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?

Plain-English summary

A Tennessee manufacturer expanding its plant asked the Department, item by item, which of the things its contractors would buy and install for the expansion qualify for Tennessee's industrial-machinery exemption — and whether the contractors could buy them tax-free. This is a revenue ruling (advisory guidance, not binding on the Department and not something any taxpayer can rely on), but it's a useful, granular map of how the exemption works.

The exemption. Tennessee taxes retail sales of tangible personal property, but § 67-6-206(a) says "no tax is due with respect to industrial machinery." "Industrial machinery" (§ 67-6-102(46)(A)(i)) is machinery, apparatus, and equipment — with all associated parts, appurtenances, and accessories — that is "necessary to, and primarily for," the fabrication or processing of products for resale, used by someone whose principal business is that manufacturing. The Department distilled four requirements: (1) use by a manufacturer (here, met — manufacturing is the taxpayer's only business; principal business means >50% of a location's revenue from fabricating/processing, Tenn. Farmers' Coop.); (2) the item is machinery, apparatus, or equipment; (3) it is necessary to the process; and (4) it is primarily for the process (>50% of its use). Because exemptions are construed against the taxpayer, the burden of proof is on the manufacturer (Am. Airlines v. Johnson).

Question A — which purchases are exempt? Most are. The ruling worked through a long table and grouped the reasons:

• Core industrial machinery (process tanks, chillers, MUA units, filters, heat exchangers, pumps, variable-speed drives, vacuum strainers, dust collection, motors, instruments and controls, and more) — exempt as machinery/apparatus/equipment necessary to and primarily for the process. "Apparatus" gets its ordinary meaning, and conveying devices like the large/small-diameter piping, pumps, and standpipe count (Eastman Chemical Co. v. Johnson).
• Associated parts and appurtenances — things attached to or part of qualifying machinery (bolts and gaskets, inserts, base plates, expansion joints, etc.) ride along as exempt because the definition includes "all associated parts, appurtenances and accessories."
• Electricity-distribution machines — the electrical distribution equipment and the two substations are exempt because machines that generate, produce, and distribute electricity/utility services are industrial machinery (§ 67-6-102(46)(D)(i)).
• Material-transport equipment — the freight elevator, used solely to move raw materials to the process and finished goods to storage, is exempt (§ 67-6-102(46)(D)(ii)).
• Installation labor on the machinery — repair and installation are normally taxable services (§ 67-6-205(c)(4), (6)), but the definition of industrial machinery includes "any necessary repair or taxable installation labor," so the Nelson stud installation on the machinery is exempt.
• Non-taxable services — demolition, excavation/backfill, heavy haul, optical alignment, NDE testing, and engineering services aren't taxable, because they're bought as standalone services that aren't enumerated taxable services and aren't part of a taxable sale.

The six taxable items. Floor coating, exterior wall siding, safety showers, piping labels, fire stop, and lighting fixtures are taxable. They're used in the plant, but none is machinery/apparatus/equipment that is necessary to and primarily for the actual fabrication of the product — each has a primary purpose beyond manufacturing (safety compliance, structural/building function, labeling, general lighting), so the exemption doesn't reach them.

Question B — can the contractors buy the exempt items tax-free? Yes — but only under their own authorization. Normally a contractor owes sales/use tax on the property it uses to perform a contract, because the contractor is the user/consumer (§ 67-6-209(b)). But the industrial-machinery exemption follows the item, not the buyer: if an item qualifies, its purchase is exempt regardless of who buys and installs it, and the contractors'-use-tax rule doesn't apply where the purchase would otherwise be exempt (§ 67-6-209(c)). The catch: a contractor may not use the manufacturer's industrial-machinery authorization. Each contractor must apply for its own industrial-machinery exemption authorization number tied to this project, and buy with that.

(Real-property wrinkle.) Where installation makes something part of the real property, the installation charge isn't taxable (Rule 1320-5-1-.27(2)) — but the contractor then owes tax on the property it buys or uses to do that real-property installation (Rule 1320-5-1-.07(1)).

