Sales and Use Tax Exemption for Renewable Energy Equipment
Colorado exempts renewable energy equipment—including solar panels, wind turbines, geothermal systems, and heat pumps—from state sales and use tax, reducing your upfront installation costs. The exemption applies to system components like inverters, wiring, and structural supports, though it covers state tax only (not local taxes in some jurisdictions). Check with your installer or local tax authority to confirm whether your specific equipment and location qualify.
You can offer customers meaningful savings on renewable energy installations by passing through the state sales tax exemption on eligible equipment and balance-of-system components; this exemption covers PV systems, solar thermal, wind, biomass, geothermal, and biogas systems. Ensure invoices properly segregate taxable items (labor, energy storage, remote monitoring) from exempt components, and verify local tax rules since incorporated municipalities may assess additional sales taxes even though the state exemption applies.
Colorado's sales tax exemption for renewable energy equipment has applied statewide to electricity-generating systems since July 1, 2006, with solar thermal systems covered from July 1, 2009 through July 1, 2017, and biogas systems from May 5, 2014 through July 1, 2019. The exemption targets all sectors (residential, commercial, industrial, agricultural, nonprofit, and government) and covers production-site components up to and including step-up transformers; funding mechanism is foregone state tax revenue. Local governments can independently choose to extend exemptions to their own sales taxes, creating variable incentive strength across jurisdictions.
Program details
- Program ID
- 3397
- Effective
- 7/1/2006
- Last updated
- 9/26/2025
Eligibility
- Sectors
- commercial industrial local government nonprofit residential state government retail supplier agricultural institutional
- Technologies
- geothermal electric solar photovoltaics wind (all) biomass geothermal heat pumps wind (small) anaerobic digestion heat pumps
Program summary
Colorado exempts from the state's sales and use tax all sales, storage, and use of components used in the production of alternating current electricity from a renewable energy source for fiscal years beginning on or after July 1, 2006. The exemption for systems which produce electricity from a renewable resource includes, but is not limited to, photovoltaic (PV) systems, solar thermal-electric systems, small wind systems, biomass systems, or geothermal systems.
Effective July 1, 2009, through July 1, 2017, all sales, storage, and use of components used in solar thermal systems are exempt from the state's sales and use tax. Effective May 5, 2014, through July 1, 2019, all sales, storage, and use of components used in biogas production systems are exempt from the state's sales and use tax (see H.B. 1159).
System Components Exempt from Taxation
Eligible components include, but are not limited to, wind turbine generators, rotors and blades, solar modules, trackers, supporting structures or racks, inverters, towers and foundations, plus balance of system components such as wiring, control systems, switchgears, and generator step-up transformers. Also exempt are concentrating solar power components that include, but are not limited to: mirrors, plumbing, and heat exchangers.
Ineligiblecomponents include any components beyond the step-up transformers located at the production site, labor, energy storage devices, or remote monitoring systems.
Local Option -- Sales and Use Tax ExemptionThe exemption only applies to state sales and use taxes – not to sales and use taxes assessed by incorporated towns, cities, and counties. However, Colorado has granted local jurisdictions the authority to exempt renewable energy equipment from sales and use taxes if a local government chooses to do so.
Contact & resources
- Additional resources
Please verify current program details with the administering agency before making any financial decisions.
