Georgia has a number of tax exemptions that could potentially apply to solar and other electric power generation projects. One that can really impact project economics is Georgia’s tangible personal property tax exemption for manufacturers. Whether or not that exemption applies to power projects, including solar and wind projects, is a tricky question – there is no clear line for power project eligibility. As of about a year ago, Georgia stopped giving advance approval (or denial) of eligibility for the exemption. And Georgia does not give written opinions regarding eligibility.
That said, the good news is that most likely, everything purchased for a power project associated with generation (probably up to but not including interconnection equipment) could be eligible for the exemption if the formula outlined below is followed.
Generating electricity is considered a manufacturing activity for the purposes of the manufacturing tangible personal property tax exemption in the Georgia Code when the electricity generation is conducted by a manufacturer. So to take advantage of the exemption, a power generation project must be placed in a legal entity that qualifies as a manufacturer as defined by the Georgia Code. A single-member LLC using an appropriate North American Industry Classification Systems code for manufacturing – one that begins with 21, 31, 32, or 33 or North American Industrial Classification Systems code 22111 or specific code 511110 – is such a legal entity.
To take advantage of the exemption, a business downloads and completes Form ST-5M Certificate of Exemption for Manufacturer from the Department of Revenue website and provides that to the vendor, who keeps it to show why no sales tax accrued.
It’s unclear how closely Georgia will track the use of the exemption, so taking advantage of the exemption is a bit of a lottery at this point. As a result, someone would likely have to provide an indemnity to investors. While anecdotally, no electricity generation projects that have taken advantage of the exemption have been challenged, we recommend that you hire local tax counsel if you decide to take advantage of the exemption.
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