sales tax exemption

Many Energy Star products will be exempt from Texas sales tax over Memorial Day Weekend.

Each year during Memorial Day Weekend, the Lone Star State provides a sales tax holiday for certain Energy Star products. Last year, Texas extended the tax-free period to WaterSense and certain other water-efficiency products, and it worked so well that the state is doing it again. In 2017, the combined energy- and water-efficient tax-free period runs Saturday, May 27 through Monday, May 29.

There’s no limit to the number of qualifying items one consumer can purchase, but not all Energy Star and water-efficiency products are eligible for the exemption.

Exempt energy-efficient products

The following items are exempt from sales tax during the Energy Star Sales Tax Holiday if marked with the Energy Star label:

  • Air conditioners costing $6,000 or less
  • Ceiling fans
  • Clothes washers
  • Dehumidifiers
  • Dishwashers
  • Incandescent and fluorescent light bulbs
  • Refrigerators priced at $2,000 or less

These items may be purchased tax-free by both individuals and businesses (to keep in inventory).

Exempt water-conserving products

Any product marked with a WaterSense label or logo is eligible for the sales tax exemption provided during the Water-Efficient Products Sales Tax Holiday, whether purchased for business or individual use. Examples of these exempt products include high-efficiency toilets, sink faucets, and showerheads.

In addition, water-conservation products used or planted for conserving or retaining groundwater, recharging water tables, or decreasing the ambient air temperature are exempt, but only when purchased for personal use (on the buyer’s personal residential property). Exempt water-conserving products include:

  • Moisture control for a sprinkler or irrigation system
  • Mulch
  • Permeable ground cover surface that allows water to reach underground aquifers, basins, or water collection points
  • Plants, trees, and grasses
  • Rain barrel or alternative rain and moisture collection system
  • Soaker or drip-irrigation hose
  • Soil and compost
  • Water-saving surfactants

Contractors and landscapers cannot purchase the above products tax-free to keep in inventory or use on new or existing residential or commercial properties.

Not exempt

The following products are not exempt during the sales tax holiday:

  • Awnings and other items used to create shade
  • Beverage chillers, kegerators, or wine refrigerators
  • Building and construction materials
  • Clothes dryers
  • Freezers
  • Heat pumps
  • Sprinklers
  • Stoves
  • Water heaters

Devilish details that can trip up compliance

In Texas, a seller’s charges for delivery, shipping and handling, and transportation are considered part of the sales price; they’re exempt when the sale is exempt and taxable when the sale is taxable. Because certain products have a price cap during the sales tax holiday, these additional charges can affect taxation. For example, a refrigerator with a sales price of $1,999.00 would be exempt, but if a $50 delivery charge is tacked on to the sale, the total sales price is $2,049.00 and taxable.

Additional information is available from the Texas Comptroller. See Energy Star Sales Tax Holiday and Water-Efficient Products Sales Tax Holiday.

Although popular among consumers, sales tax holidays can be challenging for retailers. They often require extra staff and adjusting point-of-sale systems, and they can complicate sales and use tax compliance for retailers that sell eligible products.

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photo credit: Energy Star certification via photopin (license)