Arizona State Sales Tax Exemption - Phoenix Green Homes

Arizona provides a sales tax exemption* for the retail sale of solar energy devices and for installation of solar energy devices by contractors. The statutory definition of "solar energy device" includes wind electric generators and wind-powered water pumps in addition to daylighting, passive solar heating, active solar space heating, solar water heating, and photovoltaics. The sales tax exemption does not apply to batteries, controls, etc., that are not part of the system.
 
To take advantage of these exemptions from tax, a solar energy retailer or a solar energy contractor must register with the Arizona Department of Revenue prior to selling or installing solar energy devices.
 
The Arizona Department of Commerce Energy Office has compiled a guide to the solar energy devices that qualify for exemption under the statutory definition. It is possible to petition the Arizona Department of Commerce to add additional items if they qualify per the statutory definition.
 
According to the Arizona Solar Center's website, another provision of Arizona sales tax exemption may apply without value limit to the basic power generating part of the system (consisting of at least PV modules, structure, array wiring and controls; the limits have not been clearly defined).
 
Most cities have a 0.5 to 2% city privilege ("sales") tax that is applicable to sales or installations of solar energy devices, unless a city specifically exempts such sales under its city tax code. Solar energy retailers should check with the city in which the retail business is located to find out whether city privilege tax is applicable. Solar energy contractors should check with the city in which the installation will be performed to find out whether city privilege tax is applicable.