What this means for you

Tennessee manufacturers and plant engineers

The industrial-machinery exemption is broad — it reaches not just the obvious machines but their appurtenances, the piping and pumps that convey materials, electricity-distribution substations, material-handling equipment, and the labor to install the machinery. The line is "necessary to and primarily for" fabrication. Items that merely make the building usable or safe — coatings, siding, safety showers, labels, fire-stop, general lighting — fall outside it, even inside a factory. Build your exemption claim item by item against that test, and remember the burden of proof is on you.

Contractors doing manufacturing build-outs

You can buy qualifying industrial machinery for a manufacturer's project tax-free, but don't borrow the manufacturer's authorization — get your own industrial-machinery exemption authorization number for the project (§ 67-6-209(b)-(c)). And watch the real-property line: when your installation becomes part of the realty, you owe tax on the materials you consume doing it (Rule 1320-5-1-.07(1)).

Accountants and tax professionals

This ruling is a clean checklist of the § 67-6-102(46) categories: core machinery/apparatus/equipment (with Eastman Chemical covering conveying devices), associated parts/appurtenances, electricity-distribution machines ((D)(i)), material-transport equipment ((D)(ii)), and exempt installation labor on machinery. Standalone services that aren't enumerated stay nontaxable. Because it's a revenue ruling, it's advisory only — persuasive, not binding.

Common questions

Q: Is everything in a factory exempt as "industrial machinery"?
A: No. Only machinery, apparatus, or equipment that is necessary to and primarily for the manufacturing process (plus its associated parts/appurtenances, electricity-distribution and material-transport machines, and installation labor on the machinery). Items with a primary purpose beyond manufacturing — like floor coating, siding, safety showers, labels, fire-stop, and lighting — are taxable.

Q: Do pipes, pumps, and substations count?
A: Yes. Conveying devices like piping, pumps, and the standpipe count (Eastman Chemical Co. v. Johnson), and machines that distribute electricity to the process (substations, electrical distribution equipment) count under § 67-6-102(46)(D)(i).

Q: Is the labor to install the machinery taxable?
A: Installation is normally a taxable service, but the definition of industrial machinery includes the necessary repair or installation labor for it — so installation labor on qualifying machinery is exempt. (Standalone services like engineering, demolition, and testing aren't taxable because they aren't enumerated.)

Q: Can my contractor buy the machinery tax-free using my exemption?
A: No — not on your authorization. The purchase is exempt regardless of who buys it, but each contractor must obtain its own industrial-machinery exemption authorization number for your project (§ 67-6-209(b)-(c)).

Q: Can I rely on this revenue ruling?
A: No. Tennessee revenue rulings are advisory and not binding on the Department, and no taxpayer can rely on one as binding. It shows the Department's reasoning; confirm your own facts with a tax professional.

Citations and references

Tennessee statutes (Tenn. Code Ann.; 2011 codification):

• § 67-6-206(a) (industrial machinery exemption)
• § 67-6-102(46)(A)(i) ("industrial machinery" definition); § 67-6-102(46)(D)(i) (electricity/utility-distribution machines); § 67-6-102(46)(D)(ii) (raw-material/finished-product transport)
• § 67-6-205(c)(4), (c)(6) (repair/installation services generally taxable; installation labor on machinery exempt as part of the definition)
• § 67-6-209(b) (contractor pays tax on TPP used to perform a contract); § 67-6-209(c) (no contractor's use tax where the purchase would otherwise be exempt)
• § 67-6-101 (Retailers' Sales Tax Act); § 67-6-102(78) ("retail sale"); § 67-6-102(80)(A) ("sale"); § 67-6-102(91)(A) ("tangible personal property")

Tennessee rules:

• Tenn. Comp. R. & Regs. 1320-5-1-.27(2) (1974) (real-property installation not taxable); 1320-5-1-.07(1) (2000) (contractor owes tax on property used for real-property installation)

Cases cited by the ruling:

