Residential Solar Energy Systems Equipment

Tax Bulletin ST-776 (TB-ST-776)

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Issue Date: July 27, 2012

Introduction

The sale and installation of residential solar energy systems equipment is exempt from:

• the 4% New York State sales and use tax, and
• the 3/8% sales and use tax imposed in the Metropolitan Commuter Transportation District (MCTD).

Residential solar energy systems equipment may also be exempt from local sales tax, depending on the taxing jurisdiction. See Publication 718-S, Local Sales and Use Tax Rates on Sales and Installations of Residential Solar Energy Systems Equipment, for details.

This bulletin explains:

• what is residential solar energy systems equipment,
• how to claim the sales tax exemption, and
• how to treat solar energy systems equipment that does not qualify for the exemption.

Definitions

Residential solar energy systems equipment means an arrangement or combination of components installed in a residence that uses solar radiation to produce energy designed to provide heating, cooling, hot water, and/or electricity.

The term does not include equipment that is part of a non-solar energy system, such as pipes, controls, insulation, or other equipment that is part of a conventional gas, oil, or electric heating or cooling system. It also does not include equipment that uses any sort of recreational facility, such as a swimming pool or hot tub, as a storage medium.

The term residence means a dwelling, whether owned or rented, and includes:

• a single-family house;
• a multi-family building that consists exclusively of residential dwelling units; or
• a residential dwelling unit or units within such a multi-family building, including:
  • an apartment,
  • a cooperative apartment, or
  • a condominium unit.

How to claim the exemption

To claim this exemption, contractors purchasing qualifying residential solar energy systems equipment must give the seller a properly completed Form ST-120.1, Contractor Exempt Purchase Certificate.

Persons other than contractors, such as homeowners or landlords, who purchase residential solar energy systems equipment or the service of installing the equipment, must give the seller or contractor a properly completed Form ST-121, Exempt Use Certificate, marking box U (Other) on the form and describing the exempt use as “residential solar energy systems equipment exempt under section 1115(ee) of the Tax Law.”

Solar energy systems equipment that does not qualify for exemption

Solar energy systems equipment that is installed in a commercial property is not exempt from tax. The tax must be paid by the purchaser of the equipment (i.e., the contractor or the commercial property owner).

However, installations of permanent solar energy systems or additions to permanent solar energy systems may qualify as capital improvements (see Publication 862, Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property). Therefore, if a customer hires a contractor to make a commercial installation of solar energy systems equipment and gives the contractor a properly completed Form ST-124, Certificate of Capital Improvement, the charge for installation service will be exempt from tax (even though the purchase of the equipment itself is subject to tax).

Note: A Tax Bulletin is an informational document designed to provide general guidance in simplified language on a topic of interest to taxpayers. It is accurate as of the date issued. However, taxpayers should be aware that subsequent changes in the Tax Law or its interpretation may affect the accuracy of a Tax Bulletin. The information provided in this document does not cover every situation and is not intended to replace the law or change its meaning.