SALT Report 2043 – The Tennessee Department of Revenue issued a letter ruling regarding a Taxpayer’s use of the industrial machinery exemption. The Taxpayer operates a manufacturing facility in the state that he is in the process of expanding. The expansion project includes the purchase of new, specialized machinery, the installation of supporting facilities, and the creation of an energy efficient environment.
Once completed, the plant will manufacture various products and package them for future sale and delivery. The Taxpayer requested guidance as to whether the items purchased for the expansion project qualify for the industrial machinery exemption.
In their decision the Department notes that in order to qualify for the exemption, the Taxpayer must also qualify as a manufacturer. Tennessee defines manufacturers as “those who engage in … fabrication or processing as one’s principal business” and more than fifty percent of their revenues are derived from fabricating or processing tangible personal property for resale.
Based on the facts provided, the Department determined that the Taxpayer qualified for the exemption because the machinery, apparatus, and equipment that will be purchased are necessary to, and primarily for, the fabrication or processing of products sold by the Taxpayer.
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