With this blog, we hope to keep you up to date on impactful changes in the sales tax compliance, especially in New York State. The All About Sales Tax blog is written by a team of Hodgson Russ tax attorneys and its primary author, Joe Endres. The blog will review legislative and administrative changes in the sales tax; we’ll discuss new sales tax case law; and highlight the enforcement initiatives and tactics we’re seeing while defending businesses in sales tax audits.

Local Sales Taxes on Solar-Generated Electricity

Despite these broad exemptions that generally apply to the 4% state and 3/8% Metropolitan Commuter Transportation District (MCTD) sales and use taxes, the sale of electricity from these solar systems are still subject to certain county, city, and school district sales taxes.  The New York State Department of Taxation and Finance recently published the local sales and use tax rates applicable to sales of electricity from such systems effective December 1, 2021 (See Publication 718-PPA). 

Note that there are 48 different rates based on location that could apply to sales of electricity generated by residential solar energy systems and sold under a written solar PPA.  By comparison, there are 93 different rates based on location that could apply to sales of electricity generated by commercial solar energy systems and sold under a written solar PPA (not including the 8 jurisdictions that have elected to provide the exemption by imposing a 0% rate).  Thus, significantly more local jurisdictions tax the sale of electricity from commercial systems than from residential systems. 

For a discussion of additional sales tax issues and potential benefits applicable to the renewable energy industry, click here

The possible imposition of sales tax raises several issues:  Does the operator need to register as a sales tax vendor?  Should the operator request, collect and save exemption certificates?  What are the other compliance requirements?

And it is worth noting that operators of solar energy systems might be considered “utilities” under local laws (e.g. NYC’s utility tax).  Under these laws, it is possible that the operator would be subject to a tax on gross receipts in addition to the sales tax that the operator is required to collect and remit from its non-exempt customers.

For more information, visit our State and Local Tax Practice or Renewable Energy Practice pages. 

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