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Last Updated: 11/13/2017

Energy Production Taxes

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Energy Production Taxes

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Energy Production Taxes

The department administers the Solar and Wind Energy Production Taxes.  The Solar Energy Production Tax applies to solar energy generating systems with a capacity exceeding one megawatt. The Wind Energy Production Tax applies to wind energy conversion systems (WECS) installed after January 1, 1999, unless the system is exempt from tax or you have an alternative payment agreement.

Solar Energy Production Tax 

You must file by January 15 of each year for production in the preceding calendar year. The Department of Revenue uses this information to determine your Solar Energy Production Tax. If you don't file on time, we will determine your tax using the best information we have about the capacity of the system and assume a production rate of 30 percent of capacity.
 
We may grant an extension to file of up to 15 days if a written request is submitted showing good cause. For more detail on requests for extensions to file the Energy Production Tax return, please visit the extension request instructions webpage.
 

What is a solar energy generating system?

A solar energy generating system is a set of devices whose primary purpose is to produce electricity by means of any combination of collecting, transferring, or converting solar generated energy. A  solar energy generating system is a set of devices whose primary purpose is to produce electricity by means of any combination of collecting, transferring, or converting solar generated energy.
 

Systems Exempt from Tax

Systems with an alternating current (AC) capacity of one megawatt or less are exempt from the Solar Energy Production Tax.
 

Payment of Tax

You must pay Solar Energy Production Tax by May 15 of each year. Pay this tax to the county treasurer where the systems are located, not to the Department of Revenue. 
 

Total Size of Solar Energy Generating Systems

Unless the systems are interconnected with different distribution systems, the capacity of a solar energy generating system shall be combined with the capacity of any other solar energy generating system that is constructed within the same 12-month period as the solar energy generating system and exhibits characteristics of being a single development.


In the case of a dispute, the commissioner of commerce shall determine the total size of the system and shall draw all reasonable inferences in favor of combining the systems.

Tax Rate 

The solar energy production tax rate is $1.20 per megawatt hour produced.

Note: 1 megawatt hour is equal to 1,000 kilowatt hours.

Wind Energy Production Tax Information

You must file the Wind Energy Production return by January 15 each year. The Department of Revenue uses this information to determine your Wind Energy Production Tax. If you don't file on time, we will determine your tax using the best information we have about the capacity of your WECS, and we will assume a production rate of 60 percent capacity.  
 
We may grant an extension to file of up to 15 days if a written request is submitted showing good cause. For more detail on requests for extensions to file the Energy Production Tax return, please visit the extension request instructions webpage.
 

What is a wind energy generating system?

A wind energy conversion system (WECS) is any device that converts wind energy to a usable form of energy.  
 

Systems Exempt From Tax

The following systems are exempt from tax:
  • Small scale systems with a capacity of 0.25 megawatts or less
  • Small scale systems owned by a municipality and with a capacity of 2 megawatts or less 
 

Payment of Tax

You must pay Wind Energy Production Tax by May 15 each year. Pay this tax to the county treasurer where the systems are located, not to the Department of Revenue.   
 

Alternative Payment Plans

The owner of a WECS and the jurisdiction where the system is located may negotiate an alternative payment plan (in lieu of the Wind Energy Production Tax). This plan must be signed by all parties and filed with the Department of Revenue and the county recorder where the system is located. 

Companies that negotiate an alternative payment plan must follow the terms of the contract or else they will be subject to the Wind Energy Production Tax. View the law, M.S. 272.028.  
 

Size of WECSs

For purposes of this tax, the nameplate capacities of WECSs that are under common ownership will be combined if the systems:
 
  • are located within 5 miles of each other; and
  • were constructed in the same 12-month period.
Common ownership exists when the same (or similar) persons or entities own two or more systems, even if the ownership shares are different for each system. Common ownership does not exist solely because the same person or entity provided equity financing.   
 

Tax Rate

The rate varies, based on the nameplate capacity or combined capacity of the WECSs being taxed. The table below shows the tax rates by kilowatt hours and megawatt hours.  

​Type of WECS

​Nameplate Capacity

​Tax per Kilowatt Hour

​Tax per Megawatt Hour

Large Scale WECS
 Over 12 megawatts
​ $0.0012    (0.12 cents)
​ $1.20
 ​Medium Scale WECS
 ​Over 2 to 12 megawatts
 $0.00036  (0.036 cents)
 $0.​36 (36 cents)
​ Small Scale WECS
 2 megawatts and under
 $0.00012  (0.012 cents)
 $0.12 (12 cents)

Note:
1 megawatt hour is equal to 1,000 kilowatt hours.