Energy Star Holiday
Frequently Asked Questions
1. Your Energy Star publication states "Texas shoppers get a break from state and local sales and use taxes..." Could you clarify who qualifies as a "Texas shopper"? For example, would a homebuilder qualify for the exemption if they buy large quantities?
"Texas shopper" refers to anyone in Texas buying these products on the stated weekend at a store in Texas or from an Internet or catalog seller engaged in business in this state. The term includes homebuilders, real estate developers, dealers, service providers and contractors. The purchased items may be held in inventory until ready for use. There is no limit on the number of qualifying items one can purchase during this sales tax holiday.
2. Do purchasers need to provide an exemption certificate or any other documentation to claim this exemption?
No, purchasers do not need to issue an exemption certificate or any other type of documentation to sellers to buy qualifying item tax free during the sales tax holiday period.
3. Can purchasers from outside of Texas make tax-free purchases of qualifying products during the sales tax holiday?
Yes, out-of-state purchasers may purchase qualifying items tax-free during the sales tax holiday.
Texas tax is not due on items sold for use outside Texas provided the seller ships or delivers the taxable items to an out-of-state location. The state in which the purchaser takes possession or makes use of the item may impose its sales or use taxes on the transaction.
4. I've noticed some Energy Star rated items I need are not on the list. Why?
The items eligible for the exemption during the Energy Star holiday is limited to only those items specifically listed in Tax Code Section 151.333. The Energy Star Sales Tax Holiday applies only to the following appliances and household equipment:
- air conditioners priced less than $6,000,
- ceiling fans,
- dehumidifiers,
- dishwashers,
- incandescent and fluorescent light bulbs,
- programmable thermostats,
- refrigerators priced less than $2,000 and
- clothes washers.
5. A lot of Texans may need a new water heater. Why were water heaters not added to the list? Also, it seems silly to exempt clothes washers but not clothes dryers.
The U.S. Department of Energy presently has not qualified water heaters for the Energy Star label. Also, the Energy Star designation is not applied to clothes dryers since there is little difference in the energy use between models. Combination clothes washer and dryer units will qualify for the exemption if the appliance is classified as a clothes washer by Energy Star and if the model number is listed on the Energy Star qualified clothes washer product list available online at: http://www.energystar.gov/index.cfm?fuseaction=clotheswash.display_products_html.
6. Are heat pumps considered air conditioners for the purpose of the upcoming Energy Star sales tax holiday?
No. Heat pumps and air conditioners are defined and listed separately in the information provided on the Energy Star Web site. Because Energy Star differentiates between the two types of equipment and the statute specifically states that the exemption applies only to the listed products, heat pumps do not qualify - even if they can be used to cool a home.
7. A central air conditioning system consists of several components. If I replace an air conditioner component in an existing system with a new Energy Star rated component, will that part qualify for the sales tax holiday exemption?
No. The exemption does not apply to individual air conditioning components. The exemption is for the purchase of air conditioning units priced at $6000 or less.
8. Can a wine refrigerator, kegerator or residential beverage chiller qualify for the sales tax holiday exemption?
No., Wine cooler refrigerators, beer coolers, kegerators, and other beverage coolers can not qualify for Energy Star designation and therefore cannot be purchased tax-free during the sales tax holiday. The Energy Star program only qualifies residential refrigeration products that are included in the Department of Energy's appliance efficiency standards program. Since wine cooler refrigerators, beer coolers, kegerators, and other beverage coolers do not meet the technical definitions for any of the 18 product types that are included in the standards program, they are not included in the Energy Star program.
9. Do freezers or stoves qualify for the exemption?
No. Freezers and stoves are not included in the statutory list of products eligible for the Energy Star sales tax holiday exemption.
10. Do attic fans qualify for the exemption?
No.The EPA does not label attic fans because they use more energy than alternative attic cooling methods such as passive ventilation. Therefore attic fans do not qualify for the exemption.
11. Do mini-fridges qualify for exemption from tax during the sales tax holiday?
Yes. Compact or mini-fridges priced less than $2000 and designated with the Energy Star logo may be purchased tax-free during the Memorial Day weekend sales tax holiday.
