A utility's customers buy electricity tax-exempt as manufacturers or nonprofits, and some have multiple meters or sites. Do they need a separate exemption certificate for each location?

Plain-English summary

The taxpayer is an electricity provider. Two kinds of its customers buy power tax-exempt or at a reduced rate: manufacturers (energy fuels qualify for a reduced rate or, in some cases, full exemption — § 67-6-206(b)) and not-for-profit organizations (religious, charitable, and educational entities — § 67-6-322). Some customers have multiple meters at one premises (buildings spanning city blocks), and some have multiple locations across the utility's service territory. The utility asked: do these customers need a separate exemption certificate for each location?

The Department gave a consistent, practical answer for both: one certificate per location — but not per building, and not per meter.

1. Manufacturers — a certificate for each manufacturing location. A manufacturer buying energy fuels at the reduced 1.5% rate (§ 67-6-206(b)(1)) or fully exempt (energy used directly in the manufacturing process under § 67-6-206(b)(3), or to make heat-treated glass under § 67-6-206(b)(5)) must present the utility a Manufacturing and Processing Industrial Machinery, Energy Fuels and Water certificate of exemption for each manufacturing location. But if a single location is made up of several buildings, the manufacturer needs only one certificate, listing the physical address of the main building.

2. Not-for-profits — a certificate for each location. A not-for-profit exempt under § 67-6-322 must present a separate certificate of exemption for each location in Tennessee. But a not-for-profit that operates one site or campus whose buildings span multiple streets needs only one certificate, listing the physical address of its main office.

No certificates by meter — and watch for PO boxes. The Department was explicit that it does not issue these exemption certificates by specific utility meter — and that's true even when an organization's buildings span multiple streets. So a valid certificate must show a physical location address. If the utility receives a certificate that lists only a PO box or a meter number instead of a physical address, it should tell the customer to contact the Department for a new certificate.

The throughline: the exemption certificate follows the location, not the meter or the building. Each separate site needs its own certificate; a multi-building site or multi-street campus is still one location and needs only one certificate keyed to its main address. Underpinning all of it, the seller must collect the purchaser's identifying information and reason for exemption at the time of sale (§ 67-6-409).

What this means for you

Utilities and sellers of electricity / energy fuels

When a customer claims a manufacturer or not-for-profit exemption, collect a certificate for each separate location you serve, and make sure each certificate lists a physical address — not a PO box or meter number. Tennessee doesn't issue per-meter certificates, so don't expect (or accept) one certificate per meter. A single certificate keyed to the main building/office covers a multi-building site at that location.

Manufacturers with more than one plant

You need a separate energy-fuels exemption certificate for each manufacturing location, listing both your mailing address and the facility address. If a given plant spans several buildings, one certificate naming the main building's physical address is enough for that location. Apply per place of manufacturing (Rule 1320-05-01-.15(4)). Remember the full exemption (vs. the 1.5% reduced rate) requires the energy to be used directly in the manufacturing process (separate metering or other proof) — otherwise the reduced rate applies.

Nonprofits with a campus or multiple sites

If your exempt organization has multiple locations, give the utility a separate certificate for each. But a single campus whose buildings cross several streets is treated as one location — one certificate listing your main office address suffices. You can't get a separate certificate per meter.

Accountants and tax professionals

The analysis: electricity is TPP (§ 67-6-102(89)(A)); claiming an exemption requires the seller to capture identifying information and the exemption reason at purchase (§ 67-6-409(a)). Manufacturers' energy-fuel relief runs through § 67-6-206(b) (1.5% rate; full exemption for direct-process use and heat-treated glass) and the industrial-machinery energy-fuels application/certificate process (Rules 1320-05-01-.15(2), (4)); not-for-profit relief runs through § 67-6-322(a), (e). The Department issues certificates per location, not per meter — a multi-building site or multi-street campus is one location keyed to the main building/office address — and a certificate showing only a PO box or meter number must be re-issued with a physical address.

Common questions

Q: I'm a manufacturer with several plants. Does one exemption certificate cover all of them?
A: No. You need a separate certificate for each manufacturing location. But if one location consists of several buildings, a single certificate listing the main building's physical address covers that location.

Q: My nonprofit's campus spans several streets. Do I need multiple certificates?
A: No. A single site or campus is one location — one certificate listing your main office's physical address is enough, even if the buildings cross multiple streets.

