Sent via email

 

July 6, 2015

 

 

            Re:      Sales Tax Exemption for Solar Energy Equipment

 

Dear :

 

The Iowa Department of Revenue (“Department”) has received your email regarding the sales tax exemption for solar energy equipment. 

 

Questions and Analysis:

 

Iowa Code section 423.3(90) exempts from tax the sales price from the sale of solar energy equipment.  For purposes of this subsection, “ solar energy equipment” means equipment that is primarily used to collect and convert incident solar radiation into thermal, mechanical, or electrical energy or equipment that is primarily used to transform such converted solar energy to a storage point or to a point of use. 

 

You asked whether the solar energy equipment exemption (Iowa Code section 423.3(90)) applies to four separate items. 

 

1)      Repair or replacement parts for solar energy equipment.

 

Answer: 

Looking at the legislative history, as well as a fiscal note included in Senate File 2398, 81st G.A., 2d Sess. §1 (Iowa 2006), it is not likely that the legislature intended repair or replacement parts to be included in the exemption for solar energy equipment.  The fiscal note addresses the two primary types of solar energy systems and discusses the cost of an entire system. It does not mention any type of replacement or repair parts, only the installation of a whole new system, to be included as an exemption.  Therefore, repair or replacement parts for solar energy equipment are not exempt from taxation under Iowa law.

 

2)      Equipment used to meter or monitor a solar energy system.

 

Answer:   
This Iowa Code section only allows an exemption for equipment primarily used to collect and convert incident solar radiation into thermal, mechanical, or electrical energy or transform the converted solar energy to storage or use.  From the information you provided, equipment used to meter or monitor a solar energy system does neither of these things, and it is therefore not exempt.

 

3)      Switchgear used to connect a solar energy system to an electric grid.

 

Answer:   
The same analysis set out in section 2) applies to this section. From the information you provided, switchgear used to connect a solar energy system to an electric grid does not fit into either of the permitted uses, and it is therefore not exempt.

 

4)      Wire used to connect the different components of a solar energy system.

 

Answer: 

In order to determine whether wire qualifies for the exemption, it must be determined if wire is solar energy equipment under Iowa Code section 423.3(90).  If the wire is solar energy equipment that is primarily used to collect and convert incident solar radiation into thermal, mechanical, or electrical energy or equipment that is primarily used to transform such converted solar energy to a storage point or to a point of use, it is exempt from sales tax under Iowa Code section 423.3(90). 

 

Based on the facts you provided and the code sections above, the items in questions 1-3 are not exempt from sales tax.  It is not clear from the information you provided whether or not the wire used to connect different components of a solar energy system is exempt under Iowa Code section 423.3(90).  Remember, tax exemption statutes are strictly construed with all doubts resolved in favor of taxation.  Iowa Ag. Constr. Co. v. Iowa State Bd. of Tax Review, 723 N.W.2d 167, 174 (Iowa 2006).  The party claiming an exemption bears the burden of proving entitlement to the exemption. Id.

 

I hope this information has been helpful to you. Please remember that this letter is an informal opinion based only on the facts you provided and on the current law. In the future, the Department could take a position contrary to that stated in this letter. Any written advice or opinion rendered to members of the public by Department personnel that is not pursuant to a Petition for Declaratory Order under 701 IAC 7.24 is not binding upon the Department. If you have any additional questions regarding this matter please do not hesitate to contact me.

 

Sincerely,

 

 

 

Theresa A. Dvorak

Policy Section

Taxpayer Services and Policy Division

Iowa Department of Revenue

(515) 281-3194

theresa.dvorak@iowa.gov