LR 8258
Taxability of a Solar Energy System
July 31, 2023
Dear Applicant:
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated May 19, 2023.
The facts as presented in your letter ruling request are summarized as follows:
Applicant will be purchasing machinery, equipment, materials, and supplies related to the development of a utility scale solar farm in Missouri (the "Solar Energy System").
As part of the Solar Energy System, the specific equipment outlined below will be procured and integrated into the solar farm's manufacturing process for the production of saleable, high-voltage AC power required for the ultimate resale to consumers for their consumption. The individual components are listed below:
Solar Panels
Solar Panel Racking and Supports
Tracking System
Combiner Boxes
Inverters
Solar Collection Transformers
Electrical DC Wiring
AC Electrical wiring and data cabling
Supervisory Control and Data Acquisition ("SCADA") system control center
Project substation & Interconnection transformer
Site Fencing
Service and Access Roads
ISSUE 1:
Are Applicant's purchases of solar panels, solar panel racking and supports, combiner boxes, inverters, solar collection transformers, and project substation and interconnection transformers exempt from Missouri sales and use tax?
RESPONSE 1:
Yes. Applicant's purchases of solar panels, solar panel racking and supports, combiner boxes, inverters, solar collection transformers, and project substation and interconnection transformers are exempt from Missouri sales and use tax.
Section 144.020.1, RSMo, provides: "A tax is hereby levied and imposed...upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state."
However, section 144.030.2(46) provides:
(46) All purchases by a company of solar photovoltaic energy systems, components used to construct a solar photovoltaic energy system, and all purchases of materials and supplies used directly to construct or make improvements to such systems, provided that such systems:
(a) Are sold or leased to an end user; or
(b) Are used to produce, collect and transmit electricity for resale or retail.
Additionally, section 144.615.3, RSMo, exempts:
(3) Tangible personal property, the sale or other transfer of which, if made in this state, would be exempt from or not subject to the Missouri sales tax pursuant to the provisions of subsection 2 of section 144.030;
The main components of a solar photovoltaic system include modules/panels, the support structures of the panels, electrical equipment that transforms energy from direct current to alternating current, and the electric cables that carry the energy through the system.
Applicant's purchases of solar panels, solar panel racking and supports, combiner boxes, inverters, solar collection transformers, and project substation and interconnection transformers are part of the solar energy system, and are therefore exempt from sales tax pursuant to section 144.030.2(46), RSMo, and exempt from use tax pursuant to section 144.615.3, RSMo.
Issue 2:
Is Applicant's purchase of tracking systems and a SCADA system control center exempt from Missouri sales and use tax?
Response 2:
Yes, Applicant's purchase of tracking systems and a SCADA system control center is exempt from Missouri sales and use tax. Although not a part of the basic components of a photovoltaic system, the tracking and SCADA systems monitor the status of the system and contributes to improving efficiency. Section 144.030.2(46), RSMo, exempts "materials and supplies used directly to construct or improve such systems." The tracking and SCADA systems' purpose is to improve the photovoltaic energy system, therefore, the materials and supplies used to construct are exempt from sales and use tax.
Issue 3:
Are Applicant's purchases of electrical DC wiring, and AC electrical wiring and data cabling exempt from Missouri sales and use tax?
Response 3:
Yes, Applicant's purchases of electrical DC wiring and AC electrical wiring and data cabling are exempt from Missouri sales and use tax when they are moving the energy through the actual system because they are a part of the photovoltaic energy system. The wiring used after the system that takes the energy to the end user is not exempt, as it is not a part of the overall system.
Issue 4:
Is Applicant's purchase of site fencing and gravel access and service roads exempt from Missouri sales and use tax?
Response 4:
No, Applicant's purchase of site fencing and gravel access and service roads are not exempt from Missouri sales and use tax because they are not a part of the photovoltaic energy system.
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Legal Counsel J. Ross Shelton, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.
Sincerely,
Wayne Wallingford