SALT Report 1938 – The Tennessee Department of Revenue updated their guidance for operators of natural gas pipelines. The notice reflects changes in the taxability of natural gas diverted from interstate pipelines that is used in the operation of in-state compressors or distribution equipment.
Specifically, the Department notes that compressor fuel diverted from interstate pipelines for use in the state is subject to sales and use state tax under Tennessee Code § 67-6-211 which states, “It is the intent of this chapter to levy a tax on the sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in this state of tangible personal property after it has come to rest in this state and has become a part of the mass of property in this state.”
Therefore, effective January 1, 2013, operators of natural gas pipelines must pay tax on the purchase price of fuel diverted from interstate pipelines.
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