100% of sales tax on eligible equipment
S.B. 1229 of 2012 extended this exemption to net metering transactions involving photovoltaics, and the sale of renewable energy credits (RECs). RECs are typically sold by a renewable energy generator to a utility for compliance with the state's Renewable Energy Standard. S.B. 1229 clarified that sales tax should not be applied to these transactions.
To take advantage of these tax exemptions, 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 (Arizona Form 6015, Solar Energy Devices – Application for Registration.) The exemption for solar energy retailers has no expiration date, but the exemption for solar energy contractors under Arizona's Prime Contracting Classification expires 12/31/2016.
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.
*Technically, the law allows retailers to deduct the amount received from the sale of solar energy devices from their transaction privilege tax base, and similarly, it allows prime contractors to deduct proceeds from a contract to provide and install a device from their transaction privilege tax base.