• Am. Airlines, Inc. v. Johnson, 56 S.W.3d 502 (Tenn. Ct. App. 2000); Rogers Group, Inc. v. Huddleston, 900 S.W.2d 34 (Tenn. Ct. App. 1995); Tibbals Flooring Co. v. Huddleston, 891 S.W.2d 196 (Tenn. 1994); United Canners, Inc. v. King, 696 S.W.2d 525 (Tenn. 1985) (exemptions construed against the taxpayer; burden of proof; well-founded doubt defeats the claim)
• Tenn. Farmers' Coop. v. State ex rel. Jackson, 736 S.W.2d 87 (Tenn. 1987) (manufacturing is "principal business" if >50% of a location's revenue)
• Tenn. Farmers Assur. Co. v. Chumley, 197 S.W.3d 767 (Tenn. Ct. App. 2006); Beare Co. v. Tenn. Dep't of Revenue, 858 S.W.2d 906 (Tenn. 1993) (undefined terms get their common meaning)
• Eastman Chemical Co. v. Johnson, 151 S.W.3d 503 (Tenn. 2004) ("machinery, apparatus, and equipment" includes devices conveying materials between process steps)
• Woods v. General Oils, Inc., 558 S.W.2d 433 (Tenn. 1977) ("primarily" = first/principally; satisfied at >50% of use)

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/12-02.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
REVENUE RULING # 12-02
WARNING
Revenue rulings are not binding on the Department. 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
The applicability of the Tennessee sales and use tax industrial machinery exemption in a
[REDACTED] manufacturing facility.
SCOPE
Revenue Rulings are statements regarding the substantive application of law and statements of
procedure that affect the rights and duties of taxpayers and other members of the public. Revenue
Rulings are advisory in nature and are not binding on the Department.
FACTS
Since [YEAR], the Taxpayer has operated an industrial facility in [REDACTED], Tennessee (the
“Facility”). The Facility, used for manufacturing, [REDACTED]. [REDACTED]. The Facility is
a shell that encompasses the industrial machinery, equipment, appurtenances, and other items
referenced below, [REDACTED].
In general, the operations and activities at the manufacturing plant consist of the procurement of
[TYPE OF] materials ([REDACTED], etc.) and the transformation of these materials by the
industrial machinery and appurtenances into [PRODUCTS]. Industrial machinery in this phase of
production is located in the “[PHASE A] Manufacturing” area of the manufacturing facility.
Once the [PRODUCTS] are produced, the machinery and appurtenances transform the
[PRODUCTS] into [OTHER PRODUCTS], which are subsequently packaged for delivery.
Industrial machinery in this phase of the production is located in the “[PHASE B] Area” of the
manufacturing facility. [REDACTED].
[REDACTED], the Taxpayer requests guidance on the sales and use tax implications of the items
referenced in the three categories detailed below. These items are purchased and installed by the
Taxpayer’s contractors.
A description of each particular item or service is set forth in Appendix A.

1

RULINGS
A)

Are the items that will be purchased [REDACTED] (and listed in the table below)
exempt from the Tennessee sales and use tax?
Ruling: All of the items listed below will be exempt from Tennessee sales and use tax
except the floor coating, the exterior wall siding, safety showers, piping labels, fire stop,
and lighting fixtures.

B)

Will the Taxpayer’s contractors’ purchases of these same items be exempt from the
Tennessee sales and use tax?
Ruling: A contractor may not use the Taxpayer’s industrial machinery authorization to
make exempt purchases. However, a contractor may apply for its own industrial
machinery exemption authorization number for the Taxpayer’s project, and may make
exempt purchases with that authorization number.
ANALYSIS

A) Taxability of Purchases
The following chart lists items or services purchased for the expansion of the Taxpayer’s facility,
states whether the service or item is exempt, and gives a numerical explanation as to the item’s
or service’s taxability. A description of each explanation is given below the chart.
Item / Service

Exempt When Explanation
Purchased by
Taxpayer?

[REDACTED]

Yes

1

Process Tanks

Yes

1

Freight Elevator

Yes

1, 4

Electrical Distribution Equipment

Yes

1, 3

Special Coatings

Yes

1, 2

Floor Coating

No

8

Exterior Wall Siding

No

8

Chillers

Yes

1, 2

[REDACTED]

Yes

1

MUA Units

Yes

1, 2

[REDACTED]

Yes

1

Safety Showers

No

8

Air Receiver

Yes

1, 2

2

Item / Service

Exempt When Explanation
Purchased by
Taxpayer?

