Solar Sales Tax Exemption

New York enacted legislation in July 2005 exempting the sale and installation of residential solar-energy systems from the state’s sales and compensating use taxes. The exemption was extended to non-residential solar systems in August 2012 (S.B. 3203), effective beginning January 1, 2013. In 2015 (A.B. 3009) the exemption was extended to solar systems that are owned by third party owners, who provide solar electricity to residential and commercial users. Both solar lease payments and the receipts of the sale of electricity by such systems are exempt from state sales and use tax.  

For both residential and non-residential systems, the exemption applies to solar-energy systems that utilize solar radiation to produce energy designed to provide heating, cooling, hot water and/or electricity. It does not include equipment that is part of a “non-solar energy system”. For residential systems additional language prohibits the exemption from being claimed for a system that uses “any sort of recreational facility or equipment as a storage medium”.  This language is not replicated in the non-residential exemption, thus it would appear that a system used to heat a non-residential pool would qualify while one used to heat a residential pool would not. There is not an expiration date for this incentive.*

The law also permits local governments (municipalities and counties) to grant an exemption from local sales taxes. If a city with a population of 1 million or more chooses to grant the local exemption, it must enact a specific resolution that appears in the state law. The New York Department of Taxation and Finance publishes a variety of sales tax reports detailing local tax rates and exemptions, including those for solar energy equipment. The solar sales tax list (Publication 718-S) is updated several times per year. The New York Department of Taxation and Finance has issued a small amount of additional guidance and instructions on how to claim the residential exemption in Publication TSB-M-05(11)S. In December 2012 the department issued similar instructions on how the claim the commercial exemption in Publication TSB-M-12(14)S.  Effective December 2015, the department issued guidance PUB 718-PPA for claiming sales and use tax exemption for sales of electricity generated through solar systems and sold under a solar power purchase agreement (PPA). More information, including a list of jurisdictions that provide an exemption, can be found here.  A Sales Tax Exemption Certificate is required to claim sales and use tax exemption for solar energy related equipment and other purchases.   

Local Sales and Use Tax Rates on Sales and Installations of Commercial Solar Energy Systems Equipment – Effective March 1, 2018

Local Sales and Use Tax Rates on Sales of Electricity under Solar Power Purchase Agreements – Effective March 1, 2018

Local Sales and Use Tax Rates on Sales and Installations of Residential Solar Energy Systems Equipment – Effective March 1, 2018

*The New York Code contains duplicate sections NYCL Tax § 1115 (ee). The first pertains to the sales tax exemption for residential solar energy systems and contains no expiration date, while the second contains rules for an unrelated exemption with expiration dates of December 1, 2014, and December 1, 2016. This appears to be a mistake that will not affect the sales tax exemption for residential solar energy equipment.