12. Does the Comptroller's office administer any programs that provide credits for energy efficient home improvement?
No. The Comptroller's office does not administer any programs that provide credits for energy efficient home improvement. We recommend that you contact local representatives in your area to see if there are any local energy savings programs in place. You may also find information about various products and programs through the Energy Star Web site at: http://www.energystar.gov/
13. Do qualifying items have to be bought and delivered to (or otherwise received by) purchasers during the sales tax holiday period in order to qualify for the exemption?
No. The exemption applies to all sales of qualifying products made during the sales tax holiday period. A sale is considered made during the sales tax holiday period if the items are both paid for and delivered to the purchaser during the exemption period; or if the purchaser orders and pays for the item and the retailer accepts the order during the exemption period for immediate shipment, even if delivery is made after the exemption period.
14. Do delivery or shipping and handling charges qualify for the exemption?
It depends. Transportation charges to deliver an item sold (i.e., delivery charges, shipping and handling, etc.) that are billed by the seller to the purchaser are part of the final selling price of products sold during the holiday, even if separately stated on the bill or invoice. Transportation charges billed by the seller to the purchaser are exempt if the item sold is exempt. For example, delivery charges billed by the seller of an Energy Star rated dehumidifier to the purchaser during the sales tax holiday are exempt because the delivery charges are part of the final selling price of the exempt item.
Transportation charges must be properly collected when a package or delivery contains both exempt and taxable items. For example, assume a retailer sells an Energy Star-rated clothes washer tax-free during the sales tax holiday. The same customer also purchases a clothes dryer, which does not qualify for the exemption. The retailer charges the customer a delivery fee of $25 per appliance. The $25 delivery fee for the qualifying clothes washer is exempt from sales tax, but the $25 delivery fee for clothes dryer is subject to tax because the dryer is taxable.
However, if the delivery charge is a flat rate per package or delivery address, and the amount charged is the same regardless of how many items are included in the package or delivery, for purposes of the exemption, the total charge may be attributed to one of the items in package rather than proportionately allocated between the items. For example, assume a seller charges a flat fee of $50 per customer address for delivery regardless of the number of items delivered to that address. Assume that during the sales tax holiday, a customer purchases a qualifying Energy Star-rated dishwasher tax-free, a taxable stove and a taxable microwave, and the seller charges the customer the flat fee of $50 for delivery of all three items. Under these facts, the seller may attribute the $50 charge for delivery to the sale of the dishwasher (a qualifying exempt item) and does not have to split the delivery charge between the dishwasher, stove and microwave. Because the charge may be attributed to the dishwasher, the entire flat fee delivery charge qualifies for the exemption. The sales invoice must clearly identify that the delivery charges were attributed to the exempt item and separately state the tax due on the non-qualifying merchandise.
It is important to note that delivery and/or installation charges billed in connection with the sale of air conditioners and refrigerators may disqualify some of those products from the exemption. During the Energy Star sales tax holiday, only air conditioners with a total price less than $6000 and refrigerators priced less than $2000 qualify for exemption from sales and use tax. The total sales price includes charges by the seller for delivery, and charges for installation performed by the seller if the items will remain tangible personal property (i.e., not built-in or permanently attached to the structure of the building). See Tax Code Section 151.007. The addition of these charges to the retail price of the appliance will cause the loss of the exemption if the total price exceeds the cap.
For example, the purchase of a refrigerator priced at $1899 plus a delivery charge of $100 will have a total sales price of $1999 and will qualify for the exemption. But, a refrigerator priced at $1999 with a delivery charge of $100 would not qualify for the exemption because the total sales price would be $2099 which exceeds the $2000 cap.
15. Are installation charges for free-standing or mobile items also exempt? For example, there are charges to set appliances in place and make the necessary connections for the clothes washers, refrigerators, portable dishwashers and window or room air conditioning units to work. Would these charges qualify for the Energy Star sales tax holiday exemption?
Provided an item retains its identity as tangible personal property after installation, the installation charges billed by the seller of the item also qualify for the sales tax holiday exemption - even if the installation is performed after the holiday period is concluded. For example, if an item is purchased on Saturday and the seller cannot install the item until the next week, the installation charges are still exempt because the charges were part of the sale made during the holiday. See answer to FAQ #13 above. A product will be considered tangible personal property if it is not permanently attached to land or the building structure such that its removal from the property would not cause substantial damage to the property or destroy the equipment's intended usefulness.
