From: Kevin McCray <firstname.lastname@example.org>
Sent: Thursday, May 4, 2017 9:49 AM
To: Garen Ewbank
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
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800 551.7379 (614 898.7791) x 1503 | fax 614 898.7786
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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.