Alternative Energy Sales Tax Exemption
Administered by Utah State Tax Commission
This exemption is aimed at large commercial, industrial, and utility projects rather than home systems, because the generating facility must have a minimum capacity of 2 megawatts. A typical household solar installation would not qualify, so contact the Utah State Tax Commission or your installer about other incentives for residential systems.
Customers building qualifying alternative energy facilities of at least 2 MW (or expansions adding at least 1 MW) can avoid Utah state sales tax on eligible equipment such as turbines, generating equipment, control and monitoring systems, power lines, and substation equipment. Purchases or leases must occur on or after July 1, 2004 and before June 30, 2027, leases must run at least seven years, and the facility must produce more energy than it needs to operate. Construction tools, contracted construction services, and post-operation maintenance equipment are not exempt.
This is a state sales tax exemption on the purchase or lease of equipment for facilities generating electricity from alternative resources, including wind, solar, biomass, geothermal, hydroelectric, waste energy, and certain fuel sources, with fuel cells also exempt since 2013. It applies to purchases made from July 1, 2004 through before June 30, 2027, requires facilities of at least 2 MW (or an expansion of at least 1 MW), and requires leases of at least seven years. It targets commercial, industrial, investor-owned, municipal, and cooperative utility developers and is funded through foregone sales tax revenue rather than a budgeted appropriation.
Program details
- Program ID
- 1070
- Effective
- 7/1/2004
- Expires
- 6/30/2027
- Last updated
- 3/23/2026
Eligibility
- Sectors
- commercial industrial investor-owned utility municipal utilities cooperative utilities
- Technologies
- geothermal electric solar thermal electric solar photovoltaics wind (all) biomass hydroelectric municipal solid waste fuel cells using non-renewable fuels wind (small) fuel cells using renewable fuels
Program summary
Utah exempts the purchase or lease of equipment used to generate electricity from alternative resources from the state sales tax. Eligible purchases or leases must be made for or by an alternative energy production facility on or after July 1, 2004, and before June 30, 2027. All leases must be made for at least seven years.
Eligible resources include wind, solar, biomass, geothermal, hydroelectricity, and energy that is derived from coal-to-liquids, nuclear fuel, oil-impregnated diatomaceous earth, oil sands, oil shale, petroleum coke, waste heat from an industrial facility, or waste heat from a power station in which an electric generator is driven through a process in which water is heated, turns into steam, and spins a steam turbine. Facilities must use alternative energy to produce electricity and must have a minimum capacity of 2 megawatts (MW). An existing facility that is expanded by one or more MW as a result of the machinery or equipment may also be eligible for the exemption.
Equipment used to generate electricity from waste energy is also eligible for this exemption. Waste energy is defined as using as the primary source of energy materials that would be placed in a landfill or refuse pit if it were not used to generate electricity. This includes tires, waste coal, oil shale, and municipal solid waste. The facility must generate an amount of energy greater than that required for the operation of the facility.
Equipment eligible for the exemption generally includes wind turbines, generating equipment, control and monitoring systems, power lines, substation equipment, lighting, fencing, pipes, and other equipment for locating power lines and poles. Equipment not eligible for the exemption includes tools and other equipment used in construction of a new facility, contracted services required for construction, and routine maintenance activities and equipment utilized or acquired after the project is operational.
As of 2013, sales of fuel cells are also exempt from taxation.
Contact & resources
- Contact email
- taxmaster@utah.gov
Please verify current program details with the administering agency before making any financial decisions.
