Tennessee State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Tennessee, with full citations and the original source on every page.
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Are the computers, software, and related equipment a Tennessee manufacturer uses to run its production lines exempt from sales tax as industrial machinery?
Mostly yes for the systems that actually run the production lines. For a manufacturer, the computer hardware and software used to monitor and control production — line-optimization (MLO) and quality/s…
Which quality-assurance testing machines and supplies used by a Tennessee food manufacturer qualify for the industrial machinery exemption?
It depends on when the testing happens. For a manufacturer, equipment and supplies used to test the product during manufacturing are exempt: in-process testing equipment (metal detectors, fat analyzer…
Is the equipment and supplies a Tennessee manufacturer uses to treat its incoming process water and its wastewater exempt from sales tax as pollution control facilities?
It depends on which side of the process the item is on. For a manufacturer, the equipment that treats the wastewater the plant discharges — equalization tanks, pumps, circulators, feed pumps, instrume…
Which freezing-plant machinery, equipment, and supplies qualify for Tennessee's industrial machinery exemption for a frozen-food manufacturer?
Mostly yes. For a frozen-food manufacturer, Tennessee's industrial machinery exemption covers the freezing system (freezers, compressors, evaporators, refrigerant/ammonia, chillers, piping/controls/va…
Can a contractor expanding a municipal water-treatment plant buy the treatment piping exempt from Tennessee sales and use tax as industrial machinery?
Yes — the process piping is exempt. A municipal water utility that draws river water and treats it into drinking water sold to customers is a 'manufacturer' for Tennessee tax purposes (water is tangib…
Are a contract manufacturer's fees and products for clinical-trial drugs subject to Tennessee sales tax, and does its equipment qualify for the manufacturing and R&D exemptions?
Mostly exempt. The Department ruled that the drugs a contract manufacturer makes for FDA-authorized clinical trials are exempt from Tennessee sales and use tax as prescription drugs for human use, bec…
Can a quarry that mines raw material and ships it to a separate manufacturing plant get its own Tennessee industrial-machinery sales-tax exemption?
Yes — with its own registration and application. The Department concluded (in an advisory Revenue Ruling) that a quarry can qualify for the Tennessee industrial-machinery sales-tax exemption on the eq…
A Tennessee blood and plasma processor must run federally required disease tests on the blood it turns into products for sale. Are the chemical reagents used in that testing exempt from Tennessee sales and use tax?
Yes, with conditions. The chemical reagents the company uses to run federally required disease tests on donated whole blood and source plasma are exempt from Tennessee sales and use tax as 'industrial…
When a Tennessee manufacturer drop-ships goods for an affiliated buyer, which sales count toward its Tennessee franchise & excise tax — does title passing in Tennessee control, or the final delivery destination?
It depends entirely on where the goods are ultimately delivered — not on where title passes or who the buyer is. This Tennessee manufacturer sells products to an affiliated sales company ('SalesCo') t…
At an FDA-regulated manufacturing plant, which process items — water-treatment, HVAC, boiler, pigging, RF guns, antifoam, labels, printers — are exempt as industrial machinery, and which are taxable?
It varies item by item. At this FDA-regulated manufacturing plant, the Water Treatment System, HVAC System, Boiler System, Pigging System, RF Guns, and Antifoam Treatment are all EXEMPT from Tennessee…
A Tennessee food producer bolted storage racks into its freezer to freeze and hold its own packaged food before shipping. Are the freezer racks exempt from sales and use tax as 'industrial machinery'?
Yes. The freezer racks a food producer bolted into its freezer qualify as exempt 'industrial machinery' (Tenn. Code Ann. § 67-6-206(a)), so no Tennessee sales or use tax is due on them. The exemption …
When a manufacturer expands a factory, which of the new machinery, structural components, electrical systems, and pollution-control equipment qualify for Tennessee's industrial machinery sales tax exemption -- and which count as part of the building instead?
Mostly exempt, but the BUILDING itself is taxable. The Department ruled that nearly everything a manufacturer bought for a plant expansion — machinery, electrical distribution equipment, transport equ…
Do reusable, part-specific protective containers that move components from storage to a factory's assembly line qualify for Tennessee's industrial machinery sales tax exemption?
Yes. The Department ruled that a manufacturer's reusable, part-specific protective containers — used to move components from a parts-storage area to the production and assembly line, then returned to …
Does Tennessee's sales tax exemption for energy fuels used directly in manufacturing apply to natural gas burned in a factory's ovens — and does it matter whether each oven is separately metered?
Yes, but only for the metered ovens. The Department ruled that natural gas a food manufacturer burns in its direct-fired processing ovens qualifies for Tennessee's FULL energy-fuel exemption (Tenn. Co…
Are charges from a third-party contractor for fabricating, installing, reworking, or repairing parts and inventory during a Tennessee manufacturer's production process subject to sales and use tax?
Mostly exempt, with one exception. The Department ruled that a manufacturer's third-party contractor charges for (1) fabricating parts of the product, (2) installing parts on the product, and (3) rewo…
Which items and services bought to expand a Tennessee manufacturing plant qualify for the industrial-machinery sales-and-use-tax exemption — and can the manufacturer's contractors buy them tax-free?
Most of it is exempt, but not all. The Department (in an advisory revenue ruling) applied Tennessee's INDUSTRIAL MACHINERY exemption (Tenn. Code Ann. § 67-6-206(a)) to a long list of items a manufactu…
If a company sells compressed air (not the compressor itself) to a manufacturer under a long-term service contract, does the sale qualify for Tennessee's industrial machinery sales tax exemption?
No. Selling compressed air under a "compressed air as a service" contract does NOT qualify for Tennessee's industrial machinery exemption, for two independent reasons: (1) the customer never buys, lea…
A Tennessee manufacturer buys design software with a bundled maintenance plan, plus a long list of welding gases, gear, and shop supplies -- which of these qualify for the sales tax industrial machinery or industrial materials exemptions?
It's a mixed bag by item. The design software (and its bundled maintenance contract) is FULLY TAXABLE -- because it's used before raw materials reach the manufacturing process, it doesn't count as "ne…
Are the reusable wooden patterns a metal casting foundry uses to make sand molds exempt from Tennessee sales and use tax as industrial machinery, even though the patterns never directly touch the finished metal casting?
Yes. Even though the wooden patterns never directly touch the molten metal or finished casting, they are "necessary to and primarily for" fabricating the product — an impossible-to-skip step in making…
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These are official tax letter rulings and advisory opinions issued by Tennessee's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.