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Texas ENERGY STAR Sales Tax Holiday


Shopper Eligibility Questions

1. Could you clarify who qualifies as a Texas shopper? For example, would a homebuilder qualify for the exemption if they buy large quantities?

“Texas shopper” refers to anyone in Texas buying these products on the stated weekend at a store in Texas or from an Internet or catalog seller engaged in business in this state. The term includes homebuilders, real estate developers, dealers, service providers and contractors. Products may be purchased for existing homes, new homes and nonresidential properties. The purchased items may be held in inventory until ready for use. There is no limit on the number of qualifying items one can purchase during this sales tax holiday.

2. Do I need to provide an exemption certificate or any other documentation to claim this tax exemption?

No, you do not need to provide any documentation to buy qualifying items tax-free during the sales tax holiday period.

3. I live outside of Texas. Can I make tax-free purchases of qualifying products during the sales tax holiday?

Yes, out-of-state purchasers shopping in Texas may purchase qualifying items Texas tax-free during the sales tax holiday. Purchasers from other states should be aware, however, that most states impose use tax on items brought or delivered into a state for use or consumption. Therefore, out-of-state purchasers may owe tax to the state to which the product(s) is transported.


ENERGY STAR Product Eligibility Questions

1. I've noticed some ENERGY STAR rated items are not on the list. Why?

Items eligible for the exemption during the ENERGY STAR holiday are limited to those items specifically listed in Tax Code Section 151.333. The ENERGY STAR Sales Tax Holiday applies only to the following appliances and household equipment:

  • Air conditioners priced at $6,000 or less
  • Refrigerators priced at $2,000 or less
  • Ceiling fans
  • Incandescent and fluorescent light bulbs
  • Clothes washers
  • Dishwashers
  • Dehumidifiers
  • Programmable thermostats

2. I heard that programmable thermostats no longer receive the ENERGY STAR certification. Why are they still on the list?

ENERGY STAR specification of programmable thermostats was suspended on December 31, 2009; however, any existing stock of ENERGY STAR labeled programmable thermostats offered for sale by retailers is still eligible for the exemption.

3. Do water heaters that have an ENERGY STAR rating qualify for the holiday?

No, please see the response to the first product eligibility question above.

4. It seems silly to exempt clothes washers but not clothes dryers. Why don’t clothes dryers qualify for the exemption?

The federal government does not apply its ENERGY STAR certification to clothes dryers because there is little difference in the energy use between models. Combination clothes washer/dryer units qualify for the exemption if the ENERGY STAR program classifies them as a clothes washer and if the model number is listed on the ENERGY STAR qualified clothes washer product list.

5. A central air conditioning system consists of several components. If I replace an air conditioner component in an existing system with a new ENERGY STAR rated component, will that part qualify for the sales tax holiday exemption?

No. The exemption does not apply to individual air conditioning components. The exemption is for the purchase of air conditioning systems priced at $6,000 or less.

6. Are heat pumps considered air conditioners for the purpose of the ENERGY STAR sales tax holiday?

No. Under current Texas law, heat pumps do not qualify for the exemption, even if they can be used to cool a home.

7. Do attic fans, wine refrigerators, kegerators or residential beverage chillers qualify for the sales tax holiday exemption?

No. These products are not part of the ENERGY STAR program and therefore the sales tax exemption does not apply.

8. Do freezers or stoves qualify for the exemption?

No. Freezers and stoves are not included in the statutory list of products eligible for the sales tax exemption.

9. Do mini-fridges qualify for exemption from tax during the sales tax holiday?

Yes, as long as they are priced at $2,000 or less and are ENERGY STAR qualified.


Delivery and Installation Charges Questions

1. Do qualifying items need to be delivered (or otherwise received) during the sales tax holiday period?

No. The exemption applies to all sales of qualifying products made during the sales tax holiday period. A sale is considered made during the sales tax holiday period if

  1. the item is both paid for and delivered to the purchaser during the exemption period; or
  2. the retailer accepts an order for the item during the exemption period for immediate shipment and the item is paid for during the exemption period, even if delivery is made after the exemption period

2. Do delivery or shipping and handling charges qualify for the exemption?

Yes. Delivery, shipping, handling or other transportation charges connected to the sale of a qualifying item qualify for the tax exemption.

If a delivery contains both exempt and taxable items, only the fee for delivery of the qualifying item(s) is exempt from sales tax. For example, if a customer purchases both an ENERGY STAR clothes washer and a clothes dryer, and the retailer charges $25 per appliance for delivery, only the fee for delivery of the clothes washer is exempt from sales tax.

3. What if the delivery charge is a flat rate, not allocated by item?

If the delivery charge is a flat rate, the total delivery charge may be attributed to the tax-exempt item(s). For example, if a retailer charges a flat fee of $50 per delivery and a delivery includes an ENERGY STAR appliance as well as several other items, the $50 charge can be applied to the ENERGY STAR item without allocating the delivery charge among all the purchases.

4. What happens if the delivery charge causes an air conditioner or refrigerator purchase to exceed the price cap?

The exemption no longer applies if the total price exceeds the statutory caps. Delivery charges connected with the sale of air conditioners and refrigerators will disqualify these products from the sales tax holiday if they cause the total price of the item to exceed the exemption’s price caps ($6,000 for air conditioners and $2,000 for refrigerators). The total sales price includes additional charges for shipping.

