Open Forum

Sales Taxation by state on the GHEX

  • 1.  Sales Taxation by state on the GHEX

    Posted 05-03-2017 13:42
    Pennsylvania state sales tax officials are pressing that sales tax must be collected on the total price of a GHEX with no exemption for machinery, labor and expendables. On water wells they only tax the materials.
    This would greatly increase the price of a GHEX so what are some of the other states doing. In Oklahoma the materials (loops and grout) are taxed and it is just like a water well.
    Please let us know what the IGSHPA members think.

    Garen Ewbank

    Ewbank Geo Testing, LLC
    Fairview OK

  • 2.  RE: Sales Taxation by state on the GHEX

    Posted 05-04-2017 09:57

    From:                                         Kevin McCray <>

    Sent:                                           Thursday, May 4, 2017 9:49 AM

    To:                                               Garen Ewbank

    Subject:                                     PA


    Garen:  You can post this, if you wish.  Thanks for the consideration.

    In July 2016, as a member courtesy, NGWA's legal counsel broadly examined issues with regard to the Commonwealth of Pennsylvania seeking to collect back sales taxes on all or portions of geothermal heat pump system installations. 

    Counsel observed then the exemption for common mining activities in Pennsylvania applies to "commercial" mining activities. While drilling is conducted by NGWA member contractors, the extraction of heat energy is seen by Pennsylvania government as a non-commercial activity conducted by the property owner after the geothermal system is installed.

    Water well drillers are explicitly exempt under the statute.  While it is not for the Association to judge what only Pennsylvania government can determine, it does not appear a geothermal heat pump system, including the drilled loop well or borehole is a "water well" within the meaning of the regulation.

    While not offered as legal advice, and understanding that effected members are encouraged to make their own assessments, NGWA believes closed loop boreholes would not be considered sales tax exempt by the Commonwealth of Pennsylvania. 

    NGWA, by choice, elects not to conduct state level advocacy directly, although the Association does often provide informational resources, typically to our affiliate state organizations, such as Pennsylvania.

    Kevin B. McCray, CAE | CEO

    Advancing groundwater knowledge

    Providing | Protecting | Managing | Remediating

    and also serving the NGWA Foundation

    601 Dempsey Road | Westerville, Ohio 43081| USA

    800 551.7379 (614 898.7791) x 1503 | fax 614 898.7786 |


    Private Well Owner Hotline: 855-H2O-WELL (855 420.9355)

    This e-mail and any attachments are only for the use of the individual or entity to which they are addressed and may contain information that is privileged, confidential, and exempt from disclosure under applicable law.

    Garen Ewbank

    Ewbank Geo Testing, LLC
    Fairview OK

  • 3.  RE: Sales Taxation by state on the GHEX

    Posted 05-04-2017 12:13
    Garen, do you know where this "push" is coming from and if so please let me know. I am personnel friends with both Senator McGarrigle and Killion personally and also  number of the Representatives but for me to speak to them I have to know where this is coming from. Let's discuss next week but since we do not have a PA GEO Assoc. we should take the lead.

    Jack DiEnna

    Geothermal National & International Initiative
    Springfield PA

  • 4.  RE: Sales Taxation by state on the GHEX

    Posted 05-04-2017 13:50
    Jack, thanks and that will help. It is coming from the Pennsylvania Department of Revenue. I will get you the Dept. head's name and the auditor that is pushing the issue. Water wells are exempt, mining is exempt, and heat exchangers are exempt but this auditor hit the driller with $120,000 back taxes.

    Garen Ewbank

    Ewbank Geo Testing, LLC
    Fairview OK

  • 5.  RE: Sales Taxation by state on the GHEX

    Posted 05-04-2017 14:00
    In the neighboring state of Ohio, geothermal installations are taxed, but to the contractor/installer/driller. When one of these entities purchases the product, unit, pipe, flow center, etc., they pay sales tax on the purchase. The installation itself does NOT have tax applied to it. This is a favorable method for collecting the taxes so contractors can give accurate... and final price... quotes to the end user without the variable of taxes. The installation is deemed a service and therefore, not taxed.

    Greg Beach

    Geo-Hydro Supply, Ltd.
    Sugarcreek OH

  • 6.  RE: Sales Taxation by state on the GHEX

    Posted 05-04-2017 14:54
    After further discussion with the driller the sales tax was applied only to the materials used in the installation of the ground heat exchanger (GHEX).
    One must be a licensed water well driller in PA to install a GHEX. No sales taxes are collected on any part of the installation of a water well and that is what drillers have been following concerning drilling the GHEX.
    If the department of revenue goes after all the projects it would be a disaster for the drillers. So far only one has been targeted but others will be due the huge amounts of money.

    Garen Ewbank

    Ewbank Geo Testing, LLC
    Fairview OK

  • 7.  RE: Sales Taxation by state on the GHEX

    Posted 05-04-2017 14:38

    In North Carolina, we have just started charging sales tax to the labor portion of repair invoices. If the repair or installation is regarded as a capital improvement, then there is a form that we have to fill out on each job that qualifies as a capital improvement in order to not pay sales tax on the labor for that project. (More paperwork!!)

    As always, we have to charge sales tax to the cost of materials and if it is not paid at the distributor level, then we have to submit it ourselves.

    In states that collect sales tax on material and labor, I would suggest that a separate line item for the machinery and expendables be created that separates those items from labor and material.

    Hopefully you can get the local government to see it that way.

    Mike Hadley