Q: Can I get an exemption certificate for each meter?
A: No. Tennessee does not issue these certificates by utility meter. The certificate must list a physical location address, not a meter number.

Q: A customer gave me a certificate showing only a PO box or meter number. Is it valid?
A: No. Ask the customer to contact the Department for a new certificate that lists the physical location address.

Q: Can I rely on this letter ruling?
A: No. A Tennessee letter ruling is binding on the Department only as to the specific taxpayer and facts it was issued to, and it can be revoked or modified. Confirm your own facts with a tax professional.

Citations and references

Tennessee statutes (Tenn. Code Ann.):

• § 67-6-206(b) (manufacturers may buy gas, electricity, fuel oil, coal and other energy fuels at a reduced rate or, in certain cases, exempt); § 67-6-206(b)(1) (1.5% reduced rate); § 67-6-206(b)(2) ("manufacturer" definition); § 67-6-206(b)(3), (b)(5) (full exemption — energy used directly in the manufacturing process; radiant heat for heat-treated glass)
• § 67-6-322 (exemption for sales to religious, charitable, and educational not-for-profit organizations); § 67-6-322(a); § 67-6-322(e) (exemption certificate issued by the Commissioner)
• § 67-6-409, § 67-6-409(a) (seller must obtain the purchaser's identifying information and reason for the exemption at the time of purchase)
• § 67-6-102(76) ("retail sale"); § 67-6-102(89)(A) ("tangible personal property" — includes energy-producing fuels such as electricity)

Rules:

• Tenn. Comp. R. & Regs. 1320-05-01-.15(2) (1983) (manufacturer may apply to buy energy fuel and water at the reduced rate for use at a specified location)
• Tenn. Comp. R. & Regs. 1320-05-01-.15(4) (1983) (application for the energy-fuels/water exemption for each place engaged in manufacturing or processing)

Source

• Landing page: https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rulings.html
• Original PDF: https://www.tn.gov/content/dam/tn/revenue/documents/rulings/sales/17-10.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
LETTER RULING # 17-10
Letter rulings are binding on the Department only with respect to the individual taxpayer
being addressed in the ruling. This ruling is based on the particular facts and circumstances
presented, and is an interpretation of the law at a specific point in time. The law may have
changed since this ruling was issued, possibly rendering it obsolete. The presentation of this
ruling in a redacted form is provided solely for informational purposes, and is not intended as
a statement of Departmental policy. Taxpayers should consult with a tax professional before
relying on any aspect of this ruling.
SUBJECT
Sales and use tax exemption certificates.
SCOPE
This letter ruling is an interpretation and application of the tax law as it relates to a specific set of
existing facts furnished to the Department by the taxpayer. The rulings herein are binding upon the
Department, and are applicable only to the individual taxpayer being addressed.
This letter ruling may be revoked or modified by the Commissioner at any time. Such revocation or
modification shall be effective retroactively unless the following conditions are met, in which case
the revocation shall be prospective only:
(A)

The taxpayer must not have misstated or omitted material facts involved in the
transaction;

(B)

Facts that develop later must not be materially different from the facts upon
which the ruling was based;

(C)

The applicable law must not have been changed or amended;

(D)

The ruling must have been issued originally with respect to a prospective or
proposed transaction; and

(E)

The taxpayer directly involved must have acted in good faith in relying upon the
ruling; and a retroactive revocation of the ruling must inure to the taxpayer’s
detriment.
FACTS

[REDACTED] (the “Taxpayer”) [REDACTED – TAXPAYER SELLS ELECTRICITY].
The Taxpayer services a diverse base of customers that includes manufacturers seeking to purchase
electricity at a reduced rate or exempt from sales and use tax and pursuant to TENN. CODE ANN. § 676-206 (2013) and various not-for-profit entities seeking to purchase electricity exempt from the
Tennessee sales and use tax under TENN. CODE ANN. § 67-6-322 (2013). The Taxpayer’s customers

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may have multiple meters at one premise location, where buildings span over several city blocks, or
they may have more than one location within the Taxpayer’s service territory.
RULINGS

