Renewable Energy Sales and Use Tax Exemption

In Washington State, sales tax exemptions are available for equipment sales used in electricity generation and for “hog fuel” sales, which refers to wood waste and other wood residuals, excluding firewood and wood pellets. Hog fuel must be utilized for generating electricity, steam, heat, or biofuel. This fuel is completely exempt from sales tax, provided the purchaser submits a sales tax exemption certificate and completes an annual tax incentive survey. Initially set to expire on June 30, 2024, this exemption has been extended to June 30, 2034, as per H.B. 1018 (2023).

Equipment sales for electricity generation using various sources like fuel cells, wind, sun, biomass energy, tidal or wave energy, geothermal resources, or technology that harnesses energy from exhaust are also tax-exempt. This exemption includes the labor and services for installing such equipment and the sale of the equipment and machinery itself. Systems with a minimum generation capacity of 1 kilowatt (kW) are eligible. Buyers can claim an exemption as a remittance. Originally set to expire on June 30, 2013, the incentive was extended to January 1, 2020, by S.B. 5882 (2013), and further to January 1, 2030, by S.B. 5116 (2019), which also adjusted the incentive amount. From January 1, 2020, to December 31, 2029, buyers may qualify for a remittance ranging from 50 to 100% of the paid state and local taxes. Furthermore, from July 1, 2019, to December 31, 2029, buyers could be entitled to an exemption of up to 100%.

Solar energy systems of 10 kW or less are entitled to a full exemption from sales and use tax. Buyers of these systems should provide an exemption certificate to the seller to avoid these taxes. S.B. 5882 (2013) also extended this incentive to solar thermal systems that produce no more than 3 million British thermal units per day using a solar collector or solar hot water system. This legislation also moved the expiration date of this exemption to June 30, 2018.