Filters

Yes

1, 2

Heat Exchangers

Yes

1, 2

[REDACTED]

Yes

1, 2

[REDACTED]

Yes

1

Pumps

Yes

1

Variable Speed Drive Machinery

Yes

1, 2

Standpipe

Yes

1

Vacuum Strainers

Yes

1

Dust Collection Machinery

Yes

1, 2

[REDACTED]

Yes

1

Medium Voltage Motors

Yes

1, 2

Primary Unit Substation

Yes

1, 3

Secondary Unit Power Substation

Yes

1, 3

Low Voltage Motors

Yes

1, 2

Instruments and Controls – [PHASE A] Area

Yes

1, 2

Bollards/Wheel Stops

Yes

1, 2

Inserts

Yes

1, 2

Large & Small Diameter Piping

Yes

1

Instrumental Panels

Yes

1, 2

Bolts and Gaskets

Yes

1, 2

Piping Labels

No

8

Expansion Joints and Equipment Hoses

Yes

1, 2

Mechanical Base Plates

Yes

1, 2

Wires and Cables

Yes

1, 2, 3

Fire Stop

No

8

Heat Tracing

No

8

Lighting Fixtures

No

8

Devices and Plates

Yes

1, 2

Communication Monitoring Equipment

Yes

1, 2

3

Item / Service

Exempt When Explanation
Purchased by
Taxpayer?

Demolition Services

Yes

7

Excavation and Backfill Services

Yes

7

Heavy Haul Services

Yes

7

Nelson Stud Installation

Yes

5, 6

Optical Alignment Services

Yes

7

NDE Testing

Yes

7

Engineering Services

Yes

7

1) Industrial Machinery
Under the Retailers’ Sales Tax Act, TENN. CODE ANN. § 67-6-101 et seq., the retail sale of
tangible personal property is generally subject to the Tennessee sales and use tax.1 However,
TENN. CODE ANN. § 67-6-206(a) (2011) exempts “industrial machinery” from the sales and use
tax, providing that “[a]fter June 30, 1983, no tax is due with respect to industrial machinery.”2
TENN. CODE ANN. § 67-6-102(46)(A)(i) (2011) defines “industrial machinery” in pertinent part
as “machinery, apparatus and equipment with all associated parts, appurtenances and accessories,
including hydraulic fluids, lubricating oils, and greases necessary for operation and maintenance,
repair parts and any necessary repair or taxable installation labor therefor, that is necessary to,
and primarily for, the fabrication or processing of tangible personal property for resale and
consumption off the premises … where the use of such machinery, equipment or facilities is by
one who engages in such fabrication or processing as one’s principal business.”

1

TENN. CODE ANN. § 67-6-102(78) (2011) defines a “retail sale” as any “sale, lease, or rental for any purpose other
than for resale, sublease, or subrent.” The term “sale” is defined under the Tennessee sales and use tax laws in
pertinent part as “any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or
otherwise, in any manner or by any means whatsoever of tangible personal property for a consideration.” TENN.
CODE ANN. § 67-6-102(80)(A). Additionally, TENN. CODE ANN. § 67-6-102(91)(A) defines “tangible personal
property” in pertinent part as “personal property that can be seen, weighed, measured, felt, or touched.”
2

The burden is on the taxpayer to establish entitlement to an exemption from taxation. The Tennessee Supreme
Court has stated that “[a]lthough the rule is well-established that taxing legislation should be liberally construed in
favor of the taxpayer and strictly construed against the taxing authority, it is an equally important principle of
Tennessee tax law that ‘exemptions from taxation are construed against the taxpayer who must shoulder the heavy
and exacting burden of proving the exemption.’” Am. Airlines, Inc. v. Johnson, 56 S.W.3d 502, 506 (Tenn. Ct. App.
2000) (quoting Rogers Group, Inc. v. Huddleston, 900 S.W.2d 34, 36 (Tenn. Ct. App. 1995)). The Tennessee
Supreme Court has also stated that the burden is on the taxpayer to establish the exemption, and any well-founded
doubt is sufficient to defeat a claimed exemption from taxation. Am. Airlines, 56 S.W.3d at 506 (citing Tibbals
Flooring Co. v. Huddleston, 891 S.W.2d 196, 198 (Tenn. 1994); United Canners, Inc. v. King, 696 S.W.2d 525, 527
(Tenn. 1985)).

