The Tennessee Department of Revenue concluded that an exemption does exist when working on a construction contract. As noted in the ruling exemptions must be properly supported by an Exemption Certificate.
Additionally, Rule 102 also contemplates contractors and subcontractors will provide exemption certificates when making purchases of tangible personal property to be used in building such plants and systems when such tangible personal property becomes a component part of the plant or system: Contractors and sub-contractors purchasing tangible personal property to be used as a component part of an electric generating plant or distribution system may furnish their supplier an exemption certificate for each purchase in lieu of the Sales or Use Tax on such sales. Dealers making such sales shall keep such certificates as part of their records. Any dealer who has made any sales which would otherwise be exempt because of this rule and regulation, but who fails to obtain an appropriate exemption certificate at the time of making the sale, shall nevertheless be liable for the payment of any Sales or Use Tax which would otherwise be due on such a transaction.1010 TENN. COMP. R. & REGS. 1320-05-01-.102(2)