5. Do installation charges for free-standing or mobile items qualify?

Yes. Items that are free-standing or mobile, such as clothes washers, dehumidifiers, refrigerators, portable dishwashers and window or room air conditioning units, count as tangible personal property, and their installation charges qualify for the exemption even if the installation is performed after the holiday period ends.

6. Do installation charges for permanently installed items qualify?

Items such as programmable thermostats, central air conditioning units and built-in refrigerators and dishwashers that are plumbed, wired or otherwise permanently attached to a building's structure are considered improvements to real property. Labor charges associated with such installations in new or existing homes qualify, while installations in nonresidential properties do not.

7. How should the invoice look for installations in nonresidential properties since those are taxable?

Charges for installations performed on nonresidential property should be stated on the invoice separately from the sales price of the qualifying ENERGY STAR-rated item. A lump sum charge for the purchase of an ENERGY STAR item and installation is subject to tax as the purchase of nonresidential repair and remodeling.

8. Should installation charges be considered when determining whether the total sales price of an air conditioner or refrigerator falls under the price cap?

For ENERGY STAR-qualified window air conditioners and refrigerators that will not be “built-in”, the installation charge, like the delivery charge, is considered part of the sales price. If the total sales price, including the charge for installation, exceeds the price cap, the entire charge – including delivery and installation – is taxable. If the total sales price is less than the applicable cap, the installation charge is exempt, even if the installation is performed after the exemption period and/or the installation charge is separately stated.

Charges for installing central air conditioners and “built-in” refrigerators though are not considered part of the sales price of the appliances and do not affect the item's eligibility for the exemption. Central air conditioning units and built-in refrigerators are considered improvements to realty and the taxability of the installation charges is determined by the type of contract, lump sum or separated, and the type of property, residential, nonresidential or new construction.

Nonresidential real property repair and remodeling is a taxable service. If the appliance is installed in an existing nonresidential building and the installation charges are separately stated from the purchase of the appliance, the charges for labor are not considered part of the sales price of appliance but rather a charge for nonresidential real property repair or remodeling, a taxable service.

Under a lump sum contract for the purchase of a qualifying product and the labor to install it in an existing nonresidential building, the total charge is taxable as the sale of a taxable service regardless of the total price.

Labor charges for new construction and residential real property repair and remodeling are not taxable. As a result, charges for installation of a qualifying built-in refrigerator or central air conditioner in a residential building or as part of a new construction project do not affect the taxability of the appliance when purchased during the exemption period.


Purchasing Requirement Questions

1. Are rentals and leases of qualifying equipment eligible for the ENERGY STAR holiday tax exemption?

Rentals and leases of qualifying ENERGY STAR products, including “rent to own” contracts, qualify for exemption during the ENERGY STAR sales tax holiday. Under 151.005 the definition of “sale” includes the exchange, barter, lease, or rental of tangible personal property. Therefore, rental and lease contracts (for qualifying items) entered into during the sales tax holiday qualify for the exemption. The exemption will only apply to the specified rental or lease period designated by the contract. However, extensions or renewals of contracts do not qualify unless they occur during another Texas ENERGY STAR sales tax holiday.

2. Can I receive a refund of sales and use taxes paid on purchases of qualifying ENERGY STAR equipment made before the sales tax holiday?

No. The exception applies only to sales made during the Memorial Day weekend holiday period beginning at 12:01 a.m. the Saturday before Memorial Day and ending at 11:59 p.m. on Monday (Memorial Day).

3. Is there a limit on the number of ENERGY STAR products I can purchase during the sales tax holiday?

No. The Texas sales tax holiday has no limit on the number of products you can purchase during the exemption period.

4. Do I have to replace or recycle an old appliance?

No, there are no replacement or recycling requirements for the tax exemption although recycling is strongly encouraged. Recycling helps keep scrap metal out of landfills and avoids contaminating Texas natural resources. For more information about recycling in Texas or to find a recycling location, see the State of Texas Alliance for Recycling (STAR) website.


Seller Questions

1. Do all retailers located in the state of Texas have to participate in the ENERGY STAR Tax Holiday?

Yes. Texas retailers that sell qualifying ENERGY STAR products should comply with the sales tax exemption law.

2. As a seller of items that qualify for this temporary exemption, how do I report my May sales taxes to account for those sales?

If you sold qualifying energy efficient products tax-free during this year’s energy star sales tax holiday, don’t include receipts from those sales in Taxable Sales (Item 2) of your sales tax return. If you were not required to and did not charge the sales tax on certain products, you are not required to remit any tax on these items. If you collected tax, however, then you must send it to the state.

Example

During the three-day holiday, an appliance store sold a qualifying dishwasher for $850 and did not collect tax. The appliance store will report the $850 in Total Sales (Item 1), but will not include the $850 in the Taxable Sales column. This dishwasher qualifies as a tax-free holiday item and no tax is due.

The appliance store sold a qualifying dishwasher for $850 and a dryer for $990 during the holiday. When the appliance store completes its sales tax return, the amount shown in Total Sales will be $1840 (all sales made during your reporting period). The amount shown in Taxable Sales will be $990 (for the dryer only).

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