Does sales tax apply to electric car charging services?

Does sales tax apply to electric car charging services?

Though the first sales of electricity predate sales tax, selling electricity through an electric vehicle charging station is relatively new. And in some states, it’s not clear whether such sales are subject to sales tax.

South Carolina sales and use tax applies to the sale and use of tangible personal property. The law defines “tangible personal property” as “personal property which may be seen, weighed, measured, felt, touched, or which is in any other manner perceptible to the senses. It also includes services and intangibles, including … sales of electricity, the sale or use of which is subject to tax under this chapter” (Section 12-36-60) (emphasis mine).

If electricity is subject to sales tax, are sales of electricity at an electric vehicle charging station subject to sales tax? An electric charging station business wisely reached out to the South Carolina Department of Revenue for clarification. In Private Letter Ruling 20-5, the department confirmed:

  • Electricity sold to consumers by electric car charging stations is subject to South Carolina sales tax
  • Electricity sold to electric car charging stations by utilities for resale to customer is an exempt wholesale sale

The New York State Department of Taxation and Finance was asked a similar question back in 2013. Like its counterpart in South Carolina, the department concluded the unit charge and any fee charged to customers for the sale of electricity at an electric vehicle charging station are subject to New York sales tax (TSB-A-13(18)S). It explained, “Section 1105(b)(1)(A) of the Tax Law imposes sales tax on the receipts from every sale of electricity and electric service of whatever nature,” and that the “words ‘of whatever nature’ indicate that a broad construction is to be given the terms describing the items taxes.”

There’s no such straight answer available in Iowa, where many charging stations in the state aren’t set up to collect payment. But starting July 1, 2023, electric fuel sold at a nonresidential location is subject to a 2.6-cent-per-kilowatt-hour excise tax. The tax is to be paid by a licensed electric fuel dealer in a manner prescribed by the Iowa Department of Revenue, which has yet to publish rules governing the dispensing of electric fuel by licensed dealers and users. It’s likely the taxes will be passed on to the final consumer.

Keeping up with changing sales tax laws in multiple states is taxing. Automating sales tax collection and remittance makes it less so. Learn more at avalara.com

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