There is no North Carolina solar sales tax exemption for ordinary homeowners or businesses. Solar panels, inverters, batteries, racking, and wiring are taxed as tangible personal property at a combined state and local rate between 6.75% and 7.5%, depending on your county. A few narrow buyers can avoid or recover the tax, and the way your installation contract is written changes whether you ever see a sales tax line on your invoice. A separate property tax exclusion gives homeowners meaningful relief, but it operates under a different statute than the sales tax rules.
The Sales Tax That Applies to Solar Equipment
North Carolina imposes a 4.75% state sales and use tax on tangible personal property, which includes every piece of a solar system.1North Carolina General Assembly. North Carolina Code 105-164.4 – Tax Imposed on Retailers Counties add local and transit tax ranging from 2% to 2.75%, so the combined rate on a solar purchase lands between 6.75% and 7.5%.2North Carolina Department of Revenue. Current Sales and Use Tax Rates
The tax covers panels, mounting hardware, wiring, inverters, and battery storage. On a $15,000 equipment purchase in a county with a 7% combined rate, the tax at the register is roughly $1,050. Several neighboring states exempt residential solar equipment outright. North Carolina does not.
Why Your Installer’s Invoice May Not Show Sales Tax
Most homeowners don’t buy panels off a shelf. They sign a contract with an installer who supplies the equipment and attaches it to the house. North Carolina treats that arrangement as a real property contract, which means the installer is the final consumer of the materials. The contractor pays sales tax when buying from the supplier, and you do not see a separate sales tax line on your invoice.3North Carolina Department of Revenue. Real Property Contracts
The tax hasn’t gone away. The contractor’s material cost already includes it, and that cost is folded into the overall project price. The contractor must certify payment of the applicable tax on Form E-589P and provide the affidavit to the property owner.3North Carolina Department of Revenue. Real Property Contracts
Contract structure matters. If the installer itemizes the equipment separately from installation services, the transaction can be reclassified as a retail sale plus installation rather than a real property contract. In that case you may see sales tax charged directly on the materials, and installation charges on tangible personal property that does not become part of real property are themselves taxable.4North Carolina Department of Revenue. Repair, Maintenance, and Installation Services Read your installer’s agreement before signing so you understand how the tax is being handled.
Who Can Actually Avoid or Recover the Tax
The limited exceptions are based on who the buyer is, not what is being bought.5North Carolina Department of Revenue. Sale and Purchase Exemptions
State and Local Government Agencies
Purchases by state agencies are exempt at the point of sale when the agency follows proper procurement procedures and gives its exemption number to the vendor.6North Carolina General Assembly. North Carolina Code 105-164.13 – Retail Sales and Use Tax This applies to solar equipment bought for use on government buildings or facilities. Local government units follow a similar process.
Nonprofit Organizations
A common misconception is that 501(c)(3) nonprofits are exempt from North Carolina sales tax. They are not. Nonprofits pay the tax at the time of purchase like any other buyer. Qualifying nonprofits can then apply for semiannual refunds of the sales tax paid on items used to carry out their nonprofit work.7North Carolina Department of Revenue. State Taxation and Nonprofit Organizations The refund mechanism is slower than a point-of-sale exemption and requires more paperwork, but it recovers the same dollars.
Filing a Point-of-Sale Exemption
Buyers who qualify use Form E-595E, the Streamlined Sales and Use Tax Certificate of Exemption. It requires a sales and use tax registration number or an exemption number, along with the reason for the exemption.8North Carolina Department of Revenue. Form E-595E, Streamlined Sales and Use Tax Certificate of Exemption Give the completed form to the seller before the transaction so they have documentation for not collecting the tax, and keep a copy for your own records. If the Department of Revenue later audits the seller, that certificate is the proof that the non-collection was legitimate.
The Property Tax Exclusion That Does Help Homeowners
The sales tax picture is unforgiving, but the property tax side is where residential owners actually see state-level relief. Under G.S. 105-275(45), 80% of the appraised value of a solar energy electric system is excluded from the property tax base.9North Carolina General Assembly. North Carolina Code 105-275 – Property Classified and Excluded from the Tax Base If a solar installation adds $25,000 to your home’s appraised value, only $5,000 of that increase is subject to annual property taxes.
The statute defines a solar energy electric system as all equipment used directly and exclusively for converting solar energy to electricity, which covers panels, inverters, racking, and dedicated wiring.9North Carolina General Assembly. North Carolina Code 105-275 – Property Classified and Excluded from the Tax Base County tax assessors apply the exclusion during annual valuation. There is no special application form, but it is worth confirming with your county assessor after installation that the system has been correctly classified.
At typical county property tax rates of $0.50 to $1.00 per $100 of assessed value, the 80% exclusion on a $25,000 system saves roughly $100 to $200 each year. Over a 25-year system lifespan that compounds into thousands of dollars retained.
What the State Does Not Offer
North Carolina has no state income tax credit for solar installations. The state’s earlier renewable energy credit expired and has not been renewed. The property tax exclusion under G.S. 105-275(45) is the only state-level financial incentive currently on the books.
The federal Residential Clean Energy Credit under Section 25D, which previously covered 30% of installation costs, is also no longer available for new residential projects. The One Big Beautiful Bill signed into law in 2025 terminated the credit without a phasedown, and it does not apply to any property placed in service after December 31, 2025.10Internal Revenue Service. Residential Clean Energy Credit The IRS treats the expenditure as made when original installation is finished, so a project had to be fully completed by the end of 2025 to qualify.11Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under the One Big Beautiful Bill Homeowners who claimed the credit in a prior year but couldn’t use the full amount can still carry the unused portion forward.
Put the pieces together before you sign a contract. Assume sales tax at the full combined rate will be built into your project price, apply the 80% property tax exclusion to your long-term math, and treat any further relief as the exception rather than the rule.