity of at least 200 watts, instead of the previous requirement of at least 200kW.

See 2001 H.B. 1859; RCW § 82.08.02567 and § 82.12.02567.

Other Examples of Sales Tax Exemptions

Florida - Solar Energy Equipment Sales Tax Exemption

See Florida Statutes § 212.08 (7)(hh).

Iowa - Wind Energy Equipment Exemption

See Iowa Code § 422.45(48).

Nevada - Renewable Energy Sales Tax Exemption

See NRS § 374.307.

Ohio - Conversion Facilities Business Tax, Sales Tax, and Property Tax Exemption

See ORC Title LVII Taxation § 5709.45 through § 5709.53.

Rhode Island - Renewable Energy Sales Tax Credit

See RI General Laws § 44-56-1.

Vermont - Sales tax exemption for renewable energy systems

See 32 V.S.A. § 9741(46); 30 V.S.A. § 219a.