Washington – Exemption for Renewable Energy Systems Extended

SALT Report 3016 – The Washington Department of Revenue issued a special notice regarding the sales and use tax exemption for purchases of renewable energy systems. The notice provides that the exemption and refund program for buyers of qualified renewable energy systems was extended during the 2013 legislative session.  In addition, the legislation amended the exemption to include thermal heat systems that use solar collectors or solar hot water systems.

Solar Systems10kW or Less

Under the provisions of RCW 82.08.963 and RCW 82.12.963 a 100% sales and use tax exemption is available for purchases of machinery and equipment used directly in a solar energy system that generates 10kW of electricity or less.  The exemption applies to state and local sales taxes as well as to any installation charges.

To document the exemption, the buyer must provide the seller or the installer, with a Buyer’s Retail Sales Tax Exemption Certificate with box 6a checked. The seller or installer should keep this form in their records for 5 years.

For sellers that e-file, the Department has added a deduction line called Sales of Solar Machinery/Equipment; Install Labor on the retail sales tax deduction page of E-file. Previously, sellers were required to list the exemption on the deduction line under “Other” and include an explanation.

This exemption has been extended until June 30, 2018.

Solar Systems Over 10kW

A 75% sales and use tax refund is available for solar energy systems capable of generating more than 10kW of electricity.  The regulations require that the buyer pay the total amount of tax due on its purchase of machinery, equipment, and installation and then apply to the Department for a refund.  All buyers who apply for a refund must complete and submit an annual tax incentive survey by April 30th, following the year in which the refund was claimed.

The refund program has been extended until December 31, 2019.

Qualified Renewable Energy Systems 1kW or More

A 75% refund of sales and use tax paid for machinery and equipment used directly in renewable energy systems that generate at least 1kW of electricity using a qualified power source is now available.  The regulation requires that buyers pay the total amount of sales tax due on its purchase of qualified machinery, equipment, and installation charges. The buyer may then apply to the Department for a refund so long as they complete and submit an annual tax incentive survey by April 30th.

This refund program has been extended until December 31, 2019.

Thermal Heat Systems

The exemption was expanded to include a 100% sales and use tax exemption for purchases of machinery and equipment used directly in the production of thermal heat using solar energy.  The exemption also applies to labor charges necessary to install the qualified equipment if the system will not produce more than 3 million BTU per day.

To document the exemption, the buyer must provide the seller or installer with a Buyer’s Retail Sales Tax Exemption Certificate with box 6b checked. The seller or installer must keep this form in its records for 5 years.  For those sellers that e-file, the Department has added a deduction line called Sales of Solar Machinery/Equipment; Install Labor on the retail sales tax deduction page of E-file.

This exemption was effective July 1, 2013 and will expire on June 30, 2018.

The special notice also discusses the procedures that must be followed when requesting a refund, how to file an annual tax incentive survey, and a list of qualified purchases.

For Further Information

Washington Department of Revenue – Special Notice