4

Therefore, in order for a purchase of tangible personal property to be exempt from the Tennessee
sales and use tax as industrial machinery, four requirements must be met. First, the use must be
by a manufacturer. Second, the tangible personal property must be machinery, apparatus or
equipment. Third, the tangible personal property must be necessary to the fabrication or
processing of the products sold by the manufacturer. Fourth, the tangible personal property must
be primarily for the fabrication of the products sold by the manufacturer.
First, under the facts presented, the Taxpayer qualifies as a manufacturer. A manufacturer is
defined under TENN. CODE ANN. § 67-6-102(46)(A)(i) as “one who engages in [the] fabrication
or processing [of tangible personal property for resale and consumption off the premises] as
one’s principal business.” Manufacturing is a taxpayer’s principal business if more than fifty
percent of its revenues at a given location are derived from fabricating or processing tangible
personal property for resale. Tenn. Farmers’ Coop. v. State ex rel. Jackson, 736 S.W.2d 87, 9192 (Tenn. 1987). The Taxpayer has indicated that its only business is operating a manufacturing
facility, and [REDACTED]. The Taxpayer is therefore a manufacturer that may be entitled to
the exemption provided in TENN. CODE ANN. § 67-6-206(a).
Second, each item listed above with only a (1) in the explanation column qualifies as machinery,
apparatus, or equipment. While several items, such as [REDACTED], clearly qualify as
machinery or equipment, other items, such as the [REDACTED] and process tanks, must fall
under the broader term “apparatus.” Neither the Tennessee Code nor the Tennessee courts have
defined the term “apparatus” for purposes of Tennessee sales and use taxation. The Tennessee
Supreme Court has stated that when a statute does not define a term, it is proper to look to common
usage to determine the term’s meaning. See, e.g., Tenn. Farmers Assur. Co. v. Chumley, 197 S.W.3d
767, 782-83 (Tenn. Ct. App. 2006); Beare Co. v. Tenn. Dept. of Revenue, 858 S.W.2d 906, 908
(Tenn. 1993). WEBSTER’S NINTH NEW COLLEGIATE DICTIONARY 96 (1991) defines the term
“apparatus” as “a set of materials or equipment designed for a particular use” or “an instrument
or appliance designed for a specific operation.”
Additionally, the Tennessee Supreme Court has interpreted the phrase “machinery, apparatus,
and equipment” to include “the devices conveying the materials and components from one part
of the manufacturing or fabricating process to another.” Eastman Chemical Co. v. Johnson, 151
S.W.3d 503, 509-510 (Tenn. 2004). This expanded definition would also include the large and
small diameter piping, the pumps, and the standpipe as industrial machinery.
Third and fourth, each item listed above with only a (1) in the explanation column is necessary to
and primarily for the production process. The terms “necessary” and “primarily” are also
undefined by the Tennessee Code and the Tennessee courts for Tennessee sale and use tax
purposes. The common definition of the term “necessary” is “that which cannot be dispensed
with; essential; indispensable; … inherent in the situation; unavoidable from the premises …
rendering some essential and intimate service.” WEBSTER’S NEW TWENTIETH CENTURY
DICTIONARY (2nd ed. 1964). Thus, in order for machinery, equipment, or apparatus to be
“necessary” to the manufacturing process, it must be essential to the manufacturing process as
engaged in by a taxpayer.
The term “primarily” has been defined by the Tennessee Supreme Court for purposes of the
industrial machinery exemption as “first of all; principally; or fundamentally” and as “first in

