Leases of Solar Panels Taxable as Leases of Tangible Personal Property

Tuesday, July 2nd, 2013


In a recent revenue ruling, the Louisiana Department of Revenue (Department) held that the lease of solar panels was a taxable lease of tangible personal property because the panels could be removed easily.

The taxpayer leased solar panels. The panels were installed either on rooftops or on poles mounted in the ground on the lessee's property. The panels were installed in a way that allowed quick removal in case the lessee chose not to renew the lease. The lessees generally used the panels to supplement their energy needs. The panels did not replace the existing hardwiring or electrical systems.

Leases of tangible personal property are subject to tax in Louisiana. Tangible personal property is corporeal moveable property. Corporeal moveable property means those things that normally move or can be moved from one place to another. Immoveable property, on the other hand, means tracts of land and their component parts. Component parts include things incorporated into a building (or other construction) so as to become an integral part of it. The taxpayer argued that the panels were integral component parts of buildings and therefore immoveable.

The Department held that because the panels could easily be removed, the panels were moveable. The panels were not an integral part of the building because they were not intended to be permanent and because they provided a supplement to, rather than a replacement of, the electrical system. The panels were therefore tangible personal property. Because the solar panels were tangible personal property, their lease was subject to tax.

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