Renewable Energy Sales and Use Tax Exemption

In Washington State, there are sales tax exemptions for the sale of equipment used to generate electricity, as well as for the sale of "hog fuel," defined as wood waste and other wood residuals including forest-derived biomass. It does not include firewood or wood pellets. Hog fuel must be used to produce electricity, steam, heat, or biofuel. Hog fuel is fully exempt from sales tax, though the buyer must provide the seller a completed sales tax exemption certificate and must complete an annual tax incentive survey. The exemption was originally set to expire June 30, 2024, but was extended to June 30, 2034 by H.B. 1018 (2023).

The sales of equipment used to generate electricity using fuel cells, wind, sun, biomass energy, tidal or wave energy, geothermal resources, or technology that converts otherwise lost energy from exhaust. The tax exemption applies to labor and services related to the installation of the equipment, as well as to the sale of equipment and machinery. Eligible systems are those with a generating capacity of at least 1 kilowatt (kW). Purchasers of the systems listed above may claim an exemption in the form of a remittance. Originally scheduled to expire on June 30, 2013, S.B. 5882 (2013) extended this incentive through January 1, 2020. S.B. 5116 (2019) further extended the incentive through January 1, 2030. S.B. 5116 (2019) also updated the incentive amount. Beginning January 1, 2020, through December 31, 2029, purchasers may be eligible for a remittance equal to 50 - 100% of the state and local tax paid. Beginning July 1, 2019, through December 31, 2029, the purchaser may be entitled to an exemption of up to 100%.

Solar energy systems 10 kW or less are eligible for a 100% exemption from sales and use tax. Purchasers of these systems can provide the seller with an exemption certificate to avoid paying the sales and use tax. S.B. 5882 (2013) expanded this incentive to include solar thermal systems capable of producing no more than 3 million British thermal units per day that use a solar collector or a solar hot water system. That same legislation extended the expiration date for this exemption to June 30, 2018.