5

rank or importance, chief, principal, basic or fundamental.” Woods v. General Oils, Inc, 558
S.W.2d 433, 436 (Tenn. 1977). (citing WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY
(1961); Breen v. Indus. Acc. Bd., 436 P.2d 701 (Mont. 1968); Twentieth Century Mfg. Co. v.
United States, 444 F.2d 1109 (Ct. Cl. 1971)). The machinery, equipment, or apparatus satisfies
this test if more than fifty percent of its use is in the manufacturing operation.
2) Associated parts, appurtenances and accessories
“Industrial machinery” as defined in pertinent part by TENN. CODE ANN. § 67-6-102(46)(A)(i)
includes “[m]achinery, apparatus and equipment with all associated parts, appurtenances and
accessories.” (Emphasis added.) Therefore, items that are not necessarily machinery
themselves, but become a part of or are added to qualifying machinery, are also exempt under the
industrial machinery exemption.
Each of the items listed under this category are attached to or are a part of a larger, more integral
piece of machinery, apparatus, or equipment that itself qualifies for the exemption.
3) Machines used to generate, produce, and distribute electricity
The term “industrial machinery” also includes “[m]achines used for generating, producing, and
distributing utility services, electricity, steam, and treated or untreated water.” TENN. CODE ANN.
§ 67-6-102(46)(D)(i). The electrical distribution equipment and the two substations distribute
electricity to the machinery and thus are exempt industrial machinery.
4) Transport of raw materials and finished product to and from the process
Equipment used to transport raw materials from storage to the manufacturing process and to
transport the finished product to storage after completion of the manufacturing process is treated
as industrial machinery pursuant to TENN. CODE ANN. § 67-6-102(46)(D)(ii).
Because the freight elevator is used solely for this purpose, it is exempt industrial machinery.
5) Repair and installation of industrial machinery
Generally, the repair or installation of tangible personal property is subject to the Tennessee sales
and use tax. TENN. CODE ANN. § 67-6-205(c)(4)&(6) (2011). However, “industrial machinery”
specifically includes “any necessary repair or taxable installation labor” of the machinery.
Thus, the Nelson stud installation services performed on the industrial machinery are exempt
from the sales and use tax.
6) Installation to real property
The installation of tangible personal property that becomes part of real property is not subject to
the Tennessee sales and use tax. TENN. COMP. R. & REG. 1320-5-1-.27(2) (1974).
Thus, any charges made for the Nelson stud installation that becomes part of real property will
not be taxable. However, the contractor that performs Nelson stud installation that becomes part

6

of real property will owe sales and use tax on the property purchased or used in making the
installation. TENN. COMP. R. & REG. 1320-5-1-.07(1) (2000).
7) Non-taxable service
Services are subject to the Tennessee sales and use tax only if they are enumerated under the
Retailers’ Sales Tax Act or are included as part of a taxable sale of tangible personal property or
a service. The demolition, excavation and backfill, heavy haul, optical alignment, NDE testing,
and engineering services each are purchased as services and not as part of a sale of tangible
personal property or enumerated service. Further, none of these services are themselves
enumerated by the statute. Thus, these services are not subject to the Tennessee sales and use
tax.
8) Taxable purchases of tangible personal property
As stated under explanation (1), unless a specific exemption applies, the retail sale of tangible
personal property is generally subject to the Tennessee sales and use tax. The floor coating,
exterior wall siding, safety showers, piping labels, fire stop, and light fixtures, if purchased as
tangible personal property, are not exempt from the Retailers’ Sales Tax Act and thus are subject
to the Tennessee sales and use tax.
Although each of these items will be used in the Taxpayer’s manufacturing facility, they do not
qualify as industrial machinery. In order to qualify as industrial machinery, an item must be
machinery, apparatus, or equipment and must be necessary to and primarily for the
manufacturing process. None of these items are necessary to or primarily for the process. While
some of these items may relate to or assist in the manufacturing process, none are essential in the
actual fabrication of the Taxpayer’s product. Further, each of these items has a primary purpose
beyond manufacturing.
B) Contractors’ Purchases
The Taxpayer has also asked whether its contractors may purchase the qualified industrial
machinery discussed above on a tax-exempt basis. While the contractors may not use the
Taxpayer’s industrial machinery authorization to make exempt purchases, they may apply for
their own respective exemption authorization numbers, which will apply only to the Taxpayer’s
project.
TENN. CODE ANN. § 67-6-209(b) (2011) requires a contractor to pay Tennessee sales or use tax
on purchases of tangible personal property used in the performance of a contract. This is
because the contractor is the user and consumer of such tangible personal property. However,
TENN. CODE ANN. § 67-6-206(a) (2011) provides that no tax is due on industrial machinery. The
definition of “industrial machinery” includes all qualifying items that are used by a
manufacturer. TENN. CODE ANN. § 67-6-102(46)(A)(i) (2011). Therefore, if an item qualifies for
the industrial machinery exemption, the purchase of the item is exempt, regardless of who
actually makes the purchase and installs the item. Further emphasizing this fact, TENN. CODE
ANN. § 67-6-209(c) states that the contractor’s use tax described above shall not apply if the
contractor and the purchases made by the contractor would otherwise be exempt.