1. Are the Taxpayer’s customers that are manufacturers seeking to purchase electricity at the
   reduced rate or exempt from Tennessee sales and use tax pursuant to TENN. CODE ANN. § 676-206(b) required to present separate certificates of exemption for each separate location?
   Ruling: The Taxpayer’s customers that are manufacturers must present separate exemption
   certificates for each manufacturing location. If one manufacturing location consists of
   various buildings, it is only necessary for the manufacturer to obtain and present one
   exemption certificate listing the physical address of the main building.
2. Are the Taxpayer’s not-for-profit customers seeking exemption from Tennessee sales and
   use tax under TENN. CODE ANN. § 67-6-322 required to present separate exemption
   certificates for each location within Tennessee?
   Ruling: The Taxpayer’s not-for-profit customers seeking exemption from sales and use tax
   under TENN. CODE ANN. § 67-6-322 must present separate certificates of exemption for each
   location. A not-for-profit customer that operates a single site or campus with buildings
   spanning over multiple streets is only required to obtain and present one certificate of
   exemption listing the physical address of its main office.
   ANALYSIS
   1

Under the Retailers’ Sales Tax Act, the retail sale in Tennessee of tangible personal property and
specifically enumerated services is subject to the sales tax, unless an exemption applies. “Retail sale”
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is defined as “any sale, lease, or rental for any purpose other than for resale, sublease, or subrent.”
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Tangible personal property includes energy producing fuels such as electricity.
The Taxpayer indicates that it has non-residential customers that are manufacturers seeking to
purchase electricity at the reduced rate as well as manufacturers seeking complete exemption from
sales and use tax on their purchases. It also has customers that are not-for-profit entities seeking to
purchase electricity exempt from the sales and use tax.
TENN. CODE ANN. § 67-6-409 (2013) generally sets forth the requirements for claiming an exemption
for sales and use tax. It provides that sellers are required to “obtain identifying information of the
purchaser and the reason for claiming a tax exemption at the time of the purchase in accordance
with the rules and regulations promulgated by the commissioner,” including the purchaser’s “name,

1

Tennessee Retailers’ Sales Tax Act, ch. 3, §§ 1-18, 1947 Tenn. Pub. Acts Ch. 22, 22-54 (codified as amended at TENN. CODE ANN.
§§ 67-6-101 to -907 (2013)).

2

TENN. CODE ANN. § 67-6-102(76) (Supp. 2016).

3

TENN. CODE ANN. § 67-6-102 (89)(A).

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address, type of business, reason for exemption, and a tax identification number issued by
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Tennessee or other governmental authority as required by the commissioner.”
Manufacturers
5

TENN. CODE ANN. § 67-6-206(b) (Supp. 2016) authorizes manufacturers to purchase gas, electricity,
fuel oil, coal and other energy fuels at a reduced sales and use tax rate and in certain circumstances
to purchase such substances entirely exempt from sales and use tax.
TENN. CODE ANN. § 67-6-206(b)(1) imposes a one and one half percent (1.5%) sales and use tax rate on
a manufacturer’s purchase and use of such substances. TENN. COMP. R & REGS. 1320-05-01-.15(2)
(1983) states, “a manufacturer whose principal business at a specified location is fabricating or
processing tangible personal property for resale and for ultimate use or consumption off his
premises may apply to the Commissioner and be authorized to purchase energy fuel and water for
use at that location at such reduced rate as authorized by law.” The manufacturer must furnish a
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copy of the authorization to the vendor of the energy fuel.
A manufacturer’s purchase or use of energy fuel is entirely exempt from sales and use tax in certain
circumstances as set forth in TENN. CODE ANN. § 67-6-206(b)(3 and 5). A manufacturer can purchase
or use energy fuels completely exempt from sales and use tax by establishing, “by separate
metering or otherwise, they [the substances] are exclusively used directly in the manufacturing
process, coming in direct contact with the article being fabricated or processed by the manufacturer,
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and being expended in the course of the contract.” Moreover, a manufacturer may purchase or use
electricity exempt from sales and use tax if it uses the electricity to generate radiant heat for the
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production of heat-treated glass.
With regard to both the reduced rate for energy fuels and the exemption from sales and use tax for
water and energy fuels, a manufacturer is required to submit the Application for Industrial
Machinery Energy Fuels and Water Sales and Use Tax Exemption for “each place engaged in
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manufacturing or processing tangible personal property for sale.” This application requires that a
manufacturer list both its mailing address and the facility location where it uses the energy fuels.
The Manufacturing and Processing Industrial Machinery, Energy Fuels and Water Sales and Use Tax
Certificate of Exemption issued by the Department that a manufacturer presents to the seller lists
both the manufacturer’s mailing address and the facility address for the specific manufacturing

4

TENN. CODE ANN. § 67-6-409(a) (Supp. 2016).

