Tennessee Sales Tax Exemption for Manufacturing
The Tennessee sales tax exemption for manufacturing is available on industrial machinery purchased by a qualified Tennessee manufacturer that is necessary to the manufacturing process. Tennessee defines industrial machinery as “equipment used mainly to fabricate or process tangible personal property to be resold and consumed off the premises” per Tenn. Code Ann. §67-6-102(44). The experienced sales tax consultants at Agile Consulting are available to assist Tennessee manufacturers take advantage of the Tennessee sales tax exemption for manufacturing and industrial machinery. See below for examples of items Tennessee manufacturers should be purchasing exempt from sales tax:
Exempt Industrial Machinery Per Tennessee Sales Tax Exemption for Manufacturing:
- Industrial Machinery including Accessories and Attachments
- Repair Parts
- Material Handling Equipment (only when used in the manufacturing process)
- Packaging Equipment
- Consumables (must come in direct contact with product and consumed within 25 calendar days)
- Cost of Goods Sold Items Included in the Final Product
- Hand Tools Used in Production
- Installation and Service on Industrial Machinery
- Utility Distributing Machinery
- Computers and Software used in Data Centers
- Industrial Machinery for these Specific Industries:
- Mining, Photography, Printing, Digital Products, Contractors, Water Pollution Control, Prescription Eyewear
The Tennessee sales tax exemption for manufacturing also provides a reduced state sales tax rate to Tennessee manufacturers on purchases of energy fuel and water. All energy fuel and water purchased by Tennessee manufactures, regardless of use, is subject to a reduced state sales tax rate of 1.5% and 1%, respectively. All energy fuel and water purchased by Tennessee manufacturers that comes in direct contact with the product during the manufacturing process and is separately metered is completely exempt from sales tax.
There are two separate sales tax exemption certificates Tennessee manufactures can send to their vendors in order to purchase industrial machinery tax exempt per the Tennessee sales tax exemption for manufacturing. The first one comes directly from the state. To receive this exemption certificate Tennessee manufacturers must complete Tennessee Form RV-F1303101 “Application for Industrial Machinery, Energy Fuels and Water Sales and Use Tax Exemption” and send it to the Tennessee Department of Revenue. Once the state reviews and approves the application, the manufacturer will be given a sales tax exemption certificate that can be distributed to the manufacturer’s vendors.
The second option is for Tennessee manufacturers to bypass the state’s approval and fill out a Streamlined Sales Tax SSTGB Form F0003 “Streamlined Sales and Use Tax Agreement Certificate of Exemption.” That form can be sent directly to the manufacturer’s vendors to avoid sales taxes being charged on tax exempt items. Both Forms are viable options, however with the Streamlined certificate the purchaser assumes all liability if the certificate was presented inappropriately on non-qualifying items. The first option offers the purchaser the security of knowing the exemption has already been approved by the state of Tennessee.
Tennessee manufacturers can recover sales tax dollars erroneously paid on exempt items up to 3 years (36 months) after the sales tax was paid. In the state of Tennessee, only the entity that remitted the tax to the state can be refunded the tax dollars, therefore Tennessee manufacturers must request a sales tax refund directly from their vendors. The vendors then have two options. The first is to amend their sales and use tax returns and issue their customer a refund check. The second option is for the vendor to fill out, sign and send in form Tennessee Form RV-F1403301 “Claim for Credit or Refund of Sales or Use Tax” to the Tennessee Department of Revenue. Once the vendor’s claim for refund is approved by the state the vendor will issue the refund back to the customer. Please contact Agile’s experienced sales tax consultants to aid you in the recovery of sales tax refunds from the Tennessee sales tax exemption for manufacturing.
As with all sales and use tax research, the specifics of each case need to be considered when determining taxability. Additional advice from Agile Consulting Group’s sales tax consultants can be found on our page summarizing Tennessee sales and use tax exemptions . If you have questions, comments or would like to discuss the specific circumstances you are encountering regarding this particular issue or any other sales and use tax issue, please contact any of Agile Consulting Group’s sales tax consultants at (888) 350-4TAX (4829) or via email at info@salesandusetax.com .
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