7

Thus, a contractor installing the qualified industrial machinery discussed above for the Taxpayer
may apply to the Tennessee Department of Revenue for its own industrial machinery
authorization number. Such an industrial machinery authorization number will enable the
contractor to purchase the industrial machinery for the Taxpayer’s facility exempt from the
Tennessee sales and use tax.

Elizabeth Henderson
Tax Counsel

APPROVED:

Richard H. Roberts
Commissioner of Revenue

DATE:

04/30/2012

8

APPENDIX A
ITEM
[REDACTED]
Process Tanks

DESCRIPTION/FUNCTION
[REDACTED]
Tanks used exclusively in the [PHASE A] area for channeling
[MATERIALS] prior to distribution to different industrial machinery.
They agitate and maintain a constant pressure on the [MATERIALS].
Freight Elevator
Transports raw materials from storage to manufacturing and finished
goods to storage areas.
Electrical Distribution Controls, monitors, and channels electric power to machinery located in
Equipment
the [PHASE A] and [PHASE B] areas.
Special
Utilized to maintain and repair industrial machinery in the [PHASE A]
Coating[REDACTED] and [PHASE B] areas by preventing corrosion from accumulating on
the machinery; enables optimal functions of the machinery. The
coatings are applied to and cover the industrial machinery.
Floor Coating
Utilized on the floor in the [PHASE A] and [PHASE B] areas to prevent
the accumulation of dust and other debris that can damage and interfere
with the optimum utilization of industrial machinery.
Exterior Wall Siding
Serves as an external, structural support for machinery located in the
interior of the [PHASE A] area.
Chillers
Located in the [PHASE A] area and connected to the [REDACTED –
INDUSTRIAL MACHINERY]; maintain the proper temperature of the
machinery by regulating and controlling the air and water temperature
of the machinery.
[REDACTED]
[REDACTED].
MUA Units
Ensure the required temperature and humidity in the [PHASE A] area
by regulating and filtering the air pumped into a [REDACTED –
INDUSTRIAL MACHINERY]. They are a part of the HVAC system
and are affixed to the [REDACTED – INDUSTRIAL MACHINERY].
[REDACTED]
[REDACTED].
Safety Showers
Located in the [PHASE A] and [PHASE B] areas to comply with
federal, state and local laws.
Air Receiver
Utilized in the [PHASE A] and [PHASE B] areas to accumulate air
necessary to insure the safe shut down of air actuated equipment in the
event of power loss. They are attached to the [REDACTED –
INDUSTRIAL MACHINERY].
Filters
Insure the purity of chemicals by eliminating and reducing the risk of
accumulation of debris and impurities. They are a part of the chemical
skids, which are industrial machinery used for chemical dosing.
Heat Exchangers
Facilitate the transfer of heat energy required for the channeling of raw
materials in the [PHASE A] area. They are connected to and a part of
the [REDACTED – INDUSTRIAL MACHINERY].
[REDACTED]
[REDACTED].

