New Mexico Solar Gross Receipts Tax (GRT) Exemption
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New Mexico offers many potential incentives for homeowners interested in going solar. Some of these incentives are covered extensively, such as New Mexico’s solar income tax credit. Other incentives aren’t really touched on all that much, besides some brief asides.
We aim to rectify that by covering some of the lesser-known solar incentives that New Mexicans can qualify for. The main incentive we’ll be covering today is the New Mexico solar sales tax exemption, known as the Solar Gross Receipts Tax Exemption (GRT).
While many of the other exemptions apply to the taxes you file at the end of the tax year — like the income tax — the GRT applies at the end of the sale period. The sales tax in New Mexico is currently 5.125 percent. We’ll go over what the exemption covers and how to apply.
Overview of the Solar Gross Receipts Tax Exemption
The GRT (Gross Receipts Tax) Sales Exemption for solar is a tax that applies to the sale of the installed solar panels. If you apply for it correctly, it will lower the price of your solar installation at the time of purchase. While the name makes it sound like it only applies to the panels themselves, it actually covers many different parts that contribute to the overall solar installation.
What Solar Components Qualify for the GRT?
In this section, we’ll cover the various parts that qualify for the GRT exemption. We hope that this will be helpful for New Mexico residents who choose to go solar in the near future. The New Mexico Energy, Minerals, and Natural Resources Department (EMNRD) provide us with a list of everything that qualifies. We’ll go over the most parts that stand out the most.
This is the big one. The average price for solar panels in New Mexico is close to $11,000. The sales tax on an $11,000 solar panel array would come out to $563.75. That’s a lot of money! While your home’s system may be a bit smaller than that, your sales tax would still be hundreds of dollars.
This is particularly true if you decide to get the most bang for your buck and purchase high-quality solar panels, such as our go-to brand, Axitec. The higher the quality of your panels, the longer they last and the more efficient they are. However, these panels come with a higher price — which means higher taxes.
It comes as a surprise to many that the mounting system for your panels can be anywhere from 10 to 25 percent of the total price of your installation. Your racking system needs to be tough, both to withstand the elements and also to protect your panels themselves.
The National Renewable Energy Laboratory (NREL) recommends that solar racking systems cost around $0.10 per watt. While there are many racking innovations coming down the pipeline, your racking will still cost around three percent of your total installation cost. That can be a sizable amount, so exempting the sales tax on your racking can save you dozens.
Batteries are another potential solar option that can cost hundreds of dollars in taxes. Battery backup is exactly what it sounds like — you install large lithium-ion batteries in your home that store energy from your solar array. This energy can then be used at night or when it’s cloudy, when your solar installation isn’t producing any power, instead of drawing power from the grid. Backup batteries are extremely useful for any solar homeowner, but the high-quality materials and long lifespan do not come for cheap.
For example, our battery backup of choice is the Tesla Powerwall. This battery is one of the cheapest battery backup options on the market and comes with a high level of craftsmanship — and a few thousand dollars. The potential sales tax on a full battery backup system (like the Tesla Powerwall) can come close to the savings from the tax on the panels. The sales tax exemption is key for those considering purchasing battery backup with their solar.
An inverter is a key part of any solar installation. The inverter takes the DC energy generated by your solar panels and converts it into AC energy, which is what your home uses. Without an inverter, your panels would be completely useless for actually powering your home.
A solar inverter can cost anywhere from several hundred dollars to more than a thousand if you’re looking for a quality piece. This means that you’ll be looking at around a $50 tax on your inverter. Go Solar Group prefers SolarEdge for our inverters, which provide you the best quality for the money spent.
Not many consider the electrical wiring necessary to fully install a solar panel system when they think about solar prices. Without this wiring, however, your solar panels would not be actually linked to your house to provide you with power. A complete system of solar wiring can cost several hundred dollars. Much like the inverter, you’ll be looking at dozens of dollars in taxes.
Solar conduits are pipes, which are what the wiring runs through to reach your house itself. Conduits are usually made of PVC and can be pretty cheap. However, depending on the climate in which you live, some homes will need conduits made of some stronger material to withstand the weather. In this case, steel is a popular choice, but also much more expensive than PVC piping.
A lightning arrester is a device that protects your panels and wiring from becoming overloaded by a sudden burst of electricity. In the case of solar panels, arresters are generally targeted at lightning strikes. They absorb excess energy generated by these strikes and direct it into the ground, which protects your panels and wiring. Most systems should have a couple of arresters, which are usually around $100 per arrester. Avoiding the sales tax on your arresters can save you a tidy sum.
Miscellaneous Solar Components
There are some other solar parts and services that qualify for exemption from the New Mexico sales tax. These include controllers, transformers, meters, disconnects, and the fees for the solar permit and the PNM hookup. While all of these individually may not cost as much as the panels, battery backup, or the inverter, when taken all together they can represent some savings.
How To Apply for the GRT
Applying for the GRT is relatively simple — at least if you’re purchasing solar. It might be a bit more work on the seller’s end, but that’s what they signed up for. In this case, you will have to cooperate with the seller and fill out form RPD-41341. If you don’t have this form at the time of purchase, but you do have your receipts and proof that you’re using your components for renewable energy purposes (i.e. that your battery is only being charged with your solar panels) then you can also apply that way.
Once the seller gets approval, they can deduct the taxes from the final sale. This particular tax exemption shouldn’t be too hard for the average buyer, as the exemption ultimately comes at the time of sale. This means that most of the work is done by the seller, which saves you time. You won’t have to worry about the tedious paperwork that comes with other incentives like the federal ITC or the state-level ITC. This means less time fiddling with your solar installation and more time enjoying your newfound energy independence.