16. Are installation charges for items that will be permanently installed in real property such as ceiling fans, built-in refrigerators, programmable thermostats, dishwashers and central air conditioning units taxable?
It depends. The installation of an item will be considered an improvement to real property if it is essential to the integrity of the property by virtue of being embedded in or permanently affixed to the property. The items listed in the question are generally installed to become improvements to realty.
The taxability of installation charges constituting an improvement to realty is determined by several variables such as the type of contract, lump sum or separated, between the installer and the customer and whether the property is residential or nonresidential.
A lump-sum charge for installation of a qualifying Energy Star product such as a built-in refrigerator or central air conditioning unit under a contract for residential real property repair or remodeling, or during new construction of an improvement to realty is not subject to tax, even outside the Energy Star Holiday period. The contractor is considered the end-consumer of the product. This means that a contractor may buy qualifying products tax-free during the sales tax holiday that he will install under a lump sum contract as long as the total price paid (including delivery or shipping/handling billed by the seller to the contractor) for the product is less than any applicable cap. In this scenario the contractor is not liable for accruing any tax on the purchase of the Energy Star product. The total charge to the contractor's customer under the lump sum contract is not taxable.
A lump sum contract for nonresidential repair and remodeling on the other hand is taxable to the customer regardless of the price charged. As an example, when a service provider installs a new air conditioning unit in an existing office building he is performing nonresidential repair and remodeling, a taxable service. The total amount charged to the customer is taxable even if the total sales price for the new air conditioning unit is less than $6000 because the service provider is selling nonresidential real property repair and remodeling services.
A separately stated charge for installation that is performed during new construction of an improvement to realty or that constitutes real property repair and remodeling is not considered part of the sales price of the item. For example, an HVAC business sells an Energy Star designated central air conditioning unit for $4200 and charges $2000 for installation to a homeowner. Under a separated contract, the separately stated charge to the customer for the air conditioning unit is not taxable if the sale of the unit is made by the HVAC business to the customer during the sales tax holiday period. The sale is considered made during the sales tax holiday period if the item is both delivered to and paid for by the customer during the exemption period; or the customer orders and pays for the item and the retailer accepts the order during the exemption period for immediate shipment, even if delivery (and/or installation) is made after the sales tax holiday period ends.
Separately stated charges for installation that constitute nonresidential repair and remodeling are taxable regardless of when the installation occurs. Nonresidential real property repair and remodeling is a taxable service. See Comptroller Rule 3.357. But the separately stated charge for the appliance will not be subject to tax provided the sale of the appliance to the customer occurs during the sales tax holiday and, if applicable, the total sales price is below the cap.
17. Do all sellers located in the state of Texas have to participate in this event, the Energy Star Tax Holiday?
All sellers engaged in business in Texas that sell qualifying Energy Star products should comply with the new law.
Texas Tax Code Section 151.333(c) states: "The sale of an energy-efficient product to which this section applies is exempted from the taxes imposed by this chapter if the sale takes place during a period beginning at 12:01 a.m. on the Saturday preceding the last Monday in May (Memorial Day) and ending at 11:59 p.m. on the last Monday in May."
18. Do rentals and leases of qualifying equipment qualify for the Energy Star holiday exemption?
Rentals and leases of qualifying Energy Star products, including "rent to own" contracts, can qualify for exemption during the new Energy Star sales tax holiday. Under 151.005 the definition of "sale" includes the exchange, barter, lease, or rental of tangible personal property. Therefore, rental and lease contracts (for qualifying items) entered into during the sales tax holiday Memorial Day weekend will qualify for the exemption. The exemption will only apply to the specified rental or lease period designated by the contract. Extensions or renewals of contracts will not qualify unless they occur during another Energy Star sales tax holiday.
19. Can a purchaser receive a refund of sales and use taxes paid on purchases of qualifying Energy Star equipment that were made before the sales tax holiday?
No. The sales tax holiday exemption applies only to sales of qualifying Energy Star rated products made during the period beginning at 12:01 a.m. on the Saturday preceding the last Monday in May (Memorial Day) and ending at 11:59 p.m. on the last Monday in May. Customers who purchase eligible items before or after the designated sales tax holiday period cannot receive a refund of the taxes unless another exemption applies.