9

ITEM
[REDACTED]
Pumps

DESCRIPTION/FUNCTION
[REDACTED].
Used in the [PHASE A] and [PHASE B] areas to transport industrial
fluids from one piece of machinery to another.
Variable Speed Drive Electrical machinery that regulates the speed of motors that power
Machinery
machinery located in the [PHASE A] and [PHASE B] areas.
Standpipe
Pipe that functions as a buffer to control process flows between various
pieces of machinery located in the [PHASE A] area.
Vacuum Strainers
Reduce and help eliminate contaminants that form in [REDACTED];
used in the [PHASE A] area.
Dust Collection
Attached to the industrial machines in the [PHASE A] area; reduces the
Machinery
accumulation of dust and debris that can damage and interfere with the
optimum utilization of the machinery.
[REDACTED]
[REDACTED].
Medium Voltage
Used exclusively to drive large process equipment located in the
Motors
[PHASE A] area.
Primary Unit Power
Located on the rear of the main industrial machines; used exclusively to
Substation
distribute power to the individual motors driving the process equipment.
Secondary Unit Power Located on the rear of the main industrial machines; used exclusively to
Substation
distribute power to the individual motors driving the process equipment.
Low Voltage Motors
Power and drive small process equipment located in the [PHASE A]
area.
Instruments and
Used to control equipment such as pumps and fans in the [PHASE A]
Controls - [PHASE A] area; located on the ground and machine floor levels.
Area
Bollards/Wheel Stops Prevent mobile equipment from damaging fixed equipment used in the
manufacturing process. They are attached to the mobile industrial
machinery such as the [REDACTED – INDUSTRIAL MACHINERY]
via an anchoring mechanism to the floor.
Inserts
Adjustable steel components that allow the adjustment of mechanical
equipment; required to accommodate manufacturing equipment
installation. They are welded to the industrial machinery.
Large & Small
Transports in-process fluids from one system to another; runs through
Diameter Piping
the [REDACTED]; the bulk of the piping is located around the
machine.
Instrument Panels
Located in the [PHASE A] and [PHASE B] areas; attached to and
control equipment.
Bolts and Gaskets
Integral part of the piping system located throughout the facility.
Piping Labels
Glued to various parts of the piping to identify the types of fluids
transported.
Expansion Joints and
Mechanical components that insure the flexibility of process piping
Equipment Hoses
systems; used within the [REDACTED – INDUSTRIAL
MACHINERY]. They connect the large and small diameter piping to
the industrial machinery.
Mechanical Base
Located under the manufacturing equipment frame to insure proper
Plates
alignment; directly used to support the [REDACTED – INDUSTRIAL

10

ITEM

Wires and Cables

Fire Stop

Heat tracers
Lighting Fixtures
Devices and Plates

Communication
Monitoring
Equipment
Demolition Services
Excavation and
Backfill Services
Heavy Haul Services
Nelson Stud
Installation
Optical Alignment
Services
NDE Testing
Engineering Services

DESCRIPTION/FUNCTION
MACHINERY]. Bolted onto the [REDACTED – INDUSTRIAL
MACHINERY] and act as a foundation to the machinery.
Located in the [PHASE A] and [PHASE B] areas; integral part of the
functioning of the [REDACTED – INDUSTRIAL MACHINERY] and
ensure power distribution and control signal communication. Attached
to and provide connectivity to the industrial machinery.
Sealing materials that prevents fire from spreading in openings made to
allow cable passage; seals penetrations used for cabling; used on cables
that are necessary to the functioning of the equipment.
Tracers are heating cables that run along all piping outside of the
building to prevent process fluids from freezing.
General lighting that allows clear eyesight of the manufacturing
equipment; also generally necessary for the building.
Instruments that are used to directly support the [REDACTED –
INDUSTRIAL MACHINERY]. Bolted onto the [REDACTED –
INDUSTRIAL MACHINERY] and act as a foundation to the
machinery.
Transfers manufacturing data from one manufacturing system to
another; integral part of the [REDACTED – INDUSTRIAL
MACHINERY]. Provides an interactive platform to control, gauge, and
monitor the industrial machinery.
Service provided by contractor to improve real property.
Service provided by contractor to improve real property.
Transport of oversized, overweight, or similarly difficult loads in the
improvement of real property.
Labor charge relating to industrial machinery welding or real property
contractor services.
Locating, reporting and issuing reports on precession and misalignment
concerns relating to industrial machinery.
Labor subcontract for the nondestructive testing of real property
construction.
Required in the construction of the manufacturing plant.

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