SALT Report 2035 – The Tennessee Department of Revenue issued a ruling discussing the industrial machinery exemption from sales and use tax as it applies to manufacturing facilities. The ruling states that in order to purchase tangible personal property exempt from Tennessee sales and use tax as industrial machinery all of the following requirements must be met:
- The use must be by a manufacturer,
- The tangible personal property must be machinery, apparatus or equipment,
- The tangible personal property must be necessary to the fabrication or processing of the products sold by the manufacturer, and
- The tangible personal property must be primarily for the fabrication of the products sold by the manufacturer
The ruling also discusses a contractor’s use of the exemption on behalf of a taxpayer. Under the terms of the exemption a contractor cannot use a taxpayer’s industrial machinery authorization to make exempt purchases. However, a contractor may apply for their own authorization number, which they can apply to the taxpayer’s project.
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