The Virginia Tax Commissioner issued a ruling on the sales and use taxability of wind electric generating equipment constructed by a taxpayer and used to produce electricity for sale or resale.[1]
The facts provided in the ruling involved a contractor building an offshore wind farm that, once completed, would be sold to a utility provider. Under Virginia law, a contractor is deemed to have purchased construction materials for use or consumption. The law also provides that contractors may purchase machinery and tools to be used directly in industrial manufacturing or processing exempt from tax.
Given the Department’s longstanding policy that the production of electricity for sale or resale is a process entitled to the industrial manufacturing and processing exemption, it ruled that the exemption applied to certain purchases of tangible personal property used directly in manufacturing and processing.
Specifically, the Tax Commissioner ruled that the wind turbines, array cables, export cables, and foundations used by a contractor to construct an offshore wind farm qualify for the manufacturing exemption from retail sales and use tax.
As part of the ruling, the taxpayer requested a tax determination for its purchase of software to be installed on servers located at the onshore substation that would control the operation of the wind turbines. The ruling explained that the taxability of this software depends on whether its predominant use is for monitoring, which is taxable, or control, which is exempt. Thus, the software is completely exempt if the preponderance of its use is to control the turbines.
Consumers who wish to make exempt purchases must issue Form ST-11A. To obtain this certificate of exemption, an applicant should submit a written request to the Department on its business letterhead and provide the required information.
Conclusion
Contractors and utilities contemplating a wind energy project in Virginia may want to analyze the savings that could be obtained from applying for Form ST-11A, which allows the purchase of qualifying machinery and equipment exempt from Virginia sales tax.
[1] Va. Dep’t of Tax’n, Ruling of the Comm’r, No. PD 25-71, 06/02/25.
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