SALT Report 1774 – The Tennessee Department of Revenue issued a letter ruling regarding a Taxpayer’s use of reusable specialty containers. The Taxpayer is a manufacturer who has several facilities in Tennessee and uses the specialty containers to transport parts from his storage facility to an assembly line for use in production.
Tennessee provides an exemption for industrial machinery under § 67-6-206(a) (2011). Industrial machinery is defined 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.”
The Department determined that the Taxpayer is a manufacturer engaged in the fabrication of products for resale. Therefore, because the Taxpayer only uses the containers to transport parts from the storage facility to the assembly line, and the containers are not used to store raw materials or to move parts around the storage facility they are exempt from Tennessee sales and use tax as industrial machinery.
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