Can a large utility-scale solar generating facility qualify as a manufacturer for South Carolina sales-tax exemptions?

Plain-English summary

South Carolina Private Letter Ruling 15-1 treated the requesting taxpayer's planned utility-scale solar electricity facility as a manufacturer eligible to pursue sales-and-use-tax exemptions available to manufacturers.

The conclusion did not automatically exempt the entire project. The taxpayer still had to satisfy the specific requirements of each claimed exemption.

Facts that drove the result

The proposed project would:

• cost approximately $100 million;
• place solar panels on 750 acres within a 1,500-acre site;
• have 74.9 megawatts of generating capacity;
• use inverters to convert direct current into utility-frequency alternating current; and
• sell all electricity to the South Carolina Public Service Authority, electric cooperatives, and investor-owned utilities.

The facility would not make retail sales to end customers.

Why DOR treated it as manufacturing

The Department said it considers the facility's purpose, how the public perceives the operation, and whether sales are mostly wholesale or retail.

Here, the facility's purpose was large-scale electricity generation. South Carolina's sales-tax definition includes electricity as tangible personal property, and all output would be sold at wholesale. Given the project's scale and those sales, DOR treated the facility as a manufacturer.

Exemptions discussed

The ruling identified potential exemptions for:

• fuel used to generate power in manufacturing;
• machinery used in manufacturing tangible personal property for sale;
• electricity used in manufacturing;
• qualifying material-handling systems and equipment at a manufacturing facility with at least $35 million invested over five years; and
• construction materials for a new or expanded manufacturing facility with at least $100 million invested over 18 months.

Eligibility for one did not prove eligibility for another. The ruling conditioned its conclusion on compliance with every exemption's own terms.

Common questions

Q: Did DOR say every solar installation is a manufacturer?

A: No. The PLR addressed one large utility-scale project with specific capacity, investment, acreage, equipment, and wholesale-sales facts.

Q: Was all equipment automatically exempt?

A: No. The ruling said each claimed manufacturer exemption had to be separately satisfied.

Q: Why did electricity generation count as producing tangible personal property?

A: Code Section 12-36-60 expressly includes sales of electricity in the definition cited by the ruling.

Q: Can another solar developer rely on this PLR?

A: No. It binds the Department only for the requesting taxpayer and the represented facts.

Citations and references

• S.C. Code Ann. § 12-36-60 (electricity as tangible personal property)
• S.C. Code Ann. § 12-36-2120(9), (17), and (19) (manufacturing fuel, machinery, and electricity exemptions)
• S.C. Code Ann. § 12-36-2120(51) and (67) (material-handling and construction-material exemptions)
• S.C. Regulations 117-302.3, 117-302.4, and 117-302.5 (regulations cited by the ruling)

Subject

Solar Energy Facility – Eligibility for Exemptions

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR15-1.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 12265, Columbia, South Carolina 29211

SC PRIVATE LETTER RULING #15-1

SUBJECT:

Solar Energy Facility – Eligibility for Exemptions
(Sales and Use Tax)

REFERENCES: S.C. Code Ann. Section 12-36-2120 (2014)
AUTHORITY:

S.C. Code Ann. Section 12-4-320 (2014)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

A Private Letter Ruling is an advisory opinion issued to a specific taxpayer by
the Department to apply principles of law to a specific set of facts or a
particular tax situation. It is the Department’s opinion limited to the specific
facts set forth, and is binding on agency personnel only with respect to the
person to whom it was issued and only until superseded or modified by a
change in statute, regulation, court decision, or another Departmental advisory
opinion, providing the representations made in the request reflect an accurate
statement of the material facts and the transaction was carried out as proposed.

Question
Is the planned large utility size solar energy generating facility of ABC, LLC, as described in the
facts, eligible for the sales and use tax exemptions available to manufacturers?

Conclusion
Yes, the planned large utility size solar energy generating facility of ABC, LLC, as described in
the facts, is eligible for the sales and use tax exemptions available to manufacturers, provided the
specific requirements of each exemption are met.

1

Facts
ABC plans to build a solar energy generating facility in XYZ County. The cost of construction is
expected to be $100 million. Solar panels will be located on 750 acres within a 1,500 acre site.
The electrical generating capacity of the system will be 74.9 megawatts. The electric power
generated by the facility will be sold exclusively to the South Carolina Public Service Authority,
electric cooperatives, and investor-owned utilities.
The planned facility will use an array of solar panels to capture sunlight. It will contain inverters
that convert the variable direct current output of the solar panels into a utility frequency
alternating current to be fed into the electrical grid for distribution and sale.

Discussion
South Carolina law provides various exemptions from sales and use tax that are available to
manufacturers, including: fuel sold to manufacturers to generate power used in manufacturing
tangible personal property for sale (Code Section 12-36-2120(9)); 1 machines used in
manufacturing tangible personal property for sale (Code Section 12-36-2120(17)); 2 electricity
used to manufacture tangible personal property for sale (Code Section 12-36-2120(19)); 3
material handling systems and equipment used in operating a manufacturing facility where there
is a capital investment of at least $35 million over a 5 year period (Code Section 12-362120(51)) 4; and construction materials used in constructing a new or expanded manufacturing
facility where there is a capital investment of at least $100 million over an 18 month period
(Code Section 12-36-2120(67)) 5.
When determining whether or not a facility is a manufacturing facility, the Department looks at
several factors, including but not limited to: (a) the purpose of the facility; (b) how the operation
is perceived by the general public – manufacturer, processor, retailer, wholesaler, or distributor;
and (c) whether sales are mostly at wholesale or at retail.
The purpose of the facility to be built by ABC is the large scale generation of electricity. As
noted in the facts, the facility will cost $100 million to build, solar panels will be located on 750
acres, and the facility’s electrical generating capacity will be 74.9 megawatts. A facility of this
magnitude that produces tangible personal property (in this case, electricity 6) for sale is generally
perceived by the general public to be a manufacturer. Moreover, all sales made by this facility
will be at wholesale to electric utility companies and electric cooperatives, not at retail to the
ultimate customer.

1

See S.C. Regulation 117-302.3.
See S.C. Regulation 117-302.5.
3
See S.C. Regulation 117-302.4.
4
See SC Revenue Ruling #13-3 for more information on this exemption.
5
See SC Revenue Ruling #15-2 for more information on this exemption.
6
Code Section 12-36-60 includes sales of electricity within the definition of “tangible personal property”.
2

2

Based on the above and the Department’s longstanding position to treat a large utility size
facility that produces and sells electricity as a manufacturer, 7 ABC, by operating the solar energy
generating facility described in the facts, is eligible for those South Carolina sales and use tax
exemptions under Code Section 12-36-2120 that are available to manufacturers, provided the
specific requirements of each exemption are met.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/Rick Reames III
Rick Reames III, Director
October 15
, 2015
Columbia, South Carolina

7

See SC Private Letter Ruling #92-9.

3