5

For this purpose, a manufacturer is defined as “one whose principal business is fabricating or processing tangible personal
property for resale.” TENN. CODE ANN. § 67-6-206(b)(2) (2013).
6

TENN. COMP. R. & REGS. 1320-05-01-.15(2) (1983). The Application for Industrial Machinery Energy Fuels and Water Sales and
Use
Tax
Exemption
is
available
on
the
Department’s
website
at
http://tn.gov/assets/entities/revenue/attachments/f1303101fillin.pdf.
7

TENN. CODE ANN. § 67-6-206(b)(3).

8

TENN. CODE ANN. § 67-6-206(b)(5).

9

TENN. COMP. R. & REGS. 1320-05-01-.15(4) (1983).

3

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location qualifying for the reduced rate or the exemption.
A manufacturer qualifying for
exemption for sales and use tax must present to its supplier an exemption certificate issued by the
Department or a fully completed Streamlined Sales Tax certificate of exemption that includes the
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manufacturer’s exemption authorization number.
Therefore, the Taxpayer’s customers seeking to purchase electricity at a reduced rate or exempt
from Tennessee sales and use tax must present to the Taxpayer a Manufacturing and Processing
Industrial Machinery, Energy Fuels and Water Sales and Use Tax Certificate of Exemption for each
manufacturing location. If a manufacturing location consists of various buildings, it is only necessary
for the manufacturer to obtain and present one exemption certificate listing the physical address of
the main building.
Not-for-Profit Entities
Not-for-profit entities are authorized make purchases exempt from the sales and use tax pursuant
to TENN. CODE ANN. § 67-6-322 (2013). TENN. CODE ANN. § 67-6-322(a) provides for an exemption for
“any sales or use tax upon tangible personal property, computer software, or taxable services sold,
given, or donated” to any religious, charitable, and educational organizations. Such organization
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must obtain an exemption certificate issued by the Commissioner of Revenue.
With regard to exempt organizations or institutions seeking exemption from sales and use tax, a
qualifying entity is required to submit to the Department an Application for Exempt Organizations or
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Institutions Sales and Use Tax Exemption. The Exempt Organizations or Institutions Sales and Use
Tax Certificate of Exemption issued by the Department lists both the entity’s mailing address and the
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physical location address of the location claiming the exemption. Once a qualifying organization
has been issued an exemption certificate, it may make purchases of tangible personal property and
taxable services exempt from the sales and use tax by presenting the dealer from which it makes a
purchase a copy of the exemption certificate or a fully completed Streamlined Sales Tax certificate of
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exemption.
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If a manufacturer purchases energy fuels exempt from tax pursuant to TENN. CODE ANN. § 67-6-206(c)(3), it must keep
records through separate metering or otherwise that the substances used “are exclusively used directly in the manufacturing
process, coming in direct contact with the article being fabricated or processed by the manufacturer, and being expended in
the course of the contract.”
The Department does not issue exemption certificates for water and energy fuels according to specific utility meter. If the
Taxpayer receives an exemption certificate from a customer that does not list a physical location address but rather a post
office box or a meter number, the Taxpayer should ask its customer to contact the Department to request a new exemption
certificate.
11

TENN. CODE ANN. § 67-6-206(b)(3, 5).

12

TENN. CODE ANN. § 67-6-322(e) (2013).

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Id. The Application for Exempt Organizations or Institutions Sales and Use Tax Exemption is available on the Department’s
website at http://tn.gov/assets/entities/revenue/attachments/f1306901.pdf.
14
The Department does not issue exemption certificates to exempt organizations or institutions according to specific utility
meter regardless of whether the organization has buildings that span over multiple streets.
15

TENN. CODE ANN. § 67-6-322(e).

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Therefore, the Taxpayer’s not-for-profit customer that has multiple locations in Tennessee should
present to the Taxpayer separate certificates of exemption for each location to make purchases
exempt from Tennessee sales and use tax pursuant to TENN. CODE ANN. § 67-6-322. If such customer
operates one site or campus that has buildings that span multiple streets, it is only necessary for it
to present one certificate of exemption to the Taxpayer listing the physical address of its main office.

Jennifer Wilson
Senior Tax Counsel

APPROVED:

David Gerregano
Commissioner of Revenue

DATE:

7/5/17

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