SALT Report 2181 – The Missouri Department of Revenue issued a letter ruling regarding the taxability of a solar hot water system that was purchased and installed in the Taxpayer’s home. The solar hot water system in this case is composed of three parts:
- Two large solar panels mounted on the roof,
- Copper and PVC piping that goes through the roof of the home into the attic and then installed in the walls of the home as the piping travels to the basement, and
- A hot water tank that heats the water
Once installed, the hot water heater and its component parts will be a permanent fixture in the Taxpayer’s home.
The contract between the parties does not specify when the title transfers from the Seller to the Taxpayer. Because of this, the Taxpayer requested guidance regarding how to determine when title passes and the subsequent application of sales and use tax.
The Department referred to 12 CSR 10-112.010(3)(A) which states that “title to property to be installed does not transfer until after installation is complete.” Thus, title to the hot water system and its component parts passed only after the components had lost their character as tangible personal property and where permanently affixed to the Taxpayer’s property.
Additionally, the Department determined that the Seller is making an improvement to real property rather than selling tangible personal property. Therefore, no tax is due on the sale to the Taxpayer; instead, the Seller is required to pay sales tax on its purchase of the